Should you buy, hold or sell Wipro shares after it announces acquisition of Applied Value Technologies? Here's what global brokerages suggest

Wipro shares are in focus in Tuesday's trade (December 17) after the company post market hours on the previous day announced that the IT major through its subsidiaries has signed a definitive agreement to acquire 100 per cent shareholding in Applied Value Technologies and its affiliates Applied Value Technologies Pte Ltd and Applied Value Technologies B.V. (“AVT”), part of the Applied Value Group. 

AVT companies provide enterprise applications development and support services for global clientele.

On Monday, the stock of Wipro closed little changed with a negative bias at Rs 309.1 per share on the BSE.

AVT helps enterprises transform IT operations through a highly customized and data-driven approach. AVT will augment Wipro’s existing application services capabilities, helping drive new growth opportunities, said the company's filing with the exchanges.

The said acquisition is likely to be completed by December 31. In an all-cash deal, the purchase consideration of the transaction is pegged at up to US$ 40 million.

Global brokerages view

Hong Kong-based global brokerage CLSA is bullish on Wipro and has continued with its previous 'outperform' call with the target doubled from the earlier Rs 303 to now Rs 606. This is over 96 per cent potential gains from the last close.

Meanwhile, Morgan Stanley held a negative view on the counter and continues with its earlier 'underweight' rating and a target of Rs 250 per share. The set price implies a potential downside of over 19 per cent.

Morgan Stanley after the company's acquisition of Capco in 2021 and then Rizing's acquisition in 2022, sees the latest target entity - Applied Value Technologies as relatively smaller.

The brokerage stated that the said acquisition will offer more of a capability boost to the Bengaluru-based IT major and also add some marquee clients to its portfolio given the small scale. 

Further, Morgan Stanley expects the acquisition to have a limited impact on the company's (Wipro)  financials in FY25/FY26 owing to the small-scale of the acquired entity.