Wipro shines on $700-mn Metro-AG deal

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The stock of IT major Wipro edged up in early trade to ₹377.50, after the company on Tuesday said it had signed a $700-million digital and IT partnership deal with German-based Metro AG.

Analysts gave a thumbs up to the deal, saying the acquisition will help it grow in the European region.

Revenue growth

Macquaire, which rated the stock as Outperform with a price target of ₹416, said, “This large deal is one of the biggest won under new CEO Thierry Delaporte from the European Market. We believe this is an important step towards improving Wipro’s revenue growth rates in Europe, a geography where they have lagged in the past… We are building in 8.2-10.2 per cent US$ revenue growth over FY22-23.”

Deal details

The deal will see over 1,300 employees of the German wholesaler move to the Indian IT major, it said in a statement. “The estimated deal value for the duration of the first five years is approximately $700 million. With the intention to extend up to four additional years, it can be a potential spend of up to $1 billion,” Wipro further said.

Wipro will partner with METRO-NOM on the products that make up the backbone of the wholesale business, which would be globally available 24/7. This includes elements such as the merchandise management system, point of sale, and data warehouse.

Wipro’s acquisition of these IT units is in line with its strategy of focusing on the European region as the company looks to scale business and accelerate revenue growth in the region, said Emkay Global. “We expect Wipro’s USD revenue growth to accelerate in FY22 to 8 per cent from a low-single digit decline in FY21. This deal is broadly in line with these assumptions. We maintain Hold with a TP of ₹360,” it added.

Cultural shift

For Prabhudas Lilladher, aggression by the new management is clearly visible as Wipro has announced a decent number of deal wins (5) this year. These are Marelli, Verifone, Fortum, EON and John Lewis.

“We believe cultural shift and growth focus were long overdue in Wipro and we see bold management initiatives translating into large deal wins for Wipro,” the domestic brokerage firm said, and added: “Wipro has truly surprised the Street with its aggression, sharpening focus on large deals & focused sales. Under the new CEO, Wipro has made a solid beginning & We believe that the gap in growth rate will reduce when compared to peers.”

Buyback opens on Dec 29

Meanwhile, the company has said that its ₹9,500-crore buyback programme will open December 29 and close on January 11, 2021. The company had already received shareholders approval to buy back up to 23.75 crore shares at ₹400 a share. This represents 4.16 per cent of the total paid-up equity share capital of the company as on September 30, 2020.

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