Sell Wipro, target Rs 240: Emkay Global Financial Services
Wipro plans to leverage its Automation platform Wipro Holmes to derive synergies out of this deal.
By ETMarkets.com | Updated:
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Emkay Global has given a ‘sell’ rating on Wipro with a target price of Rs 240.
Wipro has announced a seven-year deal with ICICI Bank for a TCV of $300 million. The deal is expected to start delivering revenues from Sep'19 itself. We see this deal to be similar to the people takeover deals that have gained prominence in the sector over the recent years.
This deal provides revenue visibility of ~0.2% of Wipro's FY20E revenues and ~0.4% bps on annualized basis. As a part of this strategic engagement, Wipro will absorb about 3,800 employees of Vara lnfotech along with its existing contracts, facilities and assets.
“While no margin details have been shared, we reckon that margins for this business will certainly be dilutive to Wipro's native IT Services margins, given low revenue productivity of Vara lnfotech's business ($8,300 for Vara vs $47,300 for Wipro).
Vara Infotech had revenues of Rs 220 crore in FY19. Vara Infotech used to provide BPO, App Services and Infra support to ICICI bank. Wipro plans to leverage its Automation platform Wipro Holmes to derive synergies out of this deal.
Wipro has announced a seven-year deal with ICICI Bank for a TCV of $300 million. The deal is expected to start delivering revenues from Sep'19 itself. We see this deal to be similar to the people takeover deals that have gained prominence in the sector over the recent years.
This deal provides revenue visibility of ~0.2% of Wipro's FY20E revenues and ~0.4% bps on annualized basis. As a part of this strategic engagement, Wipro will absorb about 3,800 employees of Vara lnfotech along with its existing contracts, facilities and assets.
“While no margin details have been shared, we reckon that margins for this business will certainly be dilutive to Wipro's native IT Services margins, given low revenue productivity of Vara lnfotech's business ($8,300 for Vara vs $47,300 for Wipro).
Vara Infotech had revenues of Rs 220 crore in FY19. Vara Infotech used to provide BPO, App Services and Infra support to ICICI bank. Wipro plans to leverage its Automation platform Wipro Holmes to derive synergies out of this deal.
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“We continue to believe Wipro's relative underperformance is here to stay in FY20E as sectoral weakness can possibly drive a growth moderation in its Financial Services vertical, where the company did well in FY19 (up ~16% YoY in CC terms). Wipro's large buybacks (7.0%/5.5% in FY18/FY19 respectively) have so far supported its stock price. We have a ‘Sell’ rating on Wipro with a target price of Rs 240 (based on 14 times FY21E P/E, a 30% discount to TCS). We have underweight stance on Wipro in our sector EAP. Faster-than-expected deal ramp-ups and rupee depreciation remain key risks,” the brokerage said.Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
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