Why Wipro share fell 4% post IT firm’s largest acquisition ever

Wipro share fell 4% in trade today after the firm inked a definitive agreement to acquire London-headquartered management and technology consultancy company Capco for $1.45 billion. The share fell 4% to Rs 421.3 against previous close of Rs 438.85 on BSE.

The stock has fallen after 4 days of consecutive gain. The share trades higher than 5 day, 50 day, 100 day and 200 day moving averages but lower than 20 day moving averages.  The IT share has gained 84.15% in one year and risen 9.46% since the beginning of this year.  Market cap of the firm fell to Rs 2.31 lakh crore.

“We are very excited to welcome Capco’s admirable leadership team and employees, and global clients, to Wipro. Together, we can deliver high-end consulting and technology transformations, and operations offerings to our clients,” Thierry Delaporte, CEO and Managing Director of Wipro Limited, said.

Here’s a look at what brokerages said about the deal. 

Brokerage Credit Suisse was neutral, after the deal with a target price of Rs 500.It said the firm took right steps towards its transformation journey; however, benefits may take some time to reflect.

Morgan Stanley is underweight on the stock with a target price of Rs 410. It said the deal comes as a surprise given size & integration challenges given its large onsite presence .

CLSA gave a target price of Rs 460 on the stock. The firm has an underperform rating on the stock. Capco acquisition is aimed at adding scale to BFSI vertical, the brokerage said adding that Capco is an impressive target with material scale, decent profit and strong client base.

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