Here’s what brokerages are saying:
Edelweiss
The brokerage said the acquisition is a great fit for Wipro and should be EPS accretive from the third year. The acquisition will dilute Wipro’s IT services’ EBIT margin by 2% in the first year and then revert to normal levels. Wipro’s expertise as a digital transformation player complemented by Capco’s BFSI-focused
consulting capabilities would accelerate growth, said Edelweiss, maintaining buy and a target price of Rs 550.
Nomura
The acquisition provides consulting experience and expands customer reach in marquee accounts in BFSI, said Nomura. On the flipside, valuation seems to be a bit on the higher side for a consulting business and it adds presence in the consulting business which has typically been a less successful venture for India IT services business. The brokerage has maintained reduce with a target price of Rs 410.
Morgan Stanley
Large acquisitions by Indian IT companies have generally not yielded the desired results due to integration challenges, top management exits and/or changes in market dynamics, said Morgan Stanley. The market will wait to see a smooth integration to cheer this transaction, said Morgan Stanley, retaining underweight rating with a target price of Rs 410.
Credit Suisse
Maintaining neutral with a target price of Rs 500, Credit Suisse said Wipro is taking the right steps towards its transformation journey but the benefits of the same may take some time to reflect. The brokerage has maintained rating as it awaits credible data points on revival of organic growth.
