Wipro shares jump 4% to be the top Nifty 50 gainer after $500 million deal win

Shares of Bengaluru-based IT services company Wipro Ltd. jumped up to 4% on Friday, becoming the top performer on the Nifty 50 index after securing an order in the US on Thursday. Wipro's shares are currently trading 3.6% higher at ₹477.55, maintaining their position as the leading gainers on the Nifty 50 index.

In a filing on Thursday evening, Wipro announced that a prominent US communication services provider has granted them a contract for managed services involving certain products and industry-specific solutions. The $500 million agreement is expected to extend over five years. Wipro has not disclosed the name of the communication service provider that awarded the contract.

The deal is particularly significant as it marks the first major contract won by Wipro under its new CEO, Srinivas Pallia. A 32-year veteran of Wipro, Pallia took over the role on April 6 following the resignation of his predecessor, Thierry Delaporte.

In April, the Bengaluru-based company announced it had signed a multi-million-dollar agreement with telecommunications giant Nokia, although the exact amount was not disclosed. The deal entails revamping Nokia's employee service desk and providing seamless, real-time IT support to its global workforce.  

Just two weeks after assuming leadership of the company, Pallia identified five key focus areas to revitalize Wipro. The foremost of these was to boost large deal momentum by fostering closer collaboration with clients and partners.

Brokerage firm Morgan Stanley commented that the significant deal in the US is a positive development, particularly given the current constraints on discretionary spending. However, the firm noted that while such large deals enhance Wipro's revenue growth visibility, the company's near-term growth may still fall behind its peers. Until this growth disparity is addressed, the price-to-earnings multiple gap between Wipro and its competitors is likely to remain substantial.

In its recent annual report, Wipro stated that it anticipates growth in the financial year 2024-25, driven by client investments in critical areas such as Artificial Intelligence (AI) and Generative AI implementation, among others. 

For the fourth quarter ending March 31, the IT services exporter reported a total contract value (TCV) of $1.2 billion, marking a year-on-year increase of over 9%. Wipro categorizes deals with a total contract value of $30 million or more as large deal bookings. On a full-year basis, the order book rose by over 16%, reaching $4.6 billion compared to $3.9 billion in FY23. Chief Financial Officer, Aparna Iyer, mentioned that the company is also securing vendor consolidation deals in Europe.

Of the 45 analysts covering Wipro, more than half, specifically 23, have given the stock a "sell" or equivalent rating. Thirteen analysts have assigned a "hold" rating, while only nine recommend a "buy." Morgan Stanley also has an "underweight" rating on Wipro, with a price target of ₹421, indicating a potential downside of 12% from current levels.