Wipro is acquiring London-based Capco, a global management and technology consultancy to banking and financial services industry for $1.45 billion, making it the Indian IT major’s biggest acquisition till date. Moshe Katri, MD, Wedbush Securities shared his views on the acquisition.

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“We have a neutral rating on the stock and this is a gutsy move by Wipro, it is a large transaction and it brings with it a lot of risks,” Katri told CNBC-TV18 while adding, “Capco is not a pure-play digital company, it has not been able to grow its topline for multiple years.”

On whether he sees the stock being under pressure and underperforming due to the deal, Katri said, “Similar to what we typically see when the new management team coming on board. The market will provide Wipro may be a grace period of about 12 months to see how this pans out. I am assuming some of that is already reflected in the performance of the stock; the stock has been a huge outperformer in the past six-twelve months since Thierry Delaporte came on board but ultimately it will be bad results, and if you can show these results coming through, obviously you will get punished.”

On Wipro’s ability to retain Capco’s top talent, Katri said, “I won’t be surprised if Capco’s top talent or top executives are getting flooded with calls from competitors to jump ship. So this is something that they have to make sure that doesn’t happen and hopefully, they are focusing on this right now.”

Katri believes the Indian IT sector is going through a rerating process.

“I think we are headed towards that reacceleration and in our view, this will support the rerating process that has been going on for some of the top names in the group that are doing very well,” he pointed out.

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(Edited by : Ajay Vaishnav)

First Published:Mar 5, 2021 10:32 AM IST