Analysts bearish on Wipro after Delaporte's exit, see up to 15% downside

Even as Srini Pallia, a Wipro veteran, is set to take charge as the chief executive officer (CEO) of the company, analysts expect the stock's underperformance to continue in the near-future.

This, they believe, will be on the back of likely loss of market share, and difficult business environment.

"We expect Wipro to underperform peers on growth once again in FY25 as channel checks and media reports suggest Wipro is losing share with select clients across multiple verticals.

"Turning around the business in a difficult environment is all the more challenging.

"Wipro has to deal with the dual challenges—internal as well as external.

"The stock trades at 20X FY2026E EPS, almost on par with Infosys and only at a marginal discount to HCL Technologies.

"The valuations are expensive for the growth profile," noted analysts at Kotak Institutional Equities.

On Saturday, Wipro announced that Thierry Delaporte has stepped down as the chief executive officer (CEO) of the company with immediate effect.

His resignation is surprising and an acknowledgment of his failure to turn around the business, analysts said.

On the bourses, shares of the IT major fell 1 per cent to Rs 479 on the BSE in Monday's intraday as against the 0.5 per cent gain in the benchmark S&P BSE Sensex.

Wipro has been seeing an influx of talent from various countries and companies along with the departure of long-standing Wipro veterans, which may have led to some cultural differences and a sense of disconnect within the organisation, analysts further pointed out.

Around eight CEOs have resigned from Wipro since the turn of the century, the highest among India-based IT services firms.

These include Vivek Paul, Azim Premji, Girish Paranjpe and Suresh Vaswani (joint CEOs), TK Kurien, Abidali Neemuchwala, and now Thierry Delaporte.

That apart, the IT major, in 2023, saw the departure of more than 10 of its senior leaders, including chief growth officer Stephanie Trautman, chief financial officer Jatin Dalal, chief operations officer Sanjeev Singh, and several others.

"Thierry Delaporte's resignation one year before the end of his contract comes as a surprise, but was on the expected lines as his term was not expected to be renewed.

"The company, during his term, has seen a slew of senior leadership exits and its performance among its large peers was the weakest," said those at ICICI Direct.

Challenges for the new CEO

According to analysts, the new CEO has multiple challenges at hand including leadership retention, managing and growing the acquired consulting portfolio, and completing the long-unfinished turnaround journey.

The $1.45-billion acquisition of CAPCO, for instance, was Thierry's big bet. However, the acquisition has not been fruitful and has not realised synergies. The consulting acquisitions, analysts said, have not worked well for Indian IT.

Investment Strategy

As a strategy, Kotak Institutional Equities has given a 'Sell' rating calling valuations expensive for Wipro’s growth profile with a target price of Rs 435.

Global brokerages Nomura and Jefferies, too, have maintained 'Reduce' and 'Underperform' rating for the stock with target prices of Rs 410 and Rs 470, respectively, according to reports.

"Wipro CEO's resignation reflects continued execution issues.

"With discretionary demand under pressure, appointment of an internal candidate limits 'hopes of a turnaround and rich valuations'.

"Any improvements in performance under the new CEO is likely to be gradual in our view," Jefferies said.

That said, analysts at Emkay Global expect Srini to garner better acceptance internally and take swift actions to arrest churn at senior levels.

"We believe strong execution will address growth underperformance issues and Srini is likely to garner the required support from the rest of the leadership team, founders, and the board to ensure swift corrective actions," said Dipeshkumar Mehta, senior research analyst, Emkay Global Financial Services.

The brokerage has 'Add' rating on the stock with a target price of Rs 500.

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