Wipro a market performer: Prabhudas Lilladher

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Wipro a market performer: Prabhudas Lilladher

Prabhudas Lilladher has maintained a market performer rating on wipro.

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RELATED NEWS Buy RIL; target of Rs 2206: Motilal Oswal Buy ICICI Bank; target Rs 931.90: ABN AMRO Bajaj Auto a market performer: Prabhudas Lilladher KEC International an outperformer: P Lilladher Buy HCL Tech; target of Rs 360: P-Sec Wipro BSE | NSE 28/05/12 Are Mutual Funds betting on Wipro?

Prabhudas Lilladher has maintained a market performer rating on Wipro.

Prabhudas Lilladher research report on Wipro

Wipro Technologies announced the acquisition of the Nasdaq-listed Infocrossing and its subsidiaries. The USD463million all-cash deal values each share of Infocrossing at USD18.7 (v/s the last traded price of USD17.7) and is expected to be closed by November '07.

Infocrossing has a significant presence in the Infrastructure Management Services (IMS) space in the US. Wipro hopes to leverage this to improve its chances of winning large IT deals in which an IMS component is almost always a requirement. Prima facie, it appears that, at a valuation of 12x CY07E EV/EBITDA, Wipro has probably made a reasonable deal in this acquisition. Since the acquisition will be consummated by November '07, we do not expect it to have any real impact on Wipro's financials this fiscal (marginal EPS dilution of less than 1% likely).Maintain Market Performer rating. 

Financials and Valuations

Info crossing has "guided" to revenue of USD 255 million, with PAT of USD12 million  (for the current fiscal). This translates into a forward EPS of USD 0.44 a share. The company has an 18% EBITDA margin, with current outstanding debt of USD130m (USD72 million of which is convertible into equity in the event of the company being acquired). Wipro's offer of USD18.7 per share values Infocrossing at 40x FY08E earnings and at an FY08E EV/EBITDA of 11.4x. Prima facie, the acquisition appears to be a reasonable deal for Wipro. It would be largely earnings-neutral in FY08 (less than 1% dilutive). Maintain Market Perfomer.