Through its demerger, the company aims to hive off its non IT business into a separate unlisted company.
Radke told CNBC-TV18 that post demerger, investors would find renewed interest in Wipro and the stock may see upward movement. "One may see positive bias in the counter in the last half an hour trading session of Wipro today. However, given that the open interest is quite low, we may not see a sharp rally in the counter today."
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What are the various options available to shareholders of Wipro and what are you recommending doing with it?
A: The Wipro demerger is announced and the management has given three options to the shareholders . 1) To convert the Wipro Ltd. shares into Wipro Enterprises, which would be an unlisted entity. 2) To go for 7 percent redeemable points. 3) To convert back these shares into the Wipro Ltd.
I expect most of the people would opt the third option. We are also recommending most of the clients to opt third option given that most of the investors are betting on the IT business. Third option gives them an opportunity to play the core business which is IT.
Even on the American Depository Receipts (ADR) front, the ADR holders have an option to convert these shares back into ADR Wipro Ltd. So, on an overall basis one may see the stock having some positive demand after the demerger also.
Tomorrow is the ex-date of the demerger and followed by that the Futures contract would get expired today. Broadly most of the contracts have got reduced in the last expiry and we have left with small positions into the Wipro Futures. So, one may see positive bias in the counter in the last half an hour trading session of Wipro today. However, given that the open interest is quite low, we may not see a sharp rally in the counter today.
However, post demerger the interest among the investors would be in the counter and we may see upward movement in the counter.
Q: What kind of a price adjustment do you see because of this demerger?
A: On broader basis, if I am expecting most of the people are opting for the third option, which is converting back the Wipro shares into the Wipro Ltd., one may say it is not a correction, it is a price drop. This is adjustment on the basis of demerger of the amount about 10-11 percent.
This is a technical adjustment of the business, which is going ex. So, maybe on tomorrow we may see the stock trading about 10-11 percent below today's closing price to just do a technical adjustment.
Q: Is there a lot of debate on the choice between the three options or the one that you indicated seems to be the consensus among the clients and holders of Wipro?
A: We have been speaking to most of the clients right from the Foreign Institutional Investors (FII) to the domestic. They have been very happy about the three options which have been given. It is a variety of options, which one can select, but most of the investors are opting for the third option.
As I said that on Wipro as a whole investors are betting on the core IT business and the enterprise version, which is more of a Fast Moving Consumer Goods (FMCG) and other businesses that was not the investment buy for the investors. So, they may opt and they are more or less of the consensus that they would be investing into the third option.
The ADR holders have only single option, which is converting back into the Wipro Ltd. Just to give some background Wipro ADRs were trading at a premium to the normal stock around 40 percent, which came down to 20 percent in last couple of years.
As the float increases in ADR market, we may see the spread of 20 percent premium contracting further. That is what we are hoping also that the spread should contract around 15 percent odd after the float coming into the ADR market.
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