# J.P. MORGAN — INDIA EQUITY RESEARCH > *This document is an illustrative research note prepared in the style/format of a J.P. Morgan equity research report. It is NOT actual J.P. Morgan research and is for informational/educational purposes only.* --- # Wipro Limited (NSE: WIPRO | NYSE ADR: WIT) ## IT Services — India **Date: August 28, 2026** | | | |---|---| | **Rating** | **UNDERWEIGHT** (Bearish) | | **Price Target (12-mo, NSE)** | **₹155** | | **Price Target (12-mo, ADR)** | **US$1.58** | | **Current Price (NSE)** | ₹176 (Aug 27 close) | | **Current Price (ADR)** | US$1.80 | | **Implied Downside** | **–11.9% (NSE) / –12.2% (ADR)** | | **Prior PT / Rating** | ₹168 / Underweight | | **Conviction** | **Medium-High** | | **Risk Rating (S&P scale)** | 3T | --- ### Price & Market Data | Metric | Value | Metric | Value | |---|---|---|---| | Market Cap | ₹1.75 tn (US$18.3bn ADR) | 52-Week Range (NSE) | ₹169 – ₹273 | | Shares Outstanding | 9.89bn | 52-Wk Range (ADR) | $1.75 – $3.09 | | Free Float | ~89% | Distance from 52-wk high | –36% | | Avg. Daily Volume (ADR) | ~14.7mn | Distance from 52-wk low | +4% | | Beta (ADR) | 0.39 | Dividend Yield (FY27E) | ~5.8% at PT | | Trailing P/E | 13.1x | FY27E P/E (cons.) | 12.9x | | Net Cash (Jun-26) | ₹182bn (down 47% in 5 qtrs) | P/B | ~2.1x | --- ## THE SETUP: A VALUE TRAP AT 13x We initiate coverage-adjacent commentary with an **Underweight** rating and a ₹155 twelve-month price target (12.2x our FY27E EPS of ₹12.70, a discount to Infosys at 14.5x trailing). Wipro's stock has already de-rated ~36% from its 52-week high, and at 13x trailing earnings it screens cheap versus global IT peers. **We believe the discount is deserved and insufficient.** Three structural issues cap the multiple: (1) a decade-long inability to translate revenue into above-peer growth — revenue has compounded at just **0.8% per year over FY23–FY26**; (2) IT Services margins that have compressed to **~16%**, the weakest among India's top-4 IT firms and now facing a double squeeze from wage hikes and aggressive AI investment; and (3) a technical overhang from its **removal from the Nifty 50 index effective September 30, 2026**, which forces passive selling into an already weak tape. The Q1 FY27 (June quarter) print reinforced our caution: IT Services revenue declined **1.4% sequentially to US$2.6bn**, margins slid to ~16%, and management guided Q2 conservatively. The stock fell on the print; we do not think the negative estimate revisions are done. Consensus still models **+6.6% revenue growth for FY27E** — nearly double the trailing three-year CAGR and, in our view, unanchored to the demand signals the company itself is signaling. --- ## KEY BEAR POINTS ### 1. Growth stagnation: consensus is modeling an inflection that has not arrived - Revenue (₹bn): FY22: 791 → FY23: 905 → FY24: 898 (–0.8%) → FY25: 891 (–0.8%) → FY26: 926 (+4.0%). That is **two consecutive years of negative growth** followed by a recovery year that still lagged every large-cap peer. - FY23–FY26 CAGR of **~0.8%** vs. ~8–11% five-year growth at TCS, Infosys and HCL Tech. - Americas 1 (the largest segment) grew FY26 revenue but Q1 FY27 commentary flagged **softness in the Americas**, Wipro's largest and most discretionary-exposed market. - Consensus FY27E revenue of ₹988bn (+6.6%) requires ~2x the trailing growth rate. We model **+3.1% (₹955bn)** and see downside risk to even that if US enterprise discretionary spend stays frozen pending clarity on AI budget shifting. ### 2. Margin squeeze: AI investment costs now, pricing deflation later - Q1 FY27 IT Services margin at **~16.0%**, down QoQ on wage hikes; management guidance implies only "gradual" recovery. - Wipro's consolidated operating margin (16.2% FY26) sits far below TCS (~25%), Infosys (~21%) and HCL Tech (~19–20%+). The gap has *not* closed under the current strategy. - AI is a double-edged sword: Wipro is spending heavily on AI capability build-out (partnerships with Google Cloud/Gemini Enterprise, Databricks; 10,000 AI specialists in training) — a **cost line today** — while generative AI-driven productivity gains are **deflationary for the pricing of the legacy ADM/commodity outsourcing revenue pool** that constitutes the bulk of its book. Wipro has more of this at-risk revenue mix than peers. ### 3. Flows & index overhang: passive selling into weakness - **Wipro exits the Nifty 50 effective September 30, 2026**, replaced by BSE Ltd — a stark symbolic demotion for a former bellwether. This mechanically forces **Nifty 50-tracking passive funds to sell** their entire index-weight position. - FPI ownership has trended down over recent quarters; the buy-side marginal buyer at these levels is unproven. - Momentum is poor: the stock sits ~4% above its 52-week low, the ADR's analyst consensus is **Sell** with a $1.75 target (–2.8%), and the rating mix has deteriorated sharply (Holds fell from 3 to 1 over six months; Sell-side scores rose from 4 to 6 of 7 analysts). J.P. Morgan's own published stance on the ADR is **Sell, PT cut from $1.70 to $1.60** on July 22, 2026. ### 4. Balance sheet support is shrinking just when it is most needed - Net cash fell from ₹341bn (Mar-25) to **₹182bn (Jun-26), down ~47%** in five quarters — the cost of outsized dividends (₹11/share FY26) and buybacks/bolt-ons. - FCF is going the wrong way: FY26 FCF of ₹134bn (–13.6% y/y); TTM FCF ₹125bn (**–19.8%**). FCF margin has compressed from 18.5% (FY24) to 13.2% (TTM). - The **6.2% trailing dividend yield** is the last leg of the bull case — but a payout of ~47% against a declining-FCF profile with shrinking cash reserves is not an unassailable floor. If FY27 FCF disappoints alongside EPS, we see risk to dividend-growth expectations, removing the primary valuation support. --- ## VALUATION & PRICE TARGET: ₹155 (US$1.58 ADR) Our PT is set on **12.2x our FY27E EPS of ₹12.70**, applied at a ~15% discount to Infosys — the gap already largely reflects Wipro's quality deficit, but we apply it to **below-consensus estimates** because we believe consensus is still too high. | Assumption | This note | Consensus | Delta | |---|---|---|---| | FY27E Revenue | ₹955bn (+3.1%) | ₹988bn (+6.6%) | –3.3% | | FY27E EPS | ₹12.70 (–0.8% y/y) | ₹13.31 (+4.0%) | –4.6% | | FY28E Revenue | ₹985bn (+3.1%) | ₹1,020bn (+3.0%) | –3.4% | | FY28E EPS | ₹13.10 (+3.1%) | ₹13.90 (+4.5%) | –5.8% | | FY27E IT Services margin | 16.0–16.5% | ~17% | ~–100bps | | Target multiple | 12.2x FY27E | — | — | | **12-mo Price Target** | **₹155 / US$1.58** | $1.75 (ADR consensus) | –11% vs. cons. | **Bear scenario:** FY27 EPS ~₹12.00 (margin miss + 2H revenue decline) on 11x = **₹132 (–25%)**. **Bull scenario (risk to our view):** discretionary recovery lifts FY27 EPS to ₹13.60 on 15x = **₹204 (+16%)**. --- ## ESTIMATES & FINANCIAL SUMMARY | ₹bn unless stated | FY24A | FY25A | FY26A | FY27E | FY28E | |---|---|---|---|---|---| | Revenue | 897.6 | 890.9 | 926.2 | 955 | 985 | | Revenue growth | –0.8% | –0.8% | +4.0% | +3.1% | +3.1% | | Gross margin | 29.7% | 30.7% | 29.2% | 28.9% | 28.9% | | Operating margin | 15.1% | 16.8% | 16.2% | 16.2% | 16.4% | | Net income | 110.5 | 131.4 | 132.0 | 124 | 128 | | EPS (₹) | 10.41 | 12.52 | 12.80 | 12.70 | 13.10 | | EPS growth | +0.7% | +20.3% | +2.2% | –0.8% | +3.1% | | FCF | 118.7 | 121.5 | 133.7 | 128 | 133 | | DPS (₹) | 1.00 | 6.00 | 11.00 | 9.05 | 9.50 | | P/E (at ₹176) | 16.9x | 14.1x | 13.8x | 13.9x | 13.4x | | Dividend yield | 0.6% | 3.4% | 6.3% | 5.1% | 5.4% | | Net cash | 243 | 341 | 340 (Jun-26: 182) | ~150 | ~140 | *FY24–FY26 figures per S&P Global Market Intelligence (reported, INR); FY26 EPS on adjusted basis per consensus convention. FY27E/FY28E are this note's own below-consensus illustrative estimates.* --- ## PEER COMPARISON (as of Aug 27, 2026) | Company | Price (₹) | Mkt Cap (₹ tn) | Trailing P/E | Div Yield | ROE | Recent Sales Growth | |---|---|---|---|---|---|---| | TCS | 2,248 | 8.13 | 15.2x | 2.9% | 51.8% | ~10% (5-yr CAGR) | | Infosys | 1,111 | 4.51 | 14.5x | 4.3% | 31.9% | high single digit | | HCL Tech | 1,282 | 3.48 | 19.2x | 4.2% | 23.8% | ~11.5% (5-yr CAGR) | | **Wipro** | **176** | **1.75** | **13.2x** | **6.2%** | **15.5%** | **8.4% 5-yr / 0.8% FY23–26** | The screen screams "cheap." Our response: Wipro has the **lowest ROE, lowest margin, and worst recent growth trajectory of the group**. A ~20–30% P/E discount to peers is the *minimum* justified by the quality gap; on our below-consensus estimates the "discount" largely evaporates. --- ## CATALYSTS (Next 6–12 Months) | Timing | Event | Direction | |---|---|---| | **Sep 30, 2026** | Nifty 50 removal effective | **Negative** — passive selling | | **Mid-Oct 2026** | Q2 FY27 results + H2 outlook | **Negative bias** — conservative guide likely; consensus cuts | | Nov–Dec 2026 | US enterprise budget-setting for CY27 | Two-sided — AI budget shift vs. discretionary freeze | | Jan 2027 | Q3 FY27 results | Negative if margin recovery stalls | | Apr 2027 | FY27 results + FY28 guidance | Key test of +6.6% consensus revenue | | Ongoing | AI-led pricing pressure in legacy ADM renewals | **Negative** — structural | | Ongoing | Capital returns (buyback / dividend step-up) | Positive — main risk to our view | --- ## RISKS TO OUR UNDERWEIGHT 1. **Faster US discretionary recovery** — a broad cyclical inflection in enterprise tech spend would disproportionately re-rate the cheapest large-cap name. 2. **Large-deal ramp** — Wipro booked $3.3bn in Q1 FY27; if cost-takeout deals ramp faster than modeled, FY27 revenue could beat our +3.1%. 3. **INR depreciation** boosts INR-reported revenue/EPS and ADR conversion economics. 4. **Capital-return surprise** — a large buyback would provide near-term support and squeeze bears. 5. **M&A** — a transformational acquisition resetting the growth narrative (execution risk, but narrative-positive). 6. **Base effects** — the stock is 36% off its highs with a 0.39 beta; in a risk-off tape it may fall less than the market, limiting absolute downside. --- ## CONCLUSION **Underweight, PT ₹155 (US$1.58 ADR), –12% implied return.** Wipro is a slow-growth, low-margin business paying out a yield it must fund from a shrinking net-cash pile, at a moment when (a) consensus still expects a growth inflection we do not see, (b) AI is simultaneously costing it money and deflating its core revenue pool, and (c) index mechanics force selling into October. We would turn more constructive only on evidence of (i) sequential IT Services revenue acceleration ex-INR tailwinds, (ii) IT Services margins sustainably above 17%, or (iii) a step-change in discretionary deal flow — none of which are visible today. **Conviction: Medium-High.** The thesis is valuation-and-estimate risk, not distress risk; the dividend floor and net cash cap tail losses, but we see an asymmetrically higher probability of further estimate cuts than beats. --- ## ANALYST CERTIFICATION & DISCLOSURES *This report was prepared in the format of a sell-side institutional research note at the user's request. It is an AI-generated illustration and is not, and must not be construed as, actual research produced, approved, or distributed by J.P. Morgan or any registered research provider. "J.P. Morgan-style" refers only to formatting conventions.* *Analyst certification (illustrative): The views expressed herein accurately reflect the analyst's personal views about the subject securities and issuers, and no part of the analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein.* *Data sources: S&P Global Market Intelligence, StockAnalysis.com, Screener.in, TipRanks, company press releases, Reuters — all as of August 27, 2026 close. Estimates labeled "this note" are illustrative modeling and differ from actual published J.P. Morgan estimates.* *Ratings convention (illustrative, J.P. Morgan style):* **Overweight** — expected to outperform the relevant benchmark over 6–12 months; **Neutral** — perform in line; **Underweight** — expected to underperform. --- *Prepared: August 28, 2026 | Coverage universe: India IT Services | Not investment advice.*