Wipro hives off non-IT business into enterprise
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In a strategic move, Indian IT bellwether Wipro Ltd on Thursday hived off its non-IT business into a separate entity by demerging its consumer care and lighting, infrastructure engineering and medical diagnostic product and services business from software services and products business.
"The board has approved the demerger of Wipro Consumer Care & Lighting, Wipro Infrastructure Engineering and Wipro Medical Diagnostic Product & Services into a separate company to be named Wipro Enterprises Ltd," the global software major said in a statement here.
Post de-merger, Wipro Ltd will focus on IT services and remain listed while Wipro Enterprises Ltd will be an unlisted company.
The demerger is expected to be completed by next fiscal year (2013-14) after judicial and regulatory approvals.
"The demerger is set to provide fresh impetus to pursue their individual growth strategies and improve the competitiveness of the two entities in their respective markets and," the statement noted.
As its flagship division, Wipro's global IT business accounted for 86 per cent of revenue (Rs.37,525 crore) and 94 per cent of operating profit of the company.
"I am confident that the demerger will enhance value for our shareholders, and provide fresh momentum for growth. Each of our distinct businesses is best of breed in its respective industry, and we are committed to both the businesses," said Wipro chairman Azim Premji.
Premji will, however, remain executive chairman of Wipro board, which remains unchanged. He will also be the non-executive chairman of Wipro Enterprises Ltd.
"Creating a technology-focused company will allow us to better serve the needs of our customers, and accelerate investments necessary to capitalise on market growth opportunities," Wipro chief executive T.K. Kurien said in the statement.
The company has set up a special committee of its board of directors to oversee the planning and execution of the demerger, which will be effective retrospectively from April 1, 2012.
The committee will comprise the board's independent directors N.Vaghul, Bill Ownes and M.K. Sharma.
"As the businesses of Wipro Enterprises Ltd are diverse, this demerger gives them an opportunity to pursue their independent growth plans," said Wipro chief financial officer Suresh Senapaty.
The demerger will also have no impact on the management structure of the parent company or in the leadership of the new entity though both the entities will jointly own the Wipro brand.
The demerger will pave way for Wipro Ltd to increase its public float for meeting the minimum public shareholding requirement under clause 40A of the listing agreement, as stipulated by the regulator - Securities Exchange Board of India (SEBI).
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