Finally, realizing the fact that a single entity providing IT services along with various non-IT operations would do nothing to maximize shareholders' wealth, Wipro has decided to demerge them. The Wipro chairman Azim Premji said the move has been aimed at extracting the best out of those businesses.
The new non-IT entity, Wipro Enterprises Ltd, would be an unlisted firm and will include Wipro Consumer Care & Lighting, Wipro Infrastructure Engineering and Medical Diagnostic Products & Services (through a strategic joint venture with GE).
"I am confident the demerger will enhance value for our shareholders, and provide fresh momentum for growth. Each of our distinct businesses is the best of breed in its respective industry, and we are committed to both the businesses," Premji said in a statement.
Experts said that the move would not just allow Wipro to focus attention on non-IT businesses but also help Azim Premji comply with regulations that require promoters' holdings in a company to be capped at 75 per cent.
"The decision was triggered by the fact that non-IT businesses have now reached critical mass, and if we wait for some more time, it will not be possible for us to segregate these businesses," said N Vaghul, independent director on the board of Wipro, as per a media report.
The company has offered three options to its shareholders. The first option is that Indian shareholders can opt for one equity share with a face value of Rs 10 in Wipro Enterprises Ltd for every five equity shares with a face value of Rs 2 each in Wipro Ltd.
Under the second option, investors can also opt to receive a 7 per cent redeemable preference share in Wipro Enterprises Ltd with a face value of Rs 50 for every five equity shares of Wipro Ltd.
Lastly, the company has offered shareholders to exchange equity shares of Wipro Enterprises Ltd and receive as consideration equity shares of Wipro Ltd held by the promoter. The exchange ratio has been set at one equity share in Wipro Ltd for every 1.65 equity shares in Wipro Enterprises Ltd.