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Wipro demerges (finally)

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logoAfter some 40 years of being strapped to the back of its founding consumer products businesses, Bangalore-based Wipro’s IT division is finally to be set free. Wipro was established in 1945 as a vegetable oil manufacturer in Maharashtra state (for which present day Mumbai is the capital). The company at that time was known as Western India Products Limited. Its main area of business was the production of Sunflower Vanaspati Oil, and later on, soaps and other consumer care products.

The IT business kicked off in the 1970’s and in 1985 was the first to market indigenous PCs. Wipro’s current day IT and BPO business started to come to the fore in the 1990’s (like many other leading India-based IT firms) on the back of the Y2K boom. ‘Wipro Tech’ now accounts for 86% of group revenues and 94% of operating profit – and, I would have thought, 100% of its market valuation. Indeed, as a result of the demerger, the non-IT related businesses – to be branded Wipro Enterprises – will not be listed. Azim Premji remains executive chairman of Wipro Ltd (which remains the holding company for the IT/BP business) and non-exec chairman of Wipro Enterprises. Premji controls some 80% of the company’s stock.

In practice this move is unlikely to change the order of play in the Indian offshore services game, though it should make Wipro’s results concalls (next due tomorrow) three minutes shorter – which was about the time that was devoted to management discussion on and investor interest in the consumer products side of the business.


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