Bangalore: Wipro Ltd, India’s third-largest software services provider, said it will separate its consumer, medical diagnostics and infrastructure businesses and focus on its information technology (IT) business, which is grappling with slowing revenue and strong competition. The company’s stock rose more than 3%.
The new company will be called Wipro Enterprises Ltd and will comprise Wipro’s non-IT businesses, which together contribute less than 15% to the company’s sales and just 6% to its profit. The new company will remain unlisted.
Wipro’s management structure, board and the leadership of the new company’s individual businesses will remain unchanged. The Wipro brand will be jointly owned by both the companies, the company said in a statement. Azim Premji will remain the executive chairman of Wipro’s board and will become the non-executive chairman of Wipro Enterprises.
Wipro chief executive T.K. Kurien said the separation, which is expected to be completed by the next fiscal year, will allow the company to “accelerate investments necessary to capitalize on market growth opportunities”.
“It is a generally positive move as it allows Wipro to be a pure-play IT business and investors had been hoping for this,” said a Mumbai-based analyst, who declined to be named as he was not authorized to speak to reporters. “But it is not a game-changing move. They are struggling to grow revenues and have not been able to match peers in bagging deals,” the analyst said.
“We do not expect material upside (to the Wipro stock) due to demerger,” brokerage Prabhudas Lilladher Pvt. Ltd said in a report.
The separation comes at a time when Wipro, which competes with Tata Consultancy Services Ltd and Infosys Ltd, is struggling to boost revenue. It reported weak earnings for the past two quarters and gave a revenue forecast for the current quarter that disappointed analysts. The company’s banking and financial services customers in the US and the UK—its main markets—are cutting back on technology spending as they themselves are facing a slowdown.