Bangalore/New Delhi: Wipro Ltd plans to build custom-designed solar and other renewable energy plants by entering the green energy technology business that’s dominated by players such as Tata BP Solar Ltd and Suzlon Energy Ltd and attracting the likes of Reliance Industries Ltd and Moser Baer Pvt. Ltd.
“We are at a stage of exploring various concepts and renewable energy is one of them,” said Anurag Behar, managing director of Wipro Infrastructure Engineering Ltd, without disclosing a launch date for the business. The company will be seeking shareholder approval for entering the renewable energy business at its annual general meeting on 16 July.
Wipro’s entry into the business comes at a time when renewable energy, in particular, has stoked investor interest the world over as oil prices rule at around $120 (Rs5,088) a barrel. “Thin film (a kind of technology that helps harness solar energy) will see large emerging applications and a robust demand (for manufacturing capacity) that is expected to grow 10-fold from 250MW currently to 2GW by 2010 with a market size of $6 billion,” Shushmul Maheshwari, chief executive of RNCOS E-Services Pvt. Ltd, a New Delhi-based market research firm, had told Mint in January this year.
What is also attracting investors to the solar energy business here are subsidies announced last year for electricity generated through solar panels. Firms such as Reliance Industries Ltd, Videocon Industries Ltd, Moser Baer, TF SolarPower Pvt. Ltd and a handful of others have announced plants to manufacture solar panels. Moser Baer, its executive director Ratul Puri had told Mint in January, expected the solar photovoltaic line to generate revenues of Rs6,000 crore in 2009.
According to consulting firm Frost and Sullivan, the installed capacity for solar power plants in India was 4.8MW in February. “After the government announced the new policy initiatives to develop grid-integrated solar photovoltaic and solar-thermal power plants, there is a huge capacity announced in West Bengal, Punjab and Haryana,” said Amol Kotwal, deputy director at the Bangalore office of the consultancy. Moser Baer has started a small unit in Rajasthan, while Reliance Industries is setting up a business in Jamnagar, Gujarat. Mint could not immediately ascertain where Wipro would set up its solar business.
Wipro, said a green energy expert, has a history of investing in new emerging areas. “From an oil and soap company, to technology and now to renewable energy,” said Shirish S. Garud, a fellow of renewable energy technology applications at The Energy Research Institute, or Teri, in New Delhi. “For corporates like Wipro, it is important to develop low-carbon infrastructure and operations.”
Further, the Bangalore company’s edge in technology and electronics (it is one of the only top tech services firm to also have a hardware business) will help it in the solar energy business, Garud added. “Technology will play a very important role in the renewable energy market with things like embedded software and intelligence control systems improving the efficiency of operations,” he said.
Wipro’s entry into renewable energy follows its recent diversification into water purification business through the acquisition of Mumbai-based Aquatech Industries Pvt. Ltd, that manufactures and sells water purification systems to beverage manufacturing, pharmaceutical, cosmetics, electronics and semiconductor, chemical processing and textile companies.
“Our water acquisition in Wipro Infrastructure Engineering was basically to make equipment...because we see it as a huge emerging opportunity in India and in the surrounding markets,” chairman Azim Premji had told analysts in an earnings call on 18 April after Wipro announced its annual results for fiscal 2008.
For the year to March, Wipro Ltd reported a one-third rise in revenues to Rs19,957.5 crore, while profits rose 12% to Rs3,282 crore. The software services business contributed 87% of Wipro’s revenues, while the consumer care and lighting business accounted for around 7%. Wipro Infrastructure Engineering, which clocked a revenue of Rs1,200 crore, accounted for about 6%.
As part of its diversification strategy, Wipro has already approached the government for necessary approvals to enter defence production, where it plans to build electronic warfare systems, radars and simulators locally for US defence contractors such as Lockheed Martin Corp and Northrop Grumman Corp. as it pursues offset contracts for missiles and aircraft sold by foreign vendors to Indian Armed Forces.
Wipro’s interest in defence springs from an Indian offset policy mandating that foreign contractors source components and systems from local vendors for at least 30% of the value of orders of more than Rs300 crore that they get from the Indian Army. Such offset orders are expected at nearly Rs40,000 crore up to 2011, according to the ministry of defence.