The World Bank has revealed that action has been taken against a total of five entities in India, including Wipro Technologies, and an individual.
The action was initiated as they were found to have ”violated the fraud and corruption provisions of the Procurement Guidelines or the Consultant Guidelines,” besides offering improper benefits to Bank staff.
Wipro was barred for four years beginning June 2007 for ”providing improper benefits to Bank staff”.
Commenting on the World Bank action, Wipro said in a statement that its inability to get future business from World Bank will not adversely affect its business and results of operations.
It should be noted that the reasons for the World Bank action, in our view, do not show Wipro in a bad light and as regards business, this client has not accounted for any significant portion of the software major’s revenues and thus, there is unlikely to be any major impact.
At the CMP, the stock trades at 7.8x FY2010E EPS. We maintain a BUY on the stock, with a target price of Rs291.