The untold story of a slice of Wipro shares

Wipro Ltd., founded on 29 December 1945, is the youngest member of this elite club (Tata Steel is the oldest, followed by ITC, Hindustan Unilever, Asian Paints and M&M).

The thirtieth edition of Twich+ uncovers a never-before-told story of how a member of the Premji family explored selling his stake, attracting interest from some of the buccaneering names of global finance, but the transaction did not go through because of a byzantine law.

So, who was this Premji family member and what really transpired?

First, a quick recap on Wipro.

Mohamed Husein Hasham Premji founded Western India Vegetable Products Ltd on 24 December 1945 in Amalner, a town about 350 km from Bombay, now Mumbai. Hasham Premji was the father of four children, two daughters and two sons. The youngest of them, Azim, left for Stanford to pursue an engineering degree in 1963. The same year, Azim Premji’s elder brother, Faroukh M.H. Premji, was inducted into the company’s board. He also owned some shares in the company.

Two years later, in 1965, Faroukh stepped down from the board and decided to move to Pakistan after getting married.

Back in Bombay, on 11 August 1966, Hasham Premji, who was 51, died of a heart attack. His wife, Gulbanoo Premji, had to now call back her youngest son from college in the US to steer the company. So Azim Premji, who was just two semesters short of completing his four-year graduate degree, left to join the family business. Two years later, at 23, he became the managing director.

Over the next half a century, AHP (as he came to be known by his colleagues) turned Wipro into a global brand before finally stepping down as chairman in 2019 and passing the baton to his elder son, Rishad.

In the meantime, the shares owned by Faroukh increased manifold in value as Wipro kept rewarding investors with stock splits and bonus shares.

In the summer of 2008, some of the most celebrated names in the world of finance, including Elliott Management and BlackRock, were surprised when they were presented a deal to buy 9.22 million or 0.62% of Wipro’s shares, according to an executive who worked on the transaction. These shares belonged to Faroukh, now based in Pakistan.

A consultant representing Faroukh made the deal even sweeter: The $120 million worth of shares could be bought at a discount, and the entire transaction could be closed between $75 million and $80 million.

What made Faroukh explore a share sale and why at this massive discount?

In 1968, India enacted a law called the Enemy Property Act, under which all movable and immovable assets owned by people who had moved to Pakistan and China were confiscated by New Delhi. This implied that shares in both public and private companies and real estate of Indian citizens before they moved to the two countries were now essentially with the government.

All these assets eventually came to be owned by the Custodian of Enemy Property for India, a department under the Ministry of Home Affairs.

It is important to mention here that during World War II, the US and the UK, too, had taken control of the properties of citizens who had decided to settle in countries such as Japan and Germany. Elliott, the hedge fund, was among the first to take a stab at what appeared to it a mouth-watering transaction. Blackrock was next.

Not surprisingly, the country’s leading domestic investment bankers, including JM Financial and DSP Blackrock, were reluctant to engage with Azim Premji on this subject. Both Nimesh Kampani and Hemendra Kothari knew that AHP, who was a stickler for rules, would not speak with the government about the transaction.

Still, this did not stop some of the biggest names from the American political establishment from lobbying the Indian government. The former US secretary of state Henry Kissinger and the then secretary of state, Condoleezza Rice, discussed this subject with P. Chidambaram, the finance minister, in 2008 and with late Pranab Mukherjee the next year.

The request was to let the Wipro shares be exempted from the draconian legislation.

The then government realized that this could not be done as allowing one such transaction to go through would open a Pandora’s Box.

As the government refused to yield, the deal remained unfinished, and by the summer of 2010, both the American firms had dropped their plans to continue with the transaction.

It wasn’t just the big boys of the finance world that eyed this prized asset.

In 2011, an American citizen, Abubaker Cochinwala, claimed to be the owner of these shares and sought the help of the Bombay high court to direct the central government to release the shares. Five years later, Amjad Baksh, an accused in the 1993 Mumbai bomb blasts case and who the Supreme Court later freed, wrote to the ministry of home affairs, claiming to be the owner.

Towards the end of the decade, New Delhi finally amended the Enemy Act and decided to sell all such shares and properties as the government looked to raise money.

In April 2019, the government earned $165 million when it sold 44.3 million Wipro shares (the number of shares increased because of stock splits and bonus shares) to three state-owned insurance companies. Life Insurance Corp. of India bought 38.6 million of the shares, while General Insurance Corp. and The New India Assurance Corp. bought the remaining.

These shares were valued at $401 million on 5 January when Wipro shares touched a three-year high, but a rout in IT shares over the last six months means they are worth $245 million as of 16 August.

In an ideal world, this money should have gone to the legal owner of the shares: Faroukh Premji, the elder brother of one of the world’s greatest philanthropists.