Why Azim Premji is displeased with the state of Wipro | Mint

Why Azim Premji is displeased with the state of Wipro

Thierry Delaporte, CEO and managing director of Wipro. (PTI)
Thierry Delaporte, CEO and managing director of Wipro. (PTI)

Summary

  • it is not Wipro’s underperformance in the last six quarters alone that has made Azim Premji unhappy

Wipro Ltd’s founder chairman Azim Premji has expressed displeasure about the way the country’s fourth-largest information technology services company is being steered to executive chairman Rishad Premji and chief executive Thierry Delaporte, four people aware of the development said.

Significantly, it is not Wipro’s underperformance in the last six quarters alone that has made Azim Premji unhappy. The Bengaluru-based company does not expect any incremental growth at least until June of next year, according to its current order book and internal hiring estimates, a Wipro finance executive said.

Wipro, which only gives quarterly revenue guidance, expects revenue to fall up to 3.5% in the October-December period. This will imply its revenue in the October-December period will be almost the same as it was in the October-December period of 2021.

Premji, 78, is unhappy given that Wipro’s turnaround has been hobbled by sweeping cultural changes, falling growth and profitability, a steady stream of exits and underperforming stock, the people said on the condition of anonymity.

Mint could not independently ascertain the nature of the discussions between Premji and Rishad that remain private: No executive accompanies the father and son during the lunch meetings at the modest Premji home, which is next door to Wipro’s office in the south-east edge of Bengaluru’s Sarjapur.

Premji, who owns 73% of Wipro, even expressed his disappointment to Delaporte in a private 45-minute meeting ahead of the Wipro’s 18 October board meeting to approve its second-quarter earnings, one of the four executives said.

Chair Rishad Premji, who succeeded Azim Premji on 31 July 2019, termed Mint’s questionnaire “sensationalist", stating the share price has almost doubled under the watch of Delaporte, who took over as CEO on 6 July 2020.

“Mr. Premji meets Thierry informally every quarter since the time he has joined, and this tradition continues. I also meet my father often to connect and benefit from his wisdom and experience," Rishad Premji said in an email response to a questionnaire. “The challenges of the industry do not take away from the fact that the Wipro stock has appreciated nearly 100% since the time Thierry joined. We do not comment on any forward-looking statements, and we guide for the quarter only."

Wipro’s shares have returned 90% between 6 July 2020 and 8 December 2023, lagging behind Infosys Ltd, HCL Technologies Ltd and Tech Mahindra Ltd, which are up 95.2%, 135.7% and 110.7%, respectively. Tata Consultancy Services’ (TCS) shares were up 60.25% during this time even as the BSE 30 or Sensex was up 91.4%.

It is important to mention that Wipro shares had underperformed rivals in the three-and-a-years before Delaporte joined. Between 3 January 2017 and 7 July 2020, Wipro shares were up 27.13% as against 37% gains made by the BSE 30 and 91.1%, 53.7% and 38.6% returns on shares of TCS, Infosys and HCL Technologies, respectively. Tech Mahindra shares returned 18.3% during this period.

All four executives maintained that Azim Premji will let the board and executive chair Rishad Premji decide on any question regarding Delaporte, whose current five-year term ends in July 2025.

“AHP (Azim Premji) will never tell Rishad what to do as Rishad is the chairman and the bucks stops with him," said a second executive. “Rishad is someone who looks at the numbers. He is the decision maker and it is up to him and the rest of the NRC (nomination and remuneration committee) to decide on the future of the CEO," the executive added.

The two key issues behind the disquiet have been Delaporte’s leadership style and the company’s declining growth and profitability.

The Frenchman’s decision to bring in talent from the outside, given his belief that only fresh thinking can bring about change, has miffed many old-timers, prompting a large number of executives to move out. Under Delaporte’s watch, more than half of the 750 executives, ranked general manager and above, have been let go or left the company.

Eventually, these exits have hurt growth. Among the Big Five, Wipro’s sequential revenue growth has been the worst or the second-worst in five of the last six quarters, according to an analysis by Mint. Operating margin has been the worst among all its rivals, with profitability falling from 19% at the end of 30 June 2020 to 16.1% at the end of 30 September 2023.

In the April-September period of 2023-24, Wipro’s revenue fell 1.5% from a year earlier, while TCS, Infosys and HCL have recorded a dollar revenue growth of 5.7%, 3.7% and 5.2%, respectively.

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