A phone call, a discussion, and a firing: Behind Delaporte's Wipro exit

Delaporte, whose five-year term was to end on 5 July, 2025, told Premji that India's fourth largest IT services company should do better in the second half of FY25, two executives aware of the call said, despite Wipro not expected to grow in the April-October period.

Mint could not ascertain internal growth numbers discussed in the call; however, Wipro, which declares earnings on 19 April, is expected to see its full-year revenue decline.

To Delaporte’s surprise, Rishad declined to offer a second term, and expressed unhappiness with Wipro's continued underperformance, based on the growth numbers collated by the company for FY24 and the outlook for the first half of FY25, the two executives said on condition of anonymity. The continued departures of senior Wipro executives and the growing disquiet over Delaporte's leadership finally made Rishad to seek the resignation, the executives said.

Conversations related to separation typically occur in person, the first executive said. However, this one started over a call, followed by emails and finally got the stamp of approval from the nine-member Wipro board, many of whom attended virtually.

Delaporte, who visited India on 12 January at the time of third-quarter earnings, was to brief analysts and the media later this month at the fourth-quarter earnings. That trip looks unlikely now.

“Ideally, Wipro would have wanted to announce the leadership changes at the time of the earnings (fourth quarter)," said the second executive. “Both sides had not planned the outcome (of the call) would be what it turned out to be."

At 13 minutes past seven on Saturday evening, Wipro informed exchanges that it had named Srini Pallia as the new CEO, its eighth since 2000. The press release stated the change was “effective immediately," making Delaporte the fifth Wipro CEO who could not complete his stated five-year term which was to end on 5th July 2025.

An email sent to Wipro seeking comment went unanswered. Delaporte was not immediately available for a comment.

Delaporte did not see the coming exit either, according to a second executive. As recently as the third week of March, he presided over an internal call of about 1,000 employees where he sounded confident and spoke about Wipro and its recent acquisition Capco, Mint has learnt.

In March 2021, Wipro spent $1.45 billion to buy Capco, a London-headquartered consulting firm. In the third week of March this year, Capco’s CEO Lance Levy stepped down to take over an advisory role, becoming the 25th executive ranked senior vice-president (SVP) and above to leave under Delaporte’s watch.

“There was no indication that the CEO was even planning to step down as he was talking about positioning of the two companies (Capco and Wipro) in the current financial year," said the second executive." I think Delaporte was blindsided with the pace of events. He perhaps did not anticipate he would be asked to resign so quickly, even though his moving out was not surprising."

Wipro’s founder chairman Azim Premji has expressed displeasure about the way Wipro was being steered to executive chairman Rishad Premji and Delaporte, Mint reported on 10 December. Premji, who owns 73% of Wipro, expressed his disappointment to Delaporte in a private 45-minute meeting ahead of Wipro’s 18 October board meeting to approve its second-quarter earnings. Premji, 78, was 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.

“In hindsight, one can say that the meeting with Mr. Premji was the one which can be described as when the die was cast," said a third executive.

Delaporte’s decision to bring in external talent on the reasoning that only fresh thinking can bring about change prompted many executives to exit. During his tenure, over half of the 750 executives ranked general manager and above have been let go or left the company, leading many internal and former executives to question its course.

Eventually, these exits have hurt growth.

Wipro, which clocked $2.65 billion revenue in the December quarter, has seen compounded quarterly revenue growth of 2.34% between 1 July 2020 and 30 December 2023. Infosys, HCL Technologies Ltd and Tata Consultancy Services Ltd’s compounded quarterly revenue was 2.91%, 2.69% and 2.63%, respectively.

Among the Big Four IT services companies, Wipro was the most acquisitive, spending close to $2.5 billion in buying a dozen-odd companies. Without the $850 million in annual revenue (or $212.5 million in quarterly revenue) from these companies it bought, Wipro’s compounded organic growth was 1.73%, according to Mint’s calculations.

Meanwhile, profitability, the lowest compared to rivals, slipped the most. Operating margin fell 300 basis points, from 19% at the end of 30 June 2020 to 16% at the end of 30 September 2023. During this time, TCS improved its operating margin by 140 basis points to 25% while Infosys and HCL’s operating margin declined 220 basis points and 70 basis points, respectively.

Wipro’s shares have returned 114.7% between 6 July 2020 and 5 April 2024, better than the 80.6% and 93.5% returns in shares of TCS and Infosys. HCL Technologies’ shares are up 155.6% during this period even as the BSE 30 or Sensex was up 106.1%.

It is important to mention that Wipro shares had underperformed rivals in the three-and-a-half years before Delaporte joined. Between 3 January 2017 and 7 July 2020, Wipro shares were up 27.13% as against 37% gains made by Sensex 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.

Some former executives maintain reviving Wipro will be a challenge for New Jesey-based Pallia, 57, who joined the company in 1992. But at least one former Wipro executive gave a thumbs-up.

“Srini is an extremely bright leader with very high potential," said former Wipro CFO Suresh Senapaty. "I am very confident that he will turn around Wipro within a reasonable time considering the fact that he commands very high respect of the Wipro team and is very strong in strategy, including execution excellence."

“The biggest challenge for Srini will be to control the loss of current clients," said a former colleague of Pallia. “In the immediate months, he should only focus on the current client base and look at the growing base of accounts."

Wipro has a retirement age of 58 for all executives. At 57, Pallia does not have to worry much because he is based out of the US and the country does not have an age by when executives have to step down. "Srini could be called as the last man standing who finally got rewarded," said a fourth executive. Pallia has a five-year term as CEO.

Delaporte joins a long list of Wipro CEOs who left mid-way. These include Vivek Paul’s second term as CEO, co-CEOs Suresh Vaswani and Girish Paranjpe, and Abidali Neemuchwala, who was hired from TCS. Paul completed his first five-year term, followed by T.K. Kurien, who completed his five-year term between 2012 and 2017.

Chair Rishad Premji, who succeeded Azim Premji on 31 July, 2019, has presided over the exits of both Neemuchwala and his successor Delaporte, raising questions about the company's ability to find the right candidate. However, not everyone agrees.

“Once Rishad was convinced that his experiment of bringing a foreigner and an outsider had failed, he acted decisively and cut his losses," said the second executive cited above. “One can argue if this should have been done six months earlier. But what you cannot question is that owners remain committed to the company and that is why they have looked at all ways to revive the company."