Wipro Planning to Separate Its IT and Non-IT Businesses

By on November 5, 2012

Azim Premji, the chairman of Wipro, has decided to separate the non-IT business dealings from the IT business and utilize it as a separate entity. This action to demerge the two sectors of Wipro comes after a long period with a view to reap in higher profit margins. It is also being reported that the action will help the company to focus on the both the business entities by giving special importance to the IT and the non-IT enterprises of the Wipro firm, separately.

According to the independent director of the Wipro board, N Vaghul, the action to demerge the sections of the enterprise was taken after careful examination of the business procedure and aspect of Wipro enterprise, which found that the non-IT segment of the enterprise had reached its critical juncture. The top management brass of the company even added that in case they would have waited for a few more time before segregating the two sectors of the company, it would have been too late for the process of bifurcation to be a success. The process would have led to the total downfall of the company’s operation.

For the time being, the management has decided to separate the non-IT section of the business from the mast of Wipro Ltd and be provided a separate entity under Wipro Enterprises Ltd. The company, Wipro Enterprises Ltd will be constituted with the Wipro Infrastructure Engineering, Wipro Consumer Care & Lighting, along with Medical Diagnostic Products and Services.

Although the two segments of IT and the non-IT sections of Wipro will be bifurcated, yet the structure of the management and the Board of Wipro Ltd will not be changed for the moment. According to reports of the company, Azim Premji will continue to be holding the position of the executive Chairman of Wipro Ltd, and also take over the duty of the non-executive chairman of the Wipro Enterprises Ltd.

The initiative of separating the IT and the non-IT entities is said to pave the way for expansion of the company for betterment. According to a statement issued by Azim Premji, the initiative of demerging the company will certainly prove to be a profitable affair for the company as a whole, leading to increase in the number of shareholders of the company. The move is also said to enhance the value of the shareholders’ stake.

According to reports, the demerger will prove to be beneficial for both the company of Wipro as a whole, as well as for the shareholders. Even the two new companies of Wipro will also be able to extract huge benefit from the step. Wipro Enterprises Ltd will be able to take up independent decisions regarding any related business matter, under the new board of directors of the company. Even, it will be easier for the company to pave new avenues into newer unlisted entities that might prove to become successful in the end.

The bifurcation will also let Wipro Ltd to focus completely into the IT section and deal with it without getting distracted. This will lead to better business for the company as the returns from the IT sector is still higher than the non-IT counterparts. The move will also sort out the confusion among the clients and other investors, since the company will get relieved of being questioned regarding its involvement in non-IT ventures.

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