IiAS, Ingovern support Wipro offer

Advise shareholders of consumer care arm to avail exit option at Rs 367 a share

Two proxy advisory firms asked minority shareholders of Wipro Enterprises (WEL), the unlisted consumer care arm of the IT major Wipro, to accept the exit option provided by the company. In separate reports, Bengaluru-based Ingovern Research and Mumbai-based Institutional Investor Advisory Services (IiAS) said the valuation offered to the shareholders at the exit option price of Rs 367 per share is substantially higher than what investors got at the time of the demerger. On Saturday, Business Standard had reported that a third proxy firm, Stakeholders’ Empowerment Services, had criticised the demerger for being unfairly enriching the promoters.

WEL has called an extraordinary general meeting on January 13 to buy out 3.4 per cent shares held by the minority and take the firm private.

Ingovern said when Wipro Enterprises was demerged from Wipro Limited two years ago as a separate entity, the company was valued at Rs 11,000 crore. “The present valuation of Rs 18,068 crore is 64 per cent higher than the then valuation of Rs 11,000 crore. This implies that the management of WEL believes that the value of the shares of the company has increased by 64 per cent within a span of two years,” it said.

Wipro Enterprises posted net profits of Rs 555 crore in FY14. With a valuation of Rs 18,068 crore and profits of Rs 555 crore, which translated into a price earnings (PE) ratio of 33. Since the consumer care and lighting business of WEL accounts for 78 per cent of the revenue, Ingovern compared it with peers such as Godrej Consumer Care, Marico, Havells and Bajaj Electricals and concluded that “the PE ratio of Wipro Enterprises is comparable to that of peers”.  IiAS in its report pointed out that at the time of the demerger, the stated intention was to keep WEL delisted. “The decision to come back to investors with an offer to buy-back is welcome. Wipro Enterprises is an unlisted company – therefore exit options are limited. While one may have wished for a better price, the price is not significantly prejudicial to the interest of minority shareholders.”

IiAS believed that Wipro’s promoters views, reflected in the EGM resolution will prevail. “At the same time, minority shareholders are not being short-changed either. At Rs 367 a share, those that stayed invested in Wipro Enterprises are getting a better return than those that chose to exit by taking Wipro shares at the time of the demerger. IiAS recommends that investors avail the offer,” the Mumbai-based firm said in the report.

In November 2012, Wipro Ltd demerged Wipro Consumer Care & Lighting (including the furniture business), Wipro Infrastructure Engineering (hydraulics & water businesses), and Medical Diagnostic Product & Services (through its strategic joint venture) into a separate company, Wipro Enterprises Ltd.