Wipro settles National Grid US lawsuit for $75 mn; Q2 earnings may be hit

The British utility major had filed a lawsuit in Dec last year seeking $140 mn towards damage with relation to an ERP project

Information technology (IT) services company Wipro Ltd on Saturday said the company has entered into a settlement with National Grid US for $75 million (around Rs 5 billion) with regard to a lawsuit filed by the energy utility major last year, and the effect of this payout would reflect in its July-September financial results. 

The company, however, didn't specify the quantum of impact on its profits for the July-September quarter. 

In a filing with Indian stock exchanges, Wipro said that the withdrawal of the lawsuit would be completed shortly post the settlement, and this would release the company "of all claims under the lawsuit with National Grid US and a stipulation of discontinuance of the lawsuit".

"The settlement has been effected for an amount of $75 million and is without admission of liability or wrongdoing of any kind by the parties," the company said.

In the lawsuit filed in the District Court for the Eastern District of New York in December last year, National Grid US had sought damages of over $140 million (Rs 9.6 billion) alleging technical glitches in an enterprise resources planning (ERP) project that was implemented by the Bengaluru-based company. According to the British electricity and gas utility major, the implementation had resulted in "substantial damages and millions of dollars of additional costs to stabilise the system".

Wipro started working on the project in 2010 and complemented the implementation in 2014.

"National Grid has been a valued customer of Wipro for over a decade and both organisations have had a mutually beneficial relationship over the years. We believe that this settlement will be commercially beneficial for us and will help us remain focused on growth," Wipro added.

The Bengaluru-headquartered firm, which saw a 5.2 per cent rise in its IT services revenue to Rs 137 billion on a year-on-year basis in the first quarter ended June, has faced client-related issues, impacting its profitability in recent quarters.

For example, the insolvency of two of its telecom clients with a revenue contribution of around $50 million had dragged its net profits in Q4 of FY18, which dropped 20 per cent at Rs 18 billion.

Similarly, the scrapping of Obama Care in the US after President Donald Trump assumed charge led to a revenue loss of around $90 million, which was flowing from its acquired entity HealthPlan Services.

Wipro is currently restructuring its India and West Asia business by shifting its focus from the government segment to enterprise while moving away from low-end commoditised services business through high-end digital offerings. The company is also in the process of restructuring its global healthcare business post the hit it received from the HealthPlan Services portfolio.

In a recent interview with Business Standard, Wipro CEO Abidali Neemuchwala had said that while restructuring of its India and West Asia business would be completed in a couple of quarters, it would be difficult to predict the timeline in the case of the healthcare business.