Wipro stock sheds 12% after splitting non-IT biz from parent firm

The stock of Wipro Ltd saw a sharp fall on Bombay Stock Exchange today, its first trading session as a stand-alone information technology (IT) stock after the company separated its non-IT businesses into a separate unlisted firm.

The stock shed as much as 12.19 per cent to close at Rs 393.80, while the broader IT index was down just 2.1 per cent. The benchmark index, Sensex, lost 1.15 per cent to 18,226.48. "We expect Wipro to trade at 10 per cent lower than the current market price post this event," brokerage firm Edelweiss said in a report yesterday.

Last November, Wipro decided to split its non-IT businesses into a separate company to stay focused on the IT business. The company had then stated this would help uncork the value of the IT business as most investors look at Wipro as an IT stock.

According to the demerger plan,  Wipro’s non-IT businesses — Wipro Consumer Care and Lighting, Wipro Infrastructure Engineering and Medical Diagnostic Product and Services businesses--have been separated into an unlisted company called Wipro Enterprises. These three businesses accounted for close to 14 per cent of the company’s overall revenue.

“We like the company’s restructuring initiatives. This makes Wipro a more focused IT company. However, below industry performance and muted quarterly guidance are a cause of significant de-rating,” financial services advisory IndiaNivesh said in a note today. “We believe the company is taking right steps to improve deals flow and profitability.”  

As part of the demerger plan, the company had given its shareholders three options including getting shares in Wipro in exchange for the value of their non-IT holdings or converting their holdings into shares in the privately-held Wipro Enterprises.

Those options are no longer available to anyone buying Wipro shares from today, as the record date for executing the options was set for April 11.

It usually takes two trading days for a purchase to be reflected in shareholders’ demat accounts.