Wipro wins biggest contract of over $1.5 billion from Alight Solutions

Information technology (IT) services company Wipro has won its largest contract to date from US-based human resources (HR) and financial solutions company Alight Solutions LLC.

The deal will fetch it around $1.6 billion in revenue over 10 years.

The contract follows the two companies’ strategic alliance announced in July. As part of that, Wipro had announced investing $117 million in Alight and acquiring its captive India unit. 

Wipro was mandated to digitally transform the Illinois-headquartered company’s business as part of this strategic arrangement. 

Alight Solutions, which used to be the technology outsourcing business of HR and management consulting company Aon Hewitt, was acquired by private equity major Blackstone in 2017 and was rebranded an independent company.

“This deal will result in revenues of $1.5-1.6 billion for Wipro over the tenure. This is Wipro’s largest win to date,” the company said in a statement. According to the deal, Wipro will drive digital transformation across Alight’s offers in health, wealth, HR, and finance solutions, among others. 

Winning this deal has helped Wipro to join its larger peer Tata Consultancy Services (TCS), which has won three multi-year deals with a combined value of more than $5 billion since December last year.

This also came as a shot in the arm for the Bengaluru-headquartered firm’s chief executive officer, Abidali Neemuchwala, who is making efforts to close the gaps with its larger peers since he took over in February 2016.

“We are delighted to be chosen by Alight as their long-term strategic partner in their enterprise transformation journey. This is a testimony to the capabilities we have built through our strategic investments in Wipro Digital, cloud platforms and cognitive platform Wipro HOLMES,” said Neemuchwala in a statement.

In a separate filing to exchanges, Wipro said its proposal to acquire Alight HR Services India had been completed on August 31. Alight has around 9,000 employees in India with centres in Gurugram, Noida, Mumbai, and Chennai. It had reported a revenue of Rs 11.32 billion in FY18.

Before the outsourcing contract with Alight, Wipro’s biggest deal win was in June 2014, when it did a $1.1-billion outsourcing deal with Canadian logistics firm ATCO. As part of the 10-year deal, the firm had acquired ATCO’s IT subsidiary for an all-cash consideration of $195 million with the rebadging of around 500 employees.

The Alight deal comes when larger deals are becoming few in the IT services industry. More digital transformation engagements are prompting companies to opt for small deals with shorter tenures.

After this deal, Wipro is likely to better its performance in the current financial year. 

“It’s a boost for Wipro and a huge positive for the industry as it indicates that larger deals are still happening in the IT outsourcing industry,” said Pareekh Jain, managing director of global research firm HfS Research.

Wipro, which was able to beat Street estimates on the revenue front in the June quarter of 2018-19, had reported 5.2 per cent year-on-year growth in its IT services revenue at Rs 137 billion. The company’s net profit during the period grew 2.1 per cent to Rs 21.2 billion.

CLINCH THE DEAL
 

• Wipro in July announced it would acquire Alight’s Indian unit for $117 million as part of the deal

• Alight deal was clinched at a time when larger deals were getting scarcer in the IT industry

• Deal is likely to help Wipro better its performance this fiscal year

• Prior to this, Wipro’s biggest deal win was from Canadian logistics firm ATCO in 2014 at $1.1 billion

• Apart from Wipro, TCS has bagged three large deals worth $5 billion since December 2017