Soap to IT services business conglomerate Wipro Ltd on Friday received shareholders nod for its plan of spin off the entity into two different business units.
Azim Premji promoted Wipro Ltd earlier in November this year had announced its intention to demerge its business into Wipro Ltd and Wipro Enterprises Ltd.
As per the proposed plan, the IT services arm of the company would remain as a listed company under the brand Wipro Ltd, while the consumer care, ligthing and engineering services businesses will be under the brand Wipro Enterprises Limited and will be an unlisted entity.
At an Extra Ordinary General Meeting (EOGM) organised by the company on Friday by the direction of Karanataka HC, the shareholders of the Bangalore-based company approved the proposed demerger plan. The meeting was a closed one and mediapersons were not allowed inside the company's Electronic City where it was organised.
In a statement published on the company's website, Wipro said, "We write to inform the stock exchanges that the shareholders at the court convened meeting held on December 28 have approved the scheme of arrangement between Wipro Limited, Azim Premji Custodial Services Private Limited and Wipro Trademarks Holding Limited."
According to some shareholders with whom Business Standard spoke to said the meeting was chaired by the Wipro's CFO and Executive Director Suresh Senapaty, and majority of the shareholders agreed to all the three options the company announced in November.
They also said the EoGM was primarily on the agenda of seeking approval for the demerging Wipro Ltd into two entities and the options offered for shareholders as part of the company's plan.
Under the demerger plan, Wipro shareholders have three options.They can receive one equity share with face value of Rs 10 in Wipro Enterprises for every five equity shares of Rs 2 each in Wipro that they hold; or receive one 7% redeemable preference share in Wipro Enterprises, with face value of Rs 50, for every five equity shares of Wipro that they hold; or exchange the equity shares of Wipro Enterprises and receive as consideration equity shares of Wipro held by the promoter.
Each Redeemable Preference Share shall have a maturity of 12 months and shall be redeemed at a value of Rs 235.20.
The company has constituted a special committee comprising N Vaghul, Bill Owens and M K Sharma to oversee the planning and execution of the demerger plan. The demerger is expected to be completed by the next fiscal year.
The non-IT servics business contribute about 14% of the total revenues of the company. In fiscal year 2011-12, the IT business contributed to 86% of revenue and 94% of operating profit of Wipro Limited.
Wipro Limited, promoted by billionaire Azim Premeji intends to reduce the promoter's stake in the company through this demerger. Presently, the promoter holding in Wipro is about 78.31%. As per Sebi guidelines the promoters would have had to pare their holdings in the company to below 75% before June 2013. The market regulator
has approved Wipro's demerger route for the compliance of minimum public shareholding requirement.
When asked about the structure of the newly formed entity and media reports of appointing Rishad Premji on the Board of Wipro Enterprise, shareholders said, "These points were not discussed in today's meeting."
There were reports in some section of media that Wipro Enterprises, a non-listed wntity, will appoint Rishad Premji, elder son of chairman Azim Premji, as a director. Rishad Premji, who is presently the Chief Strategy Officer of Wipro is on the board of Wipro GE Medical Systems Limited, a joint venture with American conglomerate GE.
When contacted by Business Standard, a Wipro spokesperson declined to comment.
The company had said at the time of announcement of the demerger that Azim Premji would be non-executive chairman of Wipro Enterprises.