Wipro dips 11% post demerger of non-IT biz

Last Updated: Tue, Apr 09, 2013 11:35 hrs

The share price of Wipro Limited, which recently got separated as a pure-play IT services company saw a sharp fall in the early trade on the BSE, a development which raises a question mark if the move by the company has gone in well among the shareholders.

In the early trade on Tuesday, Wipro shed close to 11% whereas the broader IT index was marginally down 0.47%. At 12.30 in the afternoon today, Wipro's shares were trading at Rs 400.50, about 10.69% down from the previous day's close.

"We expect Wipro to trade at 10% lower than current market price post this event," brokerage firm, Edelweiss said in a report.

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

The split took effect legally from March 31, 2013.

"We like the company's restructuring initiatives this make Wipro a more focused IT company. However, below industry performance and muted quarterly guidance is cause of significant de-rating," financial advisory firm, IndiaNivesh said in a note. "We believe the company is taking right steps to improve deals flow and profitability," it added.

As a part of the demerger, Wipro's non-IT businesses including Wipro Consumer Care and Lighting, Wipro Infrastructure Engineering and Medical Diagnostic Product and Services businesses have been separated into a separate unlisted company called, Wipro Enterprises. These three businesses accounted close to 14% to Wipro's overall revenue.

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