World Bank discloses 4-yr Wipro ban

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Mumbai: In what could further sully the image of an Indian IT sector still coming to grips with the Satyam fraud, the World Bank announced in Washington late on Sunday that it had barred Wipro Technologies from contracts under its corporate procurement programme until 2011. Two other companies were also barred: the beleaguered Satyam Computer Services and a relatively smaller company, Megasoft Consultants.

The Bank also intends to publicly list all companies that have been barred from its corporate procurement to ensure fairness and transparency, it said. The World Bank said it had imposed the ban from 2007 because Wipro offered shares during its US IPO in 2000 to Bank employees.

The BSE IT index fell by 3.80% on news of the Wipro ban. However, a statement by Wipro saying earnings from the World Bank were negligible and that the ban been issued in 2007 assuaged the woes of traders. A few IT stocks staged a recovery, but there was significant selling pressure, with Aptech and TCS falling by 5.34% and 4.46%, respectively. Wipro lost around 9.30% in Monday’s trades.

Stating that it had been consulted about the disclosure made by the World Bank under revised policies, Wipro justified the share offer to Bank staff, saying it was part of the US Securities & Exchange Commission (SEC)-approved directed share programme (DSP). The programme sought to involve employees and customers in the public offering, and the move was aimed at expanding Wipro’s recognition and brand, the company said.

“The aggregate number of shares purchased by (World Bank staff) was 1,750 for about $72,000 at the IPO price. All participants in the programme signed a conflict of interest statement that their purchase did not violate any ethics or conflict of interest policies of their company,” the Wipro statement added. Repeated attempts by FE to contact World Bank representatives failed to elicit a response.

Viral Thakker, director-IT advisory services, KPMG India, said it is difficult to ascertain how big the World Bank’s IT contracts were with the banned Indian companies. “These contracts are usually based on strong performance at operational levels and, therefore, it serves as a lesson to all companies that they need to be more clear about governance around the procurement process.”