Wipro shares fall 12% on demerger

Written by feBureau | Bangalore | Updated: Apr 10 2013, 06:29am hrs
IT major Wipros shares declined by 12.19% on the BSE on Tuesday after the companys demerger plan between the IT and non-IT businesses came into effect. The scrip ended the day at R393.80 as against the close of R448.45 on Monday.

The separation of Wipro businesses will witness the IT segment remaining a listed entity called Wipro while the non-IT segment, which includes consumer care, infra engineering and medical equipment, will turn into a privately held unit called Wipro Enterprises.

Wipro, which has received all the legal approvals for the demerger, has announced April 11 as the record date for determining the members of the company to whom securities of the resulting company will be allotted and who will be entitled to the exchange right pursuant to the scheme of arrangement.

As per the scheme of arrangement, Wipro has provided three options to the shareholders. Under the first option, shareholder can receive one equity share with face value of R10 in Wipro Enterprises for every five equity shares with face value of R2 each in Wipro that they hold. In the second option, one can receive one 7% redeemable preference share in Wipro Enterprises, with face value of R50, for every five equity shares of Wipro that they hold and in the last option, exchange the equity shares of Wipro Enterprises and receive as consideration equity shares of Wipro held by the Promoter.

The exchange ratio will be 1 equity share in Wipro for every 1.65 equity shares in Wipro Enterprises. Each redeemable preference share shall have a maturity of 12 months and shall be redeemed at a value of R235.20.

The completion of the demerger process is expected to see the public shareholding in Wipro rising to 25% complying with the requirements of Sebi. The promoters holding in the company stood at 78.29% as on December 31, 2012.

We expect Wipro to trade at 10% lower than current market price post this event. The demerger will enable the company to focus on its growth strategy in the IT services and product space and increase its competitiveness in the market, Edelweiss Research said in a report.

In November last year, Wipro had announced the biggest restructuring exercise bringing about a clear separation between the IT and non-IT business giving better clarity for the investors.