‘Reduce’ Wipro because of low confidence on turnaround: Kotak Institutional Equities

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Published: December 8, 2015 12:23:02 AM

Wipro has acquired Cellent AG, a Germany-based IT services company, for a consideration of 73.5 million euro, valuing it at 0.85X revenues and ~17X EBITDA (CY2014).

Wipro has acquired Cellent AG, a Germany-based IT services company, for a consideration of 73.5 million euro, valuing it at 0.85X revenues and ~17X EBITDA (CY2014).

This acquisition gives Wipro access to Germany, Austria and all underpenetrated markets with promising potential for a player having local strength. We believe this acquisition is good, but successful integration is the key; making Continental European acquisitions work is invariably the biggest challenge. Wipro’s stock valuations are undemanding, but low confidence on turnaround underpins our cautious stance. So ‘reduce’.

Wipro announced the acquisition of cellent AG, a Germany based IT services firm with offerings in ADM, SAP and Infrastructure services spanning manufacturing, automotive and Hi-Tech verticals.

This acquisition gives Wipro access to cellent’s 45+ clients and 800 German speaking IT professionals. Cellent has presence in 11 locations across Germany, Austria and Switzerland (DACH countries).

Continental Europe is an underpenetrated market for Indian IT.  Local presence is critical to penetrate the market; cellent acquisition would help in that direction.

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