Wipro cracks 11 per cent after splitting non-IT business into separate unit

NEW DELHI: Wipro Ltd plunged over 11 per cent in early trade on Tuesday, after the IT major hived off its non-IT business into an unlisted entity to comply with Sebi's minimum public shareholding norm.

Wipro has set April 11 as the record date for the scheme of arrangement. Sebi's norm mandates a 25 per cent minimum public holding for all listed non-PSU companies by June.

At 09:40 am, Wipro recouped some of its early losses and was trading 8.6 per cent lower at Rs 409.05. It has hit a low of Rs 397.25 and a high of Rs 410 in trade today.

Wipro's promoter held 78.29% in the company as on December 31, 2012. The non IT-businesses - consumer care and lighting, medical equipment and infrastructure engineering - have been transferred to the unlisted Wipro Enterprises (WEL).

"We expect Wipro to trade at 10 per cent lower than current market price post this event. While Wipro will remain a publicly listed company, WEL will be an unlisted entity," Edelweiss said in a report.

"The demerger will enable the company to focus on its growth strategy in the IT services and products space and increase its competitiveness in the market. Maintain 'BUY' with a restated target price of Rs 460," added the report.

According to the scheme, existing shareholders of Wipro have been given three options: get one share of WEL for every five shares of Wipro; one 7% redeemable preference share in WEL (of face value of 50) for every five shares of Wipro; investors not wanting to hold the shares of unlisted WEL can exchange every 1.65 shares of WEL for 1 share of Wipro from the promote

The third option would be the default option in case investors do not convey which of the three they would like to choose

Shareholders of Wipro who swear by the IT story should choose the third option in the company's scheme of arrangement for the delisting of its non-IT business, according to domestic brokers, ET said in a report.