Wipro to acquire UK’s Capco for $1.45 billion

BENGALURU: Wipro is paying $1.45 billion to acquire Capco, a British IT consultancy, in its boldest bet yet as the fourth largest Indian software exporter seeks to keep pace with its fast-growing peers in the country’s $147 billion IT outsourcing industry.

Announcing the all-cash deal, which ranks among the largest acquisitions by an Indian IT services company, the Bengaluru-headquartered IT major said that Capco will continue to operate as an independent entity. The deal is expected to close in June following regulatory approvals, Wipro executives told analysts on Thursday.

“I had shared (in November) that you will see a bolder, more ambitious Wipro, one that will be more risk-taking and not be afraid to shake up the applecart,” said Wipro chairman Rishad Premji.


The buyout of the privately-owned Capco marks the fourth acquisition by Wipro since July 2020 when Thierry Delaporte took charge as its chief executive officer.

‘Complementary Business Models’
The former Capgemini executive has since unveiled a five-point strategy to drive growth at Wipro, which has lagged its peers and was dislodged from its position as the country’s third largest IT services provider by HCL Technologies in 2019.

“This acquisition fits well into that strategy and will pave the path of building a bold tomorrow for Wipro,” Premji stated.

London-based Capco generated nearly half of its $720 million revenue in 2020 from consulting for banks and financial institutions. It has over 5,000 people, including several hundred professionals in India. The buyout will help boost Wipro’s BFSI (banking, financial services and insurance) revenue by nearly fourth to $3.2 billion, up from $2.5 billion.

Delaporte said he expects the acquisition to help Wipro join a select league of service providers that offer an integrated and end-to-end consulting, digital cloud and IT transformation solution to customers.

Wipro’s American Depository Receipts (ADR) on the New York Stock Exchange was up 3.2% at 8.20 pm Indian time. Wipro stock had closed 0.78% up at Rs 438.85 on the BSE before the deal was announced.

The acquisition will however hit Wipro’s margins initially with a dip of 2% in fiscal year 2022, but this will subsequently improve based on revenue and cost synergies, the company said.

Capco, with over 30 large banking and financial services clients, will help Wipro deliver high-end consulting and technology transformation, it said.

The two companies “share complementary business models and core guiding values,” Delaporte said.

Wipro reported profits of $1.08 billion (Rs 7,892 crore) on revenues of 6.26 billion (Rs45,698 crore) for the nine month period ending December.

In fiscal 2020, Wipro earned profits of $1.3 billion (Rs 9,720 crore) on revenue of $8.1 billion (Rs 61,023 crore). It had cash reserves of $5.2 billion in December last year.

So far, the biggest acquisition by any Indian IT firm has been the $1.8 billion deal by HCL Technologies to buy a slew of IBM software products in 2019. And like Wipro, HCL too has been an acquisitive company, buying engineering services firm Geometric, Sankalp Semiconductor and cloud data management company Actian.