Proxy advisory firm Stakeholders Empowerment Services has asked Wipro shareholders to seek listing of the consumer goods business it proposes to demerge. Last week, the software major’s board approved the demerger of Wipro Consumer Care & Lighting , Wipro Infrastructure Engineering (Hydraulics & Water businesses), and Medical Diagnostic Product & Services business into a separate company to be named Wipro Enterprises Limited (WEL). Wipro will remain a publicly listed company that will focus exclusively on information technology, while WEL will be an unlisted company.
SES, promoted by former Sebi official JN Gupta, said in a note “Shareholders should urge the board and the management to reconsider the demerger scheme and list the demerged entity enabling investors to realise its fair price in the market. SES believes that the stated objectives of demerger could still be met if the demerged entity were to be a listed company unless the objective itself is to create an unlisted company.”
The noted added, keeping in view the high standards of governance, transparency and fairness for all stakeholders for which Wipro Limited is well known for, we urge the shareholders to ask the company to “share valuation details and division of tangible and intangible assets between the two companies, why the Wipro brand will be shared equally between the two entities when neither the assets nor turnover or profits are equal,”
It also urged investors to ask the company what is the value assigned to Wipro brand. “Additionally, SES would welcome if the independent directors give their recommendation over the demerger proposal to shareholders (as is required in case of takeovers),” the note added.
Under the demerger scheme, the company has proposed that the demerged entity i.e. WEL would be unlisted and has given three options to resident Indian shareholders of Wipro Limited. The shareholders’ may (i) receive one equity share with face value of Rs.10 in WEL for every five equity shares with face value of Rs.2 each in WL that they hold; or (ii) receive one 7% Redeemable Preference Share in WEL, with face value of Rs.50, for every five equity shares of WL that they hold redeemable after one year; or (iii) exchange the equity shares of Wipro Enterprises Limited and receive as consideration equity shares of Wipro Limited held by the Promoter. The exchange ratio will be 1 equity share in Wipro Limited for every 1.65 equity shares in Wipro Enterprises Limited. While options (i) & (ii) above will be a primary issuance, (iii) will be a combination of primary and secondary transaction.