Wipro Enterprises proposes to buy back 1.61 crores shares held by the minority shareholders for an aggregate value of Rs 594 crore.
Azim Premji-owned Wipro Enterprises is looking to take the business private. Wipro Enterprises, the unlisted demerged consumer business arm, is seeking shareholder nod at the EGM to be held on January 13, 2015.
Wipro had demerged its consumer business in 2012 and at that time offered shareholders either cash or shares of Wipro Enterprises. Two years down the line, Wipro Enterprises has brought in a special resolution to reduce capital of the company to the extent of shares held by non-promoters.
Wipro Enterprises proposes to buy back 1.61 crores shares held by the minority shareholders for an aggregate value of Rs 594 crore. Wipro Enterprises will be paying the minority shareholders Rs 367/share as part of the squeeze out. Non-promoter shareholders hold nearly 3.4 percent stake in the unlisted consumer arm. Wipro in its communication to its shareholders has explained that at the August AGM of the company, a large number of minority shareholders sought exit option from the company, since shares are unlisted and there is no immediate plan to list the consumer division. Hence, the EGM proposal will provide exit option to the shareholders.
But this move has surprised quite a few shareholders who opted to hold shares in the demerged entity. These shareholders have collectively written to the senior management of Wipro, including Azim Premji, questioning the need for mandatory squeeze out.
Wipro has used the services of consulting firm EY to arrive at the valuation for the company. EY has pegged the price of Wipro Enterprises at Rs 367 per share. This pegs the market value of the company at Rs 17,475 crore.
Wipro Enterprises will have to seek shareholder nod under Sections 100 to 104 of the Companies Act, 1956. That would mean the EGM would require three-fourth or 75 percent of shareholders to vote in favour of the proposal. Wipro promoters already hold around 96.6 percent, thereby making the EGM approval a mere formality.
Wipro will also require to approach the Karnataka High Court to seek nod for the reduction in capital. It is only after the court approval the reduction in capital will come into effect.
Also Read: Shareholders waking up to their rights: Sebi Chief UK Sinha