Bangalore: Profit margins of Wipro's IT division are expected to improve after the demerger of non-IT businesses, Chief Financial Officer Suresh Senapaty said on Thursday. (Agencies)
"Wipro's IT business has delivered higher margins than the overall Wipro margins. The demerger will only help us to improve our profit profile," Senapaty told reporters here.
The company is demerging three non-IT business divisions -- Wipro Consumer Care & Lighting (including furniture business), Wipro Infrastructure Engineering (hydraulics and water businesses) and Medical Diagnostic Product & Services business -- into a privately-held company to be named 'Wipro Enterprises Ltd'.
"It (demerger) will help in simplification, clarity in the minds of customers, target companies, investors and analysts.
That is why we think the competitiveness of Wipro Limited will improve," Senapaty said.
Following the move, shares of the IT major surged nearly 7 percent to Rs 375 on the BSE in morning trade.
Shares were trading at Rs 359.60 apiece, up 2.51 percent from the previous close on the BSE at 1500 hrs.
Wipro would continue to remain a publicly listed company focusing exclusively on IT, while Wipro Enterprises will be an unlisted company. The Board of Wipro will also remain unchanged and the demerger will have no impact on the management structure.
He added there are no plans to list Wipro Enterprises.
Stating that Wipro's multiple businesses are not necessarily big enough to go through the process of listing and sustaining it, Senapaty said, "This is one of the reasons why we took a decision that IT business becomes a pure play and remaining businesses become diversified entities."
Asked how the cash and debt would be divided between Wipro and Wipro Enterprises, Senapaty said the debt and cash are primarily specific to various businesses.
Therefore, they automatically get split into various businesses in that ratios, he added.
Senapaty said there would not be separate CEOs and CFOs for various businesses under Wipro Enterprises as Wipro Enterprises already has their CEOs and CFOs. "There is already an organisation up and running independently," he added.
Talking about the completion of the demerger process, Senapaty said the "expectation is that the whole demerger process will get executed in the next financial year."
Bangalore: Profit margins of Wipro's IT division are expected to improve after the demerger of non-IT businesses, Chief Financial Officer Suresh Senapaty said on Thursday.