Wipro to hive off consumer business

Wipro chairman Azim Premji has initiated moves to de-merge the company's consumer care business from its mainstay IT services, as part of a rejig plan to sharpen focus on the two separate businesses, said people familiar with the matter.

The $7-billion Wipro, India's fourth largest technology services behemoth, garners about 9% revenue and roughly 6% operating profit from Wipro Consumer Care and Lighting (WCCL). Wipro has revved up this consumer unit with high-profile acquisitions of Yardley and Uzna in recent years.

WCCL is among the fastest growing FMCG companies with a clutch of brands that include Santoor, Chandrika, Yardley, Aramusk among others. It has about 8.5% share of the toilet soaps market, making it the best performer in the company's consumer play.

"They have been working on a de-merger mechanism for sometime," said a source mentioned earlier.

He refused to put a timeframe for it to happen. A Wipro spokesperson declined to comment on market speculation. Wipro shares inched up to close 1% higher at Rs 350.80, gaining for a third day in succession.

Wipro has downplayed analysts suggestions to hive off the $615 million (Rs 3,340 crore) consumer business in the past, but never ruled it out either. The company's IT services has had a few quarters of slow growth and has been passing through a turnaround phase under the chief executive T K Kurien.

Wipro has talked about more aggressive investments to push the consumer business into the rural markets, where it's flagship brand Santoor, for instance, has higher market share. Santoor with more than Rs 1,000 crore revenue has emerged as a formidable brand franchise in the FMCG industry.

WCCL also has an increasingly large revenue pool coming from emerging markets extending from Africa to Middle East to South East Asia following the Yardley and Unza buyouts.

IT sector analysts said the de-merger move would be a positive even though some of them "had learned to live with the consumer business". The move could benefit the consumer unit more but will be good for the main IT services engine, said a research analyst with an MNC brokerage who did not wish to be named.




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