| Wipro Lists on the Big Apple |
Wipro Systems Limited, the Indian software giant from a conglomerate Wipro group is on its way to be a global company. The recent ADS listing is one such step. The company issued American Depository Shares (ADS) and got listed on NewYork Stock Exchange (NYSE) on 19th October, 2000. What's behind this cash rich organsiation going in for this ADS issue and what will the company do with the resources mobilised through the issue?
It all began in early September when the Cabinet Committee on Economic Affairs (CCEA) cleared Wipro's proposal for an ADR issue of 2 per cent of its paid-up capital amounting to $500-million including the premium. The company followed it up filing to Securities Exchange Commission (SEC) on September 21, 2000 at the then price of $63.86 per ADS for a proposed public offering of 2,750,000 American Depository Shares representing the 2,75,000 equity shares - each ADS equivalent to a share (excluding the underwriters' option to purchase an additional 412,500 ADSs). Morgan Stanley Dean Witter, Credit Suisse First Boston and Banc of America Securities were chosen to be the managing underwriters of the offering.
However, the company revised its price to $52.48 on October 11 on account of weak sentiments that prevailed in the stock exchanges across the globe. The price was further reduced for the second time to $41.38 (at Wipro price of Rs.1916 and at rupee 46.3 per dollar), which represented a 35 percent discount over the initial price and 21 percent over the revised rate.
The company mopped up $135 mn including a green shoe option at the concluded price of $41.38. The company raised $114 mn by offering 2.75 mn shares at $41.38, with underwriters exercising their option to purchase an additional 412,500 ADS representing an equivalent number of equity shares to cover over allotments. Considering the market situation prevailed then, the response was said to be spectacular but then the amount was below the company's expectation of $175-200 mn.
At the time of listing the issue got oversubscribed 4 times. The issue got listed at $44.5 at a premium of 7.5 percent. This did have an impact on the Indian bourses. The stock which had seen only a downhill journey for days, came back sharply and rallied to touch the 16 percent upper circuit breaker on the BSE and touched a price of 2223.
The objective of the issue was to get currency for general corporate purposes, acquisitions, currency for US and global stock options for employees and currency for increased credibility and brand. On the corporate front, the proceeds from the issue are likely to help the company set up development facilities in South-East Asia and Europe in addition to the ones in India and the US. Further the proceeds might get extended to support the company's launch of e-commerce services in India in consulting, sustenance, and project management and implementation, in both the application build and package application approaches.
On the acquisitions front, the proceeds from the issue would help the company acquire its targets, mainly those US companies involved in internet and telecom space. However, until the plans are firmed up, the funds would be parked in interest-bearing instruments, provided that the Government allows repatriation of the proceeds.
On the investment front, the company is planning to invest in US based companies and other foreign companies using the proceeds. There is a word of caution here. Enthink the first subsidiary of the US-based Wipro Inc, which was set up with a view to invest in various technology segments in the US, is having not much of activity. With this bad experience, the extent of investing in more companies in US and in other countries should be thought about carefully by the company and needs to be cautious in running them.
K.Venu Babu
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