Proxy advisory firms such as SES and InGovern stay divided on the Wipro demerger issue. While SES feels that the demerger is not in the interest of the shareholders, Bangalore-based InGovern was of the opinion that the company complied with the corporate governance norms during the process.
SES, or Stakeholders Empowerment Services, founder Jitendra Nath Gupta, a former SEBI executive director, said the proposed demerger to separate the IT company’s non-core operations, primarily the consumer business, might not benefit the shareholders as the demerged entity Wipro Enterprises (WEL) will not be listed.
“The shareholders will benefit if the company (WEL) is listed, which again is not a difficult task,” Gupta said, adding that the best way would be to go for reverse book-building to delist before unlisting it.
Meanwhile, InGovern’s founder Sriram Subramanian said that the management has deliberately planned the demerger, as they want the minority shareholders to exit.
Calling the process “a move in direction,” Sriram said it is yet to be seen whether the valuation of the unlisted company is correct.
However, the demerger will help in increasing public shareholding and meeting the minimum public shareholding requirement of 25 per cent under clause 40A of the listing agreement, he added.
The Wipro board had, on November 1, approved the demerger of non-IT businesses by giving shareholders an option to receive one equity share in WEL for every five shares or receive one 7 per cent of redeemable preference share in WEL with face value of Rs 50 for every five equity shares of Wipro. Alternatively, they could exchange the equity shares of WEL with shares held by the promoter as consideration.
The valuation was done by Deloitte and N.M. Raiji and Company, while fairness opinions were provided by JM Financial Institutional Securities and Citigroup Global Markets. JM Financial also acted as a financial advisor to Wipro.
According to SES, by keeping the demerged entity unlisted, shareholders are forced to exit the illiquid investment through a readily available route. SES has further said the Wipro board should reconsider the demerger scheme and list the demerged entity enabling investors to realise its fair price in the market.