See equal revenue from Europe, US post SAIC arm buy: Wipro

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In an interview with CNBC-TV18, Suresh Senapaty, CFO of Wipro said, "We are very happy with this acquisition because it is in line with our strategy of filling in gaps, complementarity or building critical mass in some of these areas that we are focused on."

"With this particular acquisition, our oil and gas is almost doubling from our current size with what we acquired. Similarly, the complementarity is that we have only 10% of our revenue coming from US, now with this piece coming in, which is dominated from United States is almost 50-50 in terms of the Europe and US component, he added.

The company expects the deal to be completed during this quarter.

Below is the verbatim transcript of Senapaty's interview with Kritika Saxena of CNBC-TV18. Also watch the accompanying video.

Q: Just take us through the details of the deal, by when do you expect to close and finally close this transaction, how will this really compliment the energy unit and the oil and gas services business of Wipro?

A: We have talked about focusing on certain particular verticals of ours, which is high growth orientation and potential. Similarly, energy and utility was identified as one such vertical where organic as well as inorganic approach, we wanted to grow.

When you look at energy and utilities SAIC's oil and gas business come out very strategic for us. Because, it is a domain specialization in the area of digital oil field, petro technical global data management and petroleum application services.

If you look at energy and utility services of ours and the energy component, which is getting a large boost in terms of the investment that is getting into that particular segment. We were very poorly placed in terms of particularly, the upstream section and therefore it is a very highly complimentary. The upstream is almost four times with what size we have.

With this particular acquisition, we grow it four times and so far as oil and gas is concerned it is almost doubling from our current size with what we acquired. Similarly, the complementarity is that we have only 10% of our revenue coming from US when now with this piece coming in, which is dominated from United States is almost 50-50 in terms of the Europe and US component.

So, all in all if deal rational is access to new customers, access to this particular practice of upstream in oil and gas, which we were almost absent and the cross leverage potential that we have.

We are very happy with this acquisition because we think it is in line with our strategy of filling in gaps, complementarity or building critical mass in some of these areas that we are focused on.

Q: Since SAIC is listed on NYSE, there will be certain regulatory approval that you will require. If yes, what are the regulatory approvals and is there some kind of a time period that you have set as to when they will come and when the final deal will be completed?

A: We expect the deal to be completed during this quarter and since this is not an acquisition of the entire company but a carve out of that particular segment of their business. So, this will involve buy over of certain entities like in UK, India, Oman etc but so far as the US is concerned it will be a carve out of their existing business. Therefore, we think it should be done in the next 45-60 days.

Q: By when would the 1,450 employees that are coming onboard across geographies come in finally?

A: Soon after the consummation is announced then automatically they become part of the Wipro organization.

Q: A little bit of a clarification on the financials of the deal. This is a USD 150 million deal. In the press release its written that this is subject to certain adjustments. What are these adjustments, if you could just clarify? Also is there some kind of tax applicable on this deal?

A: When you talk about USD 150 million subject to adjustments because there is an expectation, as and when we close the deal, particular size of the working capital and assets that you takeover and therefore, if by virtue of progress in the business from today to that date of consummation there are any deltas, then that may require certain adjustments.

But, those are usual stuff and those are very small adjustments that may be required to be made. So far as the taxation is concerned it is largely a US based company and ofcourse there is lot of pieces in Europe and Oman. There is a small piece in India and from that perspective, it has to be looked at from SAIC perspective as to what the implications are. But, we think it will not be very large.

Q: How many clients does SAIC have and the arm that you have acquired and what is the revenue if you could just quickly tell us?

A: The revenue is just about USD 180 million if you look at the run rate of the business that we acquired. It has six of the top 10 customers which are fortune 500 and global 500 customers.