Update on Wipro's demerger: Emkay

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26 Aug, 2025 12:21

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By Emkay Global Financial Services

As part of the plan to demerge the non IT business from Wipro Limited, the company has announced a record date for the scheme of arrangment as April 11, 2013.

In our view as also indicated at the time of initial announcement in early Nov'2012 this move is positive as it helps to ascribe better value to the non IT business which it deserves unlike the 13-14x P/E multiple being assigned to the IT business. The non IT Business which is a combination of Wipro Consumer Care and Lighting, Medical Equippments and Wipro Infrastructure Engineering would be transferred to an unlisted private entity called Wipro Enterprises As part of the arrangement, Wipro shareholder have been given 3 options listed below.

Option 1: Receive 1 share of WEL for every 5 shares of Wipro. In this option, an investor holding 100 shares of Wipro will keep 100 shares and get 20 additional shares of unlisted WEL. The price of listed Wipro Lts stock price will adjust by ~Rs 40/share as per our calculations. However the drawback is that investor would need to remain invested in the private Wipro Ent entity (timing to take this company public is not clear)

Option 2: Get one 7 percent redeemable preference share in WEL (of face value of Rs 50) for every 5 shares of Wipro. These preference shares would be redeemed at a value of Rs235.2 after a period of 12 months.

Option 3: This option is an extension of option 1 wherein investors who would not want to hold the shares of unlisted Wipro Ent can exchange every 1.65 shares of Wipro Ent with 1 share of Wipro Ltd from the promoter.

Option 3 would be the default option in case an investor does not convey which of the 3 options he would like to choose. The company has set April 11'2013 as the record date for the scheme of demerger and intends to complete this process within 6 weeks of the record date.

As per our calculation, investors who would want to have exposure to Wipro's non IT business and do not mind holding shares of the unlisted entity for some years should opt for Option 1. We believe most institutional investors would opt for Option 1+Option 3 given the uncertainity around when Wipro Ent would go public.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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