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World Bank ban: How Wipro differs from Satyam?
By Saheer Karimbayil
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Saturday, 07 February 2009, 22:35 IST
Bangalore: Even after the announcement of its third quarter financial results, Wipro is still beating around the bush when it comes to a question about the ban imposed on it by World Bank (WB) which was disclosed early this month.
At the occasion of the Q3 announcement, Wipro Chairman Azim Premji vehemently refused to answer a query on why did the company not take action against World Bank as the latter's disclosure of details on the ban had dented the reputation of the company and pulled down its share value.
When the World Bank, alleging some improprieties on Wipro, disclosed that the company was banned for four years from receiving any contract from the Bank, there were no convincing attempts from Wipro to challenge the Bank's statement. Meanwhile, when Satyam was banned by the Bank, the now beleaguered IT major had sought an apology from World Bank. Analysts had also questioned the logic behind the Wipro's decision not to disclose the World Bank's action dated back to June 2007. Wipro and another IT firm Megasoft had been barred by the World Bank till 2011.
On Jan 11, 09, Wipro said, "To date, Wipro's revenue from World Bank is insignificant. Our inability to get future business from World Bank will not adversely affect our business and results of operations," indirectly admitting to the alleged improprieties.
In 2000, Wipro had allowed employees and clients to buy shares at its IPO price and allowed the World Bank to participate in the plan, where staff and their families ultimately bought 1,750 shares for $72,000, the company said, adding that all participants signed a conflict of interest statement saying the share purchase "did not violate any ethics or conflict of interest policies of their company."
Now, the road ahead is seemingly not smooth for Wipro. The company has registered a sequential decline of 0.9 percent in IT service revenue for the third fiscal quarter ended December 31, 08. It has also scaled down its Q4 revenue guidance to $1.04 billion against $1.35 billion. What is more, the company has reported a negative headcount addition of 1092 for its global IT service segment and 226 for its BPO division. Premji is well apprehensive about the challenges. "We are living in tough times; the macro-economic challenges are significant and impacting businesses across segments. However recessions do not last. Reslient companies do. I am confident Wiproites are resilient to withstand the near term challenges posed by an uncertain environment and come out stronger than ever. Looking ahead, for the quarter ending March 31, 09, we expect the revenue from our IT service business including revenue from the acquisition of City Technology Services to be approximately $1045 million," he said.
