Wipro to restructure Netkracker

By Rosemary Arackaparambil

BANGALORE: Wipro Ltd has said on Tuesday that it was restructuring its loss making Internet services unit Netkracker Ltd because of dim prospects for the business. Wipro, India's top software company by market capitalisation, will buy out the minority holdings in the unit from venture capital funds of financial services group ICICI Ltd for Rs 30 million ($0.62 million).

The New York Stock Exchange-listed Wipro will also spin off its Fluid Power unit, which manufactures hydraulic equipment, and combine the two businesses under a new subsidiary company called Wipro Fluid Power Ltd.

"In response to changing market conditions, Wipro Ltd has decided to restructure the business from a sole retail ISP (Internet service provider) to a manufacturing unit," the company said in a statement.

Wipro's shares bucked a weak market rising 0.52 percent to Rs 1,798 by early afternoon on the Bombay Stock Exchange, while the benchmark index was down 0.79 percent. Wipro originally held a 49 percent stake in Netkracker which was set up in 2000 to offer Internet access services to retail customers, and the ICICI venture funds owned 51 percent.

However, Wipro also held convertible preference shares in Netkracker which have now been converted into equity, taking its stake to 79 percent, the statement said. It is now buying out the remaining 21 percent stake.

A company official told Reuters that the retail ISP business was not growing significantly causing Wipro to reduce focus. Netkracker had accumulated losses of Rs 370 million as of December 31, 2001. He said Wipro Fluid Power will continue to service the existing 112,000 subscribers of Netkracker.

Wipro Chairman Azim Premji said in the statement that the hive-off would help the fluid power business to grow more aggressively and also give it the option to seek strategic investors for growth.

Wipro has been in the mobile hydraulic equipment business for the past 25 years and is a market leader in the space. The fluid power business had revenue of Rs 757 million as per the U.S. GAPP accounting standards in the year ended March 31, 2001.

(C) Reuters Ltd.