Wipro targets $166.2m. through ADS issue

By : |September 22, 2000 0

BANGALORE: Diversified information technology firm Wipro Ltd said on Thursday it had filed with the Securities and Exchange Commission (SEC) to issue 2.75 million American Depository Shares (ADS). The firm said in its filing to the US Securities and Exchange Commission that it expects net proceeds from the issue to be around $166.2 million assuming an initial public offering price of $63.86 per ADS.


Analysts said this would have a positive impact on the stock price on Friday. Wipro’s share closed down five per cent at Rs 2,620.34 on the Bombay Stock Exchange on Thursday in line with a depressed market. The ADS news came after the close of market hours.


A statement from Wipro said that the proposed public offering on the New York Stock Exchange would represent 2.75 million equity shares, excluding the underwriters’ option to purchase an additional 412,500 ADSs representing 412,500 equity shares to cover over-allotments if any.


Wipro, India’s largest information technology firm by revenues, offers computer software services and makes hardware products. The firm said the proceeds of the ADS issue will be used to acquire overseas companies for which its application was pending with the central bank.


Wipro, whose chairman Azim Premji owns 75 per cent of the firm and is India’s richest man, also makes vegetable oil, soaps, electric bulbs and childcare products. The company shares have risen less than one per cent since the start of the year, and are trading well below their year high of Rs 9,800 hit on February 21.


Additional funds

Analysts said that the ADS issue was more aimed at issuing dollar stock options to its 1,000-odd employees in the United States and retain them within the company than to raise funds as it is fairly cash-rich.


Wipro could make a fresh ADS issue at a later stage if it needs additional funds to make an acquisition in the U.S., they said. Gurunath Mudlapur, analyst at Khandwala Securities, said that he was unsure of the valuations Wipro would get in the US market as the domestic share was trading at a “fantastic premium” compared to other Indian tech stocks.


“More than raising money for the company, it is very clear they are doing it for issuing stock options to their 1,000-odd employees in the U.S.,” Mudlapur said. “So the issue also has to be at a reasonable price so it is affordable to the employees,” he said and added that it was the first time in nearly five decades that Wipro was raising funds from the public. “There will definitely be some positive impact on the share here. We should see some activity tomorrow.”


Premji had earlier this week said he proposed to raise $150-$300 million through the ADS issue and the price needed to be in a band that is “generally acceptable”. The Wipro statement said that Morgan Stanley Dean Witter, Credit Suisse First Boston and Bank of America Securities will be the managing underwriters of the offering. “A registration statement relating to these securities has been filed with the SEC but has not yet become effective,” Wipro said.

(C) Reuters Limited 2000.

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