WIPRO Limited (WIT ADR – $9.60 – NYSE) Stellar returns – So why this? WIPRO Ltd announced the much-anticipated spin off of their non-IT segment (to be known as Wipro Enterprise limited (WEL)) on October 31, 2012. The post spin off WIPRO (W) would now exclusively be an IT company. While we applaud the action to segment the business, the corporate action raises significant corporate governance concerns.

The WEL corporate action proposal details:

• Receive one equity share in WEL for every 5 equity shares in WIPRO that they hold OR
• Receive one 7% redeemable preference share in WEL, with face value of INR 50, for every 5 equity shares of WIPRO that they hold. Preference shares shall have a maturity of 12 months and shall be redeemed at INR 235.2 OR
• After receiving WEL shares, exchange the equity shares of WEL for equity shares of W held by the majority shareholder in the exchange ratio: 1 equity share of W for every 1.65 equity shares in WEL OR
• WEL will be a private, non-listed company upon spin off OR

Voting process for the scheme These proposals have been ratified by WIPRO as effective and approved through a shareholder vote. We believe there are governance concerns both with the content of the proposal, and most importantly with its process. Firstly, only a small percentage of the minorities voted for these proposals. This is likely because the company required physical presence in voting in Bangalore at 4 PM on Friday December 28, 2012. Secondly, the consideration of WEL to be spun out into a non-listed company is contrary to the underpinnings of free market processes that WIPRO has enjoyed during its years of growth.