Azim Premji trusts may get at least Rs5,000 crore from Wipro share buyback

Bengaluru: Billionaire Azim Premji’s two philanthropic arms, Azim Premji Philanthropic Initiatives Pvt. Ltd (APPI) and Azim Premji Trust (APT), stand to receive at least Rs5,000 crore from Wipro Ltd’s proposed Rs11,000 crore share buyback.

Both APPI and APT have additionally sought approval from market regulator Securities and Exchange Board of India (Sebi) to sell more shares than other promoters back to the Bengaluru-based information technology company.

“In order to augment more funds for advancing their philanthropic objectives, APPI and APT wish to maximise the acceptance of the equity shares held by them in the buyback against the entitlement available to the promoter group,” Wipro said in a filing dated 28 July to BSE Ltd.

“In this regard, it is proposed that in addition to the equity shares tendered by APPI and APT in the buyback as part of their entitlement, APPI and APT will also tender additional equity shares beyond their entitlement.”

Executives familiar with the buyback process said the two trusts will receive at least Rs5,000 crore, although the two charity arms could get more money, depending on the shares eventually offered by individuals and entities of the promoter group.

“In our previous buyback, APPI and APT, the philanthropic arms of the promoter group, participated in the buyback post the approval of Sebi on behalf of the entire promoter group. They have made a similar request for the current buyback and further course of action will be determined by the decision of Sebi,” said a spokesperson for Wipro.

Last year, in June, both APPI and APT got Rs1,963 crore from Wipro’s Rs2,500 crore share repurchase.

Premji and family, through eight promoter groups, own 56.37% of Wipro’s shares while APPI and APT own 16.81%, bringing the total holding of the promoter group in India’s third largest IT firm to 73.18%. Wipro ended the last financial year with $7.7 billion in revenue.

Current rules governing share buybacks mandate proportionate participation by every entity of the promoter group, unless otherwise approved by Sebi.

Wipro, which announced the share repurchase last month, expects to buy back up to 343.75 million shares a Rs320 apiece, and expects the process to be completed by early November.

Over the last few years, home-grown IT firms such as Wipro and its larger rivals Tata Consultancy Services Ltd (TCS) and Infosys Ltd have struggled for growth: for the first time since 2009-10, TCS, Infosys and Wipro, which together make up a quarter of the industry’s total business, grew at a slower pace than the industry’s 8.6% growth in constant currency terms in 2016-17.

Understandably, share prices of these firms lagged the broader index: in 2016, TCS fell 3.2%, Infosys 8.5% and Wipro 15.33%, while the BSE Sensex rose 2%.

To win back the faith of investors, IT firms have turned to share buybacks.

Earlier this year, Mumbai-based TCS completed a Rs16,000 buyback, which gave its promoter Tata Sons Ltd, the unlisted holding company of the Tata group, Rs10,278 crore. Tata Trusts, the charities, own two-thirds of Tata Sons.

Unlike APPI and APT, which will use the entire proceeds for philanthropic pursuits, Tata Sons will plough back much of the money back into group companies such as Tata Motors Ltd and Tata Steel Ltd.

Over the last decade, Premji, 72, has been quietly helping improve the quality of education in primary schools across the country through APT.

In 2014, Premji set up APPI, a grant-making body on the lines of the Bill and Melinda Gates Foundation, with the aim of giving grants to non-governmental organizations. Shares in Wipro held by the Azim Premji Foundation, which was established in 2001, were transferred to APPI.