e20vf
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
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Registration statement pursuant to section 12(b) or (g) of the Securities Exchange Act of 1934 |
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Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the fiscal year ended March 31, 2010 |
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the transition period from to |
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Shell Company Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Date of event requiring this shell company report |
Commission File Number 001-16139
WIPRO LIMITED
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrants name into English)
Bangalore, Karnataka, India
(Jurisdiction of incorporation or organization)
Doddakannelli
Sarjapur Road
Bangalore, Karnataka 560035, India
+91-80-2844-0055
(Address of principal executive offices)
Suresh
C. Senapaty, Chief Financial Officer and Director
Phone: +91 80 28440055; Fax: +91 80 28440104
(Name, telephone, email and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered |
American Depositary Shares, each represented by one
Equity Share, par value Rs. 2 per share.
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New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Not Applicable
Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period
covered by the annual report: 1,468,211,189 Equity Shares.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
Yes þ No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act, 1934
Yes o No þ
Note Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files)
Yes o No o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
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Large Accelerated Filer þ
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Accelerated Filer o
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Non-Accelerated Filer o
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Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing
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U.S.
GAAP o
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International Financial Reporting |
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Other |
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Standards as issued by the International |
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Accounting Standards Board |
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If
Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow.
Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)
Yes o No þ
Currency of Presentation and Certain Defined Terms
In this Annual Report on Form 20-F, references to U.S., or United States are to the United
States of America, its territories and its possessions. References to India are to the Republic
of India. References to U.K. are to the United Kingdom. Reference to $ or US$ or dollars or
U.S. dollars are to the legal currency of the United States, references to £ or Pound
Sterling or GBP are to the legal currency of United Kingdom and references to Rs. or Rupees
or Indian rupees are to the legal currency of India. All amounts are in Rs. or in U.S. dollars
unless stated otherwise. Our financial statements are presented in Indian rupees and translated
into U.S. dollars solely for the convenience of the readers and are prepared in accordance with
International Financial Reporting Standards and its interpretations (IFRS), as issued by
International Accounting Standard Board (IASB). References to Indian GAAP are to Indian
Generally Accepted Accounting Principles. References to U.S. GAAP are to United States Generally
Accepted Accounting Principles. References to a particular fiscal year are to our fiscal year
ended March 31 of such year.
All references to we, us, our, Wipro or the Company shall mean Wipro Limited and, unless
specifically indicated otherwise or the context indicates otherwise, our consolidated subsidiaries.
Wipro is our registered trademark in the United States and India. All other trademarks or trade
names used in this Annual Report on Form 20-F are the property of the respective owners.
Except as otherwise stated in this Annual Report, all translations from Indian rupees to U.S.
dollars are based on the certified foreign exchange rates published by Federal Reserve Board of New
York on March 31, 2010, which was Rs. 44.95 per $1.00. No representation is made that the Indian
rupee amounts have been, could have been or could be converted into United States dollars at such a
rate or any other rate. Any discrepancies in any table between totals and sums of the amounts
listed are due to rounding. Information contained in our website, www.wipro.com, is not part of
this Annual Report.
Forward-Looking Statements May Prove Inaccurate
In addition to historical information, this Annual Report on Form 20-F contains certain
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended
(the Exchange Act). Forward-looking statements are not historical facts but instead represent our
beliefs regarding future events, many of which are, by their nature, inherently uncertain and
outside our control. As a result, the forward-looking statements contained herein are subject to
certain risks and uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements, and reported results should not be viewed as an
indication of future performance. For a discussion of some of the risks and important factors that
could affect the firms future results and financial condition, please see the sections entitled
Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of
Operations.
The forward-looking statements contained herein are identified by the use of terms and phrases such
as anticipate, believe, could, estimate, expect, intend, may, plan, objectives,
outlook, probably, project, will, seek, target and similar terms and phrases. Such
forward-looking statements include, but are not limited to, statements concerning:
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our strategy to finance our operations, including our planned construction and expansion; |
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future marketing efforts, advertising campaigns, and promotional efforts; |
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future growth and market share projections, including projections regarding developments in
technology and the effect of growth on our management and other resources; |
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the effect of facility expansion on our fixed costs; |
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our future expansion plans; |
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our future acquisition strategy, including plans to acquire or make investments in
complementary businesses, technologies, services or products, or enter into strategic
partnerships with parties who can provide access to those assets; |
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the future impact of our acquisitions; |
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our strategy and intentions regarding new product branding, including intentions to
introduce acquired personal care product brands to establish our presence in the markets for
personal care products in India; |
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the future competitive landscape and the effects of different pricing strategies; |
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the effect of current tax laws, including the branch profit tax; |
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the effect of future tax laws on our business; |
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the outcome of any legal proceeding, hearing, or dispute (including tax hearings) and the
resulting effects on our business; |
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our ability to implement and maintain effective internal
control over financial reporting; |
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projections that the legal proceedings and claims that have arisen in the ordinary course
of our business will not have a material and adverse effect on the results of operations or
the financial position of the Company; |
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expectations of future dividend payout; |
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projections that our cash and cash equivalent along with cash generated from operations
will be sufficient to meet our working capital requirements and certain of our obligations; |
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our compensation strategy; |
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projections regarding currency transactions, including the effect of exchange rates on the
Indian rupee and the U.S. dollar; |
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the nature of our revenue streams, including the portion of our IT Services revenue
generated from a limited number of corporate clients; |
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the effect of a strategically located network of software development centers, and whether
it will provide us with cost advantages; |
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our ability to anticipate and develop new services and enhance existing services in order
to keep pace with rapid changes in technology; |
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projections regarding future economic policy, legislation, foreign investment, currency
exchange and other policy matters that may affect our business; |
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the nature and flexibility of our business model; |
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expectations as to our future revenue, margins, expenses and capital requirements; and |
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market risk in the section titled Quantitative and Qualitative Disclosure About Market
Risk under Item 11 of this Annual Report on
Form 20-F. |
We wish to ensure that all forward-looking statements are accompanied by meaningful cautionary
statements, so as to ensure to the fullest extent possible the protections of the safe harbor
established in the Private Securities Litigation Reform Act of 1995. Accordingly, all forward
looking statements are qualified in their entirety by reference to, and are accompanied by, the
discussion of certain important factors that could cause actual results to differ materially from
those projected in such forward-looking statements in this report, including the sections entitled
Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of
Operations. We caution the reader that this list of important factors may not be exhaustive. We
operate in rapidly changing businesses, and new risk factors emerge from time to time. We cannot
predict every risk factor, nor can we assess the impact, if any, of all such risk factors on our
business or the extent to which any factor, or combination of factors, may cause actual results to
differ materially from those projected in any forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which
reflect managements analysis only as of the date hereof. In addition, readers should carefully
review the other information in this Annual Report on Form 20-F and in the Companys periodic
reports and other documents filed with the Securities and Exchange Commission (SEC) from time to
time.
3
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable
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Item 3. Key Information
Summary of Selected Consolidated Financial Data
The selected consolidated financial data should be read in conjunction with the consolidated
financial statements, the related notes and operating and financial review and prospects which are
included elsewhere in this Annual Report. The selected consolidated statements of income data for
the two years ended March 31, 2010 and selected consolidated statements of financial position data
as of March 31, 2009 and 2010 in Indian rupees have been prepared and presented in accordance with
International Financial Reporting Standards and its interpretations (IFRS), as issued by
International Accounting Standard Board (IASB) and have been derived from our audited
consolidated financial statements and related notes. The summary consolidated financial data below
has been presented for the two most recent fiscal years in compliance with General Instruction G of
Form 20-F. Historical results are not necessarily indicative of future results.
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(In millions, except per equity share data) |
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2009 |
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2010 |
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2010 |
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Convenience |
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Translation into |
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US$ |
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Consolidated Statements of Income data: |
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Revenues |
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Rs. |
256,891 |
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Rs. |
271,957 |
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$ |
6,050 |
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Cost of revenues |
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(180,215 |
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(186,299 |
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(4,145 |
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Gross profit |
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Rs. |
76,676 |
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Rs. |
85,658 |
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$ |
1,906 |
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Selling and marketing expenses |
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(17,313 |
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(18,608 |
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(414 |
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General and administrative expenses |
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(14,510 |
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(14,823 |
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(330 |
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Foreign exchange gains/(losses), net |
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(1,553 |
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(716 |
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(16 |
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Results from operating activities |
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Rs. |
43,300 |
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Rs. |
51,511 |
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$ |
1,146 |
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Finance expense |
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(3,824 |
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(991 |
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(22 |
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Finance and Other income |
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5,057 |
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4,360 |
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97 |
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Share of profits of equity accounted investees |
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362 |
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530 |
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12 |
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Profit before tax |
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44,895 |
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55,410 |
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1,233 |
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Income tax expense |
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(6,035 |
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(9,294 |
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(207 |
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Profit for the year |
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Rs. |
38,860 |
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Rs. |
46,116 |
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$ |
1,026 |
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Attributable to: |
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Equity holders of the Company |
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Rs. |
38,761 |
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Rs. |
45,931 |
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1,022 |
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Minority interest |
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99 |
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185 |
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4 |
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Profit for the year |
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Rs. |
38,860 |
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Rs. |
46,116 |
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$ |
1,026 |
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Earnings per equity share: |
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Basic |
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15.99 |
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18.91 |
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0.42 |
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Diluted |
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15.90 |
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18.75 |
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0.42 |
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Weighted average number of equity shares used in
computing earnings per equity share: (2) |
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Basic |
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2,423,558,482 |
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2,429,025,243 |
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2,429,025,243 |
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Diluted |
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2,437,464,403 |
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2,449,658,532 |
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2,449,658,532 |
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Cash dividend per equity share paid |
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4.00 |
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4.00 |
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0.09 |
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Additional data: |
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Revenue by segment |
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IT Services |
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Rs. |
191,613 |
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Rs. |
202,490 |
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$ |
4,505 |
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IT Products |
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34,277 |
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38,205 |
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850 |
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Consumer Care and Lighting |
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19,249 |
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22,584 |
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502 |
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Others |
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8,995 |
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7,143 |
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159 |
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Reconciling items |
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1,204 |
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819 |
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18 |
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Total |
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Rs. |
255,338 |
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Rs. |
271,241 |
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$ |
6,034 |
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Operating income by segment |
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IT Services |
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Rs. |
40,197 |
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Rs. |
47,408 |
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$ |
1,055 |
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IT Products |
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1,363 |
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1,764 |
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39 |
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Consumer Care and Lighting |
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2,592 |
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3,080 |
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69 |
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Others |
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(294 |
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(836 |
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(19 |
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Reconciling items |
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(558 |
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95 |
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2 |
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Total |
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Rs |
43,300 |
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Rs. |
51,511 |
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$ |
1,146 |
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Consolidated Statements of Financial Position Data: |
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Cash and cash equivalents |
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Rs. |
49,117 |
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Rs. |
64,878 |
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$ |
1,443 |
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Available for sale investments |
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16,293 |
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30,420 |
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677 |
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Working capital (1) |
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57,152 |
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95,565 |
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2,126 |
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Total assets |
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284,255 |
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329,928 |
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7,340 |
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Total debt |
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56,892 |
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62,511 |
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1,391 |
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Total equity |
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147,381 |
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196,549 |
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4,373 |
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Notes:
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Working capital equals current assets minus current liabilities. |
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Adjusted for stock dividend. |
6
Exchange Rates
Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar will affect the
U.S. dollar equivalent of the Indian rupee price of our equity shares on the Indian stock exchanges
and, as a result, will likely affect the market price of our American Depositary Shares, or ADSs,
listed on the New York Stock Exchange, and vice versa. Such fluctuations will also affect the U.S.
dollar conversion by our depositary for the ADSs, Morgan Guaranty Trust Company of New York, or
Depositary, of any cash dividends paid in Indian rupees on our equity shares represented by the
ADSs.
The following table sets forth, for the fiscal years indicated, information concerning the
amount of Indian rupees for which one U.S. dollar could be exchanged based on the certified foreign
exchange rates published by Federal Reserve Board of New York. The column titled Average in the
table below is the average of the certified foreign exchange rates on the last business day of each
month during the year.
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Fiscal Year Ended March 31, |
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Period End |
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Average |
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High |
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Low |
2010 |
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Rs. |
44.95 |
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Rs. |
47.18 |
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Rs. |
50.48 |
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Rs. |
44.94 |
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2009 |
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50.87 |
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46.32 |
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51.96 |
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39.73 |
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2008 |
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40.02 |
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40.13 |
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43.05 |
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38.48 |
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2007 |
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43.10 |
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45.06 |
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46.83 |
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42.78 |
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2006 |
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44.48 |
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44.21 |
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46.26 |
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43.05 |
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On
November 05, 2010, the certified foreign exchange rates published by Federal Reserve Board of
New York was Rs. 44.2113
The following table sets forth the high and low exchange rates for the previous six months
based on the certified foreign exchange rates published by Federal Reserve Board of New York on
each business day during the period:
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Month |
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High |
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Low |
October 2010 |
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44.59 |
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44.05 |
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September
2010 |
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46.82 |
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44.56 |
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August 2010 |
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46.87 |
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45.70 |
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July 2010 |
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47.23 |
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46.25 |
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Jun 2010 |
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47.08 |
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45.64 |
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May 2010 |
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47.49 |
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44.46 |
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Capitalization and Indebtedness
Not applicable.
Reasons for the Offer and Use of Proceeds
Not applicable.
7
RISK FACTORS
This Annual Report contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in the following risk factors
and elsewhere in this Annual Report. The following risk factors should be considered carefully in
evaluating us and our business.
Risks Related to our Company and our Industry
Our revenues and expenses are difficult to predict because they can fluctuate significantly
given the nature of the markets in which we operate. This increases the likelihood that our results
could fall below the expectation of market analysts, which could cause the market price of our
equity shares and ADSs to decline.
Our revenue historically has fluctuated and may fluctuate in the future depending on a number
of factors, including:
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the size, complexity, timing, pricing terms and profitability of significant
projects or product orders; |
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changes in our pricing policies or those of our competitors; |
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the proportion of services we perform at our clients sites rather than at our
offshore facilities; |
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seasonal changes that affect the mix of services we provide to our clients or the
relative proportion of services and product revenue; |
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seasonal changes that affect purchasing patterns among our consumers of desktops,
notebooks, servers, communication devices, consumer care and other products; |
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unanticipated cancellations, contract terminations or deferral of projects or those
occurring as a result of our clients reorganizing their operations; |
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the duration of tax holidays or exemptions and the availability of other Government
of India incentives; |
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the effect of seasonal hiring patterns and the time we require to train and
productively utilize our new employees; |
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unanticipated variations in the duration, size and scope of our projects, as well as
changes in the corporate decision-making process of our clients; |
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currency exchange fluctuations; and |
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other economic and political factors. |
A significant portion of our total operating expenses in our IT Services and IT Products
business, particularly personnel and facilities, are fixed in advance of any particular quarter. As
a result, unanticipated variations in the number and timing of our projects or employee utilization
rates, in our IT Services business excluding Business Process Outsourcing (BPO) services, Indian IT
services and Infocrossing, may cause significant variations in operating results in any particular
quarter. (Utilization is the proportion of billed resources to total resources. Our total
resources for the purpose of computing utilization include resources in administration and general
support function excluding corporate activities)
Therefore, we believe that period-to-period comparisons of our results of operations are not
necessarily meaningful and should not be relied upon as indications of future performance. Thus, it
is possible that in the future some of our periodic results of operations may be below the
expectations of public market analysts and investors, and the market price of our equity shares and
ADSs could decline.
Our profits attributable to equity holders increased by 18.50% for the year ended March 31,
2010, as compared to the year ended March 31, 2009. While the environment has improved
significantly since the first half of the calendar year 2010, pricing remains competitive and
clients remain focused on cost reduction and capital conservation. We are investing in developing
capabilities in new technology areas and deepening our domain expertise. While we believe that we
have a flexible business model which can mitigate this impact, we may not be able to sustain
historical levels of profitability. In our Business Process Outsourcing or BPO business, we are
diversifying our service offerings to reduce the proportion of revenues from customer interaction
services. Continued attrition levels in our customer interaction services could adversely
8
impact our operating margins. As a result, there can be no assurance that we will be able to
sustain our historic levels of profitability.
If we do not continue to improve our administrative, operational and financial personnel and
systems to manage our growth, the value of our shareholders investment may be harmed.
Until fiscal year 2009, we experienced significant growth in all our businesses. While growth
rates were lower in fiscal 2010 compared to fiscal 2009, they have seen a strong uptick in second
half of the year. However, we expect our growth to continue to place significant demands on our
management and other resources. This will require us to continue to develop and improve our
operational, financial and other internal controls, both in India and elsewhere. In particular, our
continued growth will increase the challenges involved in:
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recruiting and retaining sufficiently skilled technical, marketing and management
personnel; |
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adhering to our high quality standards; |
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maintaining high levels of client satisfaction; |
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developing and improving our internal administrative infrastructure, particularly
our financial, operational, communications and other internal systems; and |
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preserving our culture, values and entrepreneurial environment. |
If we are unable to manage our growth effectively, the quality of our services and products
may decline, and our ability to attract clients and skilled personnel may be negatively affected.
These factors in turn could negatively affect the growth of our Global IT Services and Products
business and harm the value of our shareholders investment.
Intense competition in the market for IT and ITES services could adversely affect our cost
advantages, and, as a result, decrease our revenues.
The market for IT services is highly competitive. Our competitors include software companies,
IT companies, systems consulting and integration firms, other technology companies and client
in-house information services departments. We may also face competition from IT and ITES companies
operating from emerging low cost destination like China, Philippines,
Brazil, Romania, Poland, etc.
Many of our competitors command significantly greater financial, technical and marketing resources
and generate greater revenue than we do. We cannot be reasonably certain that we will be able to
compete successfully against such competitors or that we will not lose our key employees or clients
to such competitors. Additionally, we believe that our ability to compete also depends in part on
factors outside our control, such as the availability of skilled resources, the price at which our
competitors offer comparable services, and the extent of our competitors responsiveness to their
clients needs.
We may face difficulties in providing end-to-end business solutions for our clients that could
cause clients to discontinue their work with us, which in turn could harm our business.
We
have been expanding the nature and scope of our engagements and have
been adding new
service offerings, such as IT consulting, business process management, systems integration and
outsourcing of entire portions of IT infrastructure. The success of these service offerings is
dependent, in part, upon continued demand for such services from our existing and new clients and
our ability to meet this demand in a cost-competitive and effective manner. In addition, our
ability to effectively offer a wider breadth of end-to-end business solutions depends on our
ability to attract existing or new clients to these service offerings. To obtain engagements for
such end-to-end solutions, we also are more likely to compete with large, well-established
international consulting firms, resulting in increased compensation and marketing costs.
Accordingly, we cannot be certain that our new service offerings will effectively meet client needs
or that we will be able to attract existing and new clients to these service offerings.
The increased breadth of our service offerings may result in larger and more complex projects
with our clients. This will require us to establish closer relationships with our clients and a
thorough understanding of their operations. Our ability to establish such relationships will depend
on a number of factors, including the proficiency of our IT professionals and our management
personnel. Our failure to understand our client requirements or our failure to deliver services
which meet the requirements specified by our clients could result in termination of client
contracts, and we could be liable to our clients for significant penalties or damages.
Larger projects may involve multiple engagements or stages, and there is a risk that a client
may choose not to retain us for additional stages or may cancel or delay additional planned
engagements. These terminations, cancellations or delays may result from the business or financial
condition of our clients or the economy generally, as opposed to factors
9
related to the quality of our services. Such cancellations or delays make it difficult to plan
for project resource requirements, and inaccuracies in such resource planning may have a negative
impact on our profitability.
Our success depends in large part upon the ability of our management team and other highly
skilled professionals. If we fail to retain and attract these personnel, our business may be unable
to grow and our revenue could decline, which may decrease the value of our shareholders
investment.
The senior members of all our management team, including the continued efforts of our Chairman
and Managing Director are critical to our success. Our ability to execute project engagements and
to obtain new clients depend in large part on our ability to attract, train, motivate and retain
highly skilled professionals, especially project managers, software engineers and other senior
technical personnel. If we cannot hire and retain additional qualified personnel, our ability to
bid on and obtain new projects and to continue to expand our business will be impaired and our
revenue could decline. We believe that there is significant competition for professionals with the
skills necessary to perform the services we offer. We may not be able to hire and retain enough
skilled and experienced employees to replace those who leave. Additionally, we may not be able to
re-deploy and retain our employees to keep pace with continuing changes in technology, evolving
standards and changing client preferences. We are experiencing high employee attrition rates, in
line with the industry, as the environment continues to improve and IT Companies start to hire more
actively. Continued employee attrition rates in this business may adversely affect our revenues and
profitability.
Changes in government policies may also affect our ability to hire, attract and retain
personnel.
Exchange rate fluctuations in various currencies in which we do business, could negatively
impact our revenue and operating results.
Our IT Services business is approximately 75% of our revenue. Our revenue from this business
is derived from transactions in major world currencies while a significant portion of our costs are
in Indian rupees. The exchange rate between the rupee and major world currencies has fluctuated
significantly in recent years and may continue to fluctuate in the future. Appreciation of the
rupee against the major world currencies can adversely affect our revenue and competitive
positioning, and can adversely impact our gross margins. We generate around 35% of our IT Services
revenues in Non- USD currencies and the exchange rate fluctuations between these currencies and the
U.S. dollars can affect our revenues and growth expressed in USD terms. We enter into forward
exchange and option contracts to minimize the impact of currency fluctuations on our revenues.
However, volatility in exchange rate movement and/or sustained rupee appreciation will negatively
impact our revenue and operating results.
A significant portion of our debt is in various foreign currencies. We also undertake hedging
strategies to mitigate exposure of exchange rate risk relating to foreign currency borrowing
including entering into cross-currency interest rate swaps. As mentioned above, the exchange rate
between the rupee and major currencies of the world has fluctuated significantly in recent years
and will likely continue to fluctuate in the future. Volatility in exchange rate movement and/or
rupee depreciation may negatively impact our operating results.
Our revenues are highly dependent on clients primarily located in the United States and
Europe, as well as on clients concentrated in certain industries, and economic slowdowns or factors
that affect the economic health of the United States, Europe or these industries may affect our
business.
We derive approximately 58% of our IT Services revenues from United States and 26% of our IT
Services revenues from Europe. The recent crisis in the financial and credit markets in the United
States, Europe and Asia have contributed significantly to a global economic slowdown, with the
economies of the United States and Europe showing significant signs of weakness.
In an economic slowdown, our clients may reduce or postpone their technology spending
significantly. Reduction in spending on IT services may lower the demand for our services and
negatively affect our revenues and profitability.
Furthermore, any significant decrease in the growth of the industries on which we focus, or a
significant consolidation in any such industry, may reduce the demand for our services and
negatively affect our revenues and profitability.
Our IT Services revenue depends to a large extent on a small number of clients, and our
revenue could decline if we lose a major client.
We currently derive, and believe that we will continue to derive, a significant portion of our
IT Services revenue from a limited number of corporate clients. The loss of a major client or a
significant reduction in the service performed for a major client could result in a reduction of
our revenue. Our largest client for the years ended March 31, 2009 and 2010 accounted for 3% of our
IT Services revenue. For the same periods, our ten largest clients accounted for 20% of our IT
Services revenue. The volume of work we perform for specific clients may vary from year to year,
particularly since we
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typically are not the sole outside service provider for our clients. Thus, any major client
during one year may not provide the same level of revenue in a subsequent year.
There are a number of factors, other than our performance, that could cause the loss of a
client and that may not be predictable. In certain cases, clients have reduced their spending on IT
services due to a challenging economic environment and consequently have reduced their volume of
business with us. If we were to lose one of our major clients or have a significantly lower volume
of business with them, our revenue and profitability could be reduced. We continually strive to
reduce our dependence on the revenue earned from services rendered to any one client.
Restrictions on immigration in the U.S. may affect our ability to compete for and provide
services to clients in the United States, which could hamper our growth and cause our revenue to
decline.
Our employees who work onsite at client facilities or at our facilities in the United States
on temporary or extended assignments typically must obtain visas. If U.S. immigration laws change
and make it more difficult for us to obtain H-1B and L-1 visas for our employees, our ability to
compete for and provide services to our clients in the United States could be impaired. In response
to terrorist attacks in the United States, the U.S. Citizenship and Immigration Services has
increased the level of scrutiny in granting visas and has decreased the number of its grants. These
restrictions and any other changes in turn could hamper our growth and cause our revenue to
decline.
A majority of our personnel in the United States hold H-1B visas or L-1 visas. An H-1B visa is
a temporary work visa, which allows the employee to remain in the United States while he or she
remains an employee of the sponsoring firm, and the L-1 visa is an intra-company transfer visa,
which only allows the employee to remain in the United States temporarily. Although there is no
limit to new L-1 petitions, there is a limit to the aggregate number of new H-1B petitions that the
U.S. Citizenship and Immigration Services may approve in any government fiscal year. Beginning in
fiscal year 2005, the U.S. Citizenship and Immigration Services have limited the number of H-1B
visas that may be granted to 65,000 per year, a reduction from the 195,000 H-1B visas granted in
each of the three years prior to 2004.
The L-1 and H-1B Visa Reform Act of 2004 further precludes foreign companies from obtaining
L-1 visas for employees with specialized knowledge: (1) if such employees will be stationed
primarily at the worksite of another company in the U.S. and the employee will not be controlled
and supervised by his employer, or (2) if the placement is essentially an arrangement to provide
labor for hire rather than in connection with the employees specialized knowledge.
Immigration laws in the United States may also require us to meet certain minimum levels of
compensation, and to comply with other legal requirements, including labor certifications, as a
condition to obtaining or maintaining work visas for our technology professionals working in the
United States.
Immigration laws in the United States and in other countries are subject to legislative
changes, as well as to variations in standards of application and enforcement due to political
forces and economic conditions. It is difficult to predict the political and economic events that
could affect immigration laws, or the restrictive impact they could have on obtaining or monitoring
work visas for our technology professionals.
Although we currently have sufficient personnel with valid H-1B visas, we cannot assure you
that we will continue to be able to obtain any or a sufficient number of H-1B visas on the same
time schedule as we have previously obtained, or at all.
Our global operations expose us to numerous and sometimes conflicting legal and regulatory
requirements, and violation of these regulations could harm our
business.
Because we provide services to clients throughout the world, we are subject to numerous, and
sometimes conflicting, legal rules on matters as diverse as import/export controls, content
requirements, trade restrictions, tariffs, taxation, sanctions, government affairs, internal and
disclosure control obligations, data privacy and labor relations. Violations of these regulations
in the conduct of our business could result in fines, criminal sanctions against us or our
officers, prohibitions on doing business and damage to our reputation. Violations of these
regulations in connection with the performance of our obligations to our clients also could result
in liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity,
restrictions on our ability to process information and allegations by our clients that we have not
performed our contractual obligations. Due to the varying degree of development of the legal
systems of the countries in which we operate, local laws might be insufficient to protect our
rights.
We have approximately 18,000 employees located outside India. We are subject to risks relating
to compliance with a variety of national and local laws including multiple tax regimes, labour
laws, employee health safety and wages and benefits. We may, from time to time, be subject to
litigation or administrative actions resulting from claims against us by current or former
employees individually or as part of class actions, including claims of wrongful terminations,
discrimination, misclassification or other violations of labour law or other alleged conduct. Our
failure to comply with
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applicable regulatory requirements could have a material adverse effect on our business,
results of operations and financial condition.
Legislation
in certain countries in which we operate, including the United States, may
restrict companies in those countries from outsourcing work to us.
Recently, some countries and organizations have expressed concerns about a perceived
association between offshore outsourcing and the loss of jobs domestically. With the growth of
offshore outsourcing receiving increasing political and media attention, there have been concerted
efforts to enact new legislation to restrict offshore outsourcing or impose disincentives on
companies which have been outsourcing jobs. This may adversely impact our ability to do business in
these jurisdictions and could adversely affect our revenues and operating profitability.
In addition, from time to time, there has been publicity about negative experiences associated
with offshore outsourcing, such as theft and misappropriation of sensitive client data (including
reports involving service providers in India). Our current or prospective clients may elect to
perform certain services themselves or may be discouraged from transferring services from onshore
to offshore providers to avoid negative perceptions that may be associated with using an offshore
provider. Any slowdown or reversal of existing industry trends toward offshore outsourcing would
seriously harm our ability to compete effectively with competitors that provide services from
within the country in which our clients operate.
We focus on high-growth industries, such as networking and communications. Any decrease in
demand for technology in such industries may significantly decrease the demand for our services,
which may impair our growth and cause our revenue to decline.
Approximately 26% of our business is derived from clients in high growth industries who use
our IT Services for networking and communications equipment. These industries have experienced
periods of above normal growth and periods of contraction. Any significant decrease in the growth
of these industries will decrease the demand for our services and could reduce our revenue.
Our failure to complete fixed-price, fixed-timeframe contracts on budget and on time may
negatively affect our profitability, which could decrease the value of our shareholders
investment.
We offer a portion of our services on a fixed-price, fixed-time frame basis, rather than on a
time-and-materials basis. Although we use specified software engineering processes and rely on our
past project experience to reduce the risks associated with estimating, planning and performing
fixed-price, fixed-timeframe projects, we bear the risk of cost overruns, completion delays and
wage inflation in connection with these projects. If we fail to accurately estimate the resources
and time required for a project, future rates of wage inflation and currency exchange rates, or if
we fail to complete our contractual obligations within the contracted timeframe, our profitability
may suffer.
Disruptions in telecommunications could harm our service model, which could result in a
reduction of our revenue.
A significant element of our business strategy is to continue to leverage and expand our
offshore development centers at Bangalore, Chennai, Hyderabad and Pune in India, as well as near
shore development centers outside India. We believe that the use of a strategically located network
of software development centers will provide us with cost advantages, the ability to attract highly
skilled personnel in various regions of India and the world, the ability to service clients on a
regional and global basis and the ability to provide services to our clients 24 hours a day, seven
days a week. Part of our service model is to maintain active voice and data communications between
our main offices in Bangalore, our clients offices, and our other software development and support
facilities. Although we maintain redundancy facilities and satellite communications links, any
significant loss in our ability to transmit voice and data through satellite and telephone
communications could result in a disruption in business, thereby hindering our performance or our
ability to complete client projects on time. This, in turn, could lead to a reduction of our
revenue.
We may be liable to our clients for damages caused by disclosure of confidential information
or system failures.
We often have access to or are required to collect and store confidential client and customer
data. Many of our client agreements do not limit our potential liability for breaches of
confidentiality. If any person, including any of our employees, penetrates our network security or
misappropriates sensitive data, we could be subject to significant liability from our clients or
from our clients customers for breaching contractual confidentiality provisions or privacy laws.
Unauthorized disclosure of sensitive or confidential client and customer data, whether through
breach of our computer systems, systems failure or otherwise, could damage our reputation and cause
us to lose clients.
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We are investing substantial cash assets in new facilities and physical infrastructures and
our profitability could be reduced if our business does not grow proportionately.
We have invested substantially in construction or expansion of new software development
facilities and physical infrastructure during fiscal year 2010 in anticipation of growth in our
business. The total amount of investment made to purchase property, plant and equipment in fiscal
year 2010 was Rs. 12,631 million ($281 million). Additionally, as of March 31, 2010, we had
contractual commitments of approximately Rs. 2,782 million ($62 million) related to capital
expenditures on construction or expansion of our software development facilities. We may encounter
cost overruns or project delays in connection with new facilities. These expansions may increase
our fixed costs. If we are unable to grow our business and revenues proportionately, our
profitability will be reduced.
Our international operations subject us to risks inherent in doing business on an
international level that could harm our operating results.
Currently, we have software development facilities in several countries around the world. The
majority of our software development facilities are located in India. As we are in the process of
scaling up our presence outside India through our strategic development centres, we are subject to
additional risks related to our international expansion strategy, including risks related to
complying with a wide variety of national and local laws, restrictions on the import and export of
certain technologies and multiple and possibly overlapping tax structures. In addition, we may face
competition in other countries from companies that may have more experience with operations in such
countries or with international operations in general. We may also face difficulties integrating
new facilities in different countries into our existing operations, as well as integrating
employees that we hire in different countries into our existing corporate culture. Our
international expansion plans may not be successful and we may not be able to compete effectively
in other countries.
Our business will suffer if we fail to anticipate and develop new services and enhance
existing services in order to keep pace with rapid changes in technology and the industries on
which we focus.
The IT services market is characterized by rapid technological changes, evolving industry
standards, changing client preferences and new product and service introductions. Our future
success will depend on our ability to anticipate these advances and develop new product and service
offerings to meet client needs. We may not be successful in anticipating or responding to these
advances on a timely basis, or, if we do respond, the services or technologies we develop may not
be successful in the marketplace. Further, products, services or technologies that are developed by
our competitors may render our services non-competitive or obsolete.
Most of our client contracts can typically be terminated without cause and with little or no
notice or penalty, which could negatively impact our revenue and profitability.
Our clients typically retain us on a non-exclusive, project-by-project basis. Most of our
client contracts, including those that are on a fixed-price, fixed-time frame basis, can be
terminated with or without cause, in as few as ninety days notice and without termination-related
penalties. Additionally, most of our contracts with clients are typically limited to discrete
projects without any commitment to a specific volume of business or future work. Our business is
dependent on the decisions and actions of our clients, and there are a number of factors relating
to our clients that are outside our control that might result in the termination of a project or
the loss of a client, including:
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financial difficulties for a client; |
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a change in strategic priorities, resulting in a reduced level of IT spending; |
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a demand for price reductions; and |
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a change in outsourcing strategy by moving more work to client in-house IT
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We may engage in future acquisitions, investments, strategic partnerships or other ventures
that may harm our performance, dilute our shareholders ownership and cause us to incur debt or
assume contingent liabilities.
We have acquired and in the future may acquire or make investments in complementary
businesses, technologies, services or products, or enter into strategic partnerships with parties
who can provide access to those assets. For example, in December 2009, the Company acquired 100% of
the equity of Lornamead FZE (an entity incorporated in Dubai) and Lornamead Personal Care Private
Limited (an entity incorporated in India) from UK-based Lornamead Group Limited and operating in
the personal care category marketing fragrance products, bath and shower products and skin care
products. In
the future, we may not identify suitable acquisition, investment or strategic partnership
candidates, or if we do identify suitable candidates, we may not complete those transactions on
terms commercially acceptable to us. We could have
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difficulty in assimilating the personnel,
operations, technology and software of the acquired companies. In addition, the key personnel of an
acquired company may decide not to work for us. If we make other types of acquisitions, we could
have difficulty in integrating the acquired products, services or technologies into our operations.
These difficulties could disrupt our ongoing business, distract our management and employees and
increase our expenses. Changes in competition laws in India and abroad could also impact our
acquisition plans.
Some of our long-term client contracts contain benchmarking provisions which, if triggered
could result in lower contractual revenues and profitability in the future.
As the size and complexity of our client engagements increase, our clients may require further
benchmarking provisions in our contracts with them. Benchmarking provisions allow a customer in
certain circumstances to request a benchmark study prepared by an agreed upon third-party comparing
our pricing, performance and efficiency gains for delivered contract services to that of an agreed
upon list of other service providers for comparable services. Based on the results of the benchmark
study and depending on the reasons for any unfavorable variance, we may be required to reduce the
pricing for future services to be performed during the balance period of the contract, which could
have an adverse impact on our revenues and profitability.
We may be liable to our clients for damages caused by system failures, which could damage our
reputation and cause us to lose customers.
Many of our contracts involve projects that are critical to the operations of our clients
businesses and provide benefits that may be difficult to quantify. Any failure in a clients system
could result in a claim for substantial damages against us, regardless of our responsibility for
such failure. Although we attempt to limit our contractual liability for consequential damages in
rendering our services, we cannot be assured that such limitations on liability will be enforceable
in all cases, or that they will otherwise protect us from liability for damages. A successful
assertion of one or more large claims against us that exceeds our available insurance coverage or
changes in our insurance policies, including premium increases or the imposition of a large
deductible or co-insurance requirement, could adversely affect our operating results.
Customers may subject us to litigation to seek damages for deficient services or for violating
intellectual property rights.
Our customers may subject us to litigation and seek damages for losses caused by allegedly
deficient services. Customers may also subject us to litigation and seek damages for violating or
misusing intellectual property rights. Our inability to provide services at the contractually
agreed service levels or inability to prevent violation or misuse of our customers intellectual
property could cause significant damage to our reputation and adversely affect our results of
operations.
Compliance with new and changing corporate governance and public disclosure requirements adds
uncertainty to our compliance policies and increases our costs of compliance.
Changing laws, regulations and standards relating to accounting, corporate governance and
public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations, New York Stock Exchange rules,
Securities and Exchange Board of India rules and Indian stock market listing regulations, are
creating uncertainty for companies like ours. These new or changed laws, regulations and standards
may lack specificity and are subject to varying interpretations. Their application in practice may
evolve over time as new guidance is provided by regulatory and governing bodies. This could result
in continuing uncertainty regarding compliance matters and higher costs of compliance as a result
of ongoing revisions to such governance standards.
In particular, continuing compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and
the related regulations regarding our required assessment of our internal controls over financial
reporting requires the commitment of significant financial and managerial resources. With respect
to our Form 20-F for the year ended March 31, 2010, our management has performed an assessment of
the effectiveness of the internal control over financial reporting.
In connection with the audit
of our consolidated financial statements for the year ended March 31, 2010, and as disclosed in our Form 6-K
dated March 1, 2010, we discovered acts of embezzlement by one of our junior level employees during
the period from November 2006 to December 2009. In response to the discovery of such acts of
embezzlement, our Audit Committee conducted investigations to determine, among other things,
the materiality of the amounts embezzled, the design and implementation of internal control processes
to detect and prevent similar misappropriations in the future and
certain other issues including the appropriateness of certain
accounting entries. Based on our review of the facts discovered
during the investigations, we believe that the
amounts embezzled were not material.
See also Item 5 Managements Discussion and Analysis of Financial Condition and Results of
Operations and Item 15 Controls and Procedures for additional information pertaining to our
Audit Committee investigations, the findings and impact of the financial statement misstatements
and other adjustments identified during the investigations and our evaluation and remediation of
the material weaknesses identified in our internal controls over financial reporting as of March
31, 2009.
We and our independent registered public accounting firm also identified the lack of internal
controls that gave rise to this embezzlement and financial statement misstatements as material
weaknesses in our internal control over financial reporting as of March 31, 2009. We have taken
steps to address the underlying causes of the identified material weaknesses, primarily through the
development and implementation of policies and controls, improved processes and documented
procedures, the retention of third-party experts, and the hiring of additional accounting and
finance personnel. The actions that we have taken were reviewed by our senior management with
oversight by our Audit Committee. If we fail to remediate deficiencies in our control environment
or are unable to implement and maintain effective internal control over financial reporting, we may
be unable to accurately report our financial results, or report them within the timeframes required
by law or exchange regulations. See Item 15 Controls and Procedures for additional information
pertaining to our evaluation and remediation of the material weaknesses identified in our internal
control over financial reporting as of March 31, 2009.
We are committed to maintaining high standards of corporate governance and public disclosure,
and our efforts to comply with evolving laws, regulations and standards in this regard have
resulted in, and are likely to continue to result in, increased general and administrative expenses
and a diversion of management time and attention from revenue-generating activities to compliance
activities. In addition, the new laws, regulations and standards regarding corporate governance may
make it more difficult for us to obtain director and officer liability insurance. Further, our
board members, chief executive officer and chief financial officer could face an increased risk of
personal liability in connection with their performance of duties. As a result, we may face
difficulties attracting and retaining qualified board members and executive
officers, which could harm our business. If we fail to comply with new or changed laws or
regulations and standards differ, our business and reputation may be harmed.
If we fail to or are unable to
implement and maintain effective internal controls over our financial reporting, the accuracy and
timeliness of our financial reporting may be adversely affected.
As we disclosed in our Form 6-K dated March 1, 2010, we discovered acts of embezzlement by one
of our junior level employees during the period from November 2006 to December 2009. In response to the
discovery of such acts of embezzlement, our Audit Committee conducted
investigations to
determine, among other things, the materiality of the amounts
embezzled, the design and
implementation of internal control processes to detect and prevent similar misappropriations in the future and
certain other issues including the appropriateness of certain
accounting entries.
Based on our review of the facts discovered during the investigations,
we believe that the amounts embezzled were not material. We have
since recovered substantially all of the embezzled amounts. See also Item 5 Managements Discussion and Analysis of Financial Condition and Results of
Operations for additional information pertaining to our Audit Committee investigations and the
findings and the impact of financial statement misstatements and other adjustments identified
during the investigation.
We and our independent registered public accounting firm also identified the lack of internal controls
that gave rise to this embezzlement and financial statement
misstatements as material weaknesses in our internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of a companys
annual or interim financial statements will not be prevented or
detected on a timely basis. See also Item 15 Controls and Procedures for additional information pertaining to our
evaluation and remediation of the material weaknesses identified in our internal controls over
financial reporting as of March 31, 2009.
We
have taken steps to address the underlying causes of the identified
material weakness primarily through the development and
implementation of policies and controls, improved process and
documented procedures, the retention of third party experts, and the
having of additional accounting and finance personnel. We believe
that though we have remediated the identified material
weaknesses of March 31, 2010, any future reoccurrence of these issues or
other material weaknesses or significant deficiencies may result in our inability to accurately report our
financial results or report them within the timeframes required by law or exchange regulations. We cannot
assure you that future additional material weaknesses or significant deficiencies will not exist or otherwise
be discovered, a risk that is significantly increased in light of the complexity of our business and
multinational operations. If material weaknesses or other significant deficiencies were to occur in future
periods, our ability to accurately and timely report our financial position, results of operations or cash flows
could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange
Act, restatements of our consolidated financial statements, a decline in our stock price, suspension or
delisting of our ADSs on the New York Stock Exchange, or other material adverse effects on our business,
reputation, results of operations, financial condition or liquidity. See also Item 5 Managements Discussion and Analysis of Financial Condition and Results of
Operations and Item 15 Controls and Procedures for additional information pertaining to our
Audit Committee investigation, the findings and impact of the
financial statement misstatements and other adjustments identified
during the investigations and our evaluation and
remediation of the material weaknesses identified in our internal controls over financial reporting
as of March 31, 2009.
14
If we are unable to collect our receivables from or invoice our unbilled services to our
clients, our results of operations and cash flows could be adversely affected.
Our business depends on our ability to successfully obtain payment from our clients of the
amounts they owe us for work performed. We evaluate the financial condition of our clients and
usually bill and collect on relatively short cycles. We maintain provisions against receivables and
unbilled services. Actual losses on client balances could differ from those that we currently
anticipate and as a result we might need to adjust our provisions. There is no guarantee that we
will accurately assess the creditworthiness of our clients. Timely collection of client balances
also depends on our ability to complete our contractual commitments and bill and collect our
contracted revenues. If we are unable to meet our contractual requirements, we might experience
delays in collection of and/or be unable to collect our client balances, and if this occurs, our
results of operations and cash flows could be adversely affected. In addition, if we experience an
increase in the time to bill and collect for our services, our cash flows could be adversely
affected.
If our pricing structures do not accurately anticipate the cost and complexity of performing
our work, then our contracts could be unprofitable.
We negotiate pricing terms with our clients utilizing a range of pricing structures and
conditions. Depending on the particular contract, these include time-and-materials pricing,
fixed-price pricing, and contracts with features of both of these pricing models. Our pricing is
highly dependent on our internal forecasts and predictions about our projects and the marketplace,
which might be based on limited data and could turn out to be inaccurate. If we do not accurately
estimate the costs and timing for completing projects, our contracts could prove unprofitable for
us or yield lower profit margins than anticipated. We could face greater risk when pricing our
outsourcing contracts, as many of our outsourcing projects entail the coordination of operations
and workforces in multiple locations, utilizing workforces with different skill sets and
competencies and geographically distributed service centers. Furthermore, when outsourcing work we
occasionally hire employees from our clients and assume responsibility for one or more of our
clients business processes. Our pricing, cost and profit margin estimates on outsourced work
frequently include anticipated long-term cost savings from transformational and other initiatives
that we expect to achieve and sustain over the life of the outsourcing contract. There is a risk
that we will under price our contracts, fail to accurately estimate the costs of performing the
work or fail to accurately assess the risks associated with potential contracts. In particular, any
increased or unexpected costs, delays or failures to achieve anticipated cost savings, or
unexpected risks we encounter in connection with the performance of this work, including those
caused by factors outside our control, could make these contracts less profitable or unprofitable,
which could have an adverse effect on our profit margin.
Our profitability could suffer if we are not able to maintain favorable utilization rates.
The cost of providing our services, including the utilization rate of our professionals,
affects our profitability. If we are not able to maintain an appropriate utilization rate for our
professionals, our profit margin and our profitability may suffer. Our utilization rates are
affected by a number of factors, including:
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our ability to transition employees from completed projects to new assignments and
to hire and assimilate new employees; |
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our ability to forecast demand for our services and thereby maintain an appropriate
headcount in each of our geographies and workforces; |
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our ability to manage attrition; and |
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our need to devote time and resources to training, professional development and
other non-chargeable activities. |
Our work with government clients exposes us to additional risks inherent in the government
contracting environment.
Our clients include national, provincial, state and local governmental entities. Our
government work carries various risks inherent in the government contracting process. These risks
include, but are not limited to, the following:
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Government entities often reserve the right to audit our contract costs, including
allocated indirect costs, and conduct inquiries and investigations of our business practices with
respect to our government contracts. If the client finds that the costs are not reimbursable, then
we will not be allowed to bill for them, or the cost must be refunded to the client if
it has already been paid to us. Findings from an audit also may result in our being required
to prospectively adjust previously agreed rates for our work and may affect our future margins. |
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If a government client discovers improper or illegal activities in the course of
audits or investigations, we may become subject to various civil and criminal penalties and
administrative sanctions, which may include termination of contracts, forfeiture of profits,
suspension of payments, fines and suspensions or debarment from doing business with other agencies
of that government. The inherent limitations of internal controls may not prevent or detect all
improper or illegal activities, regardless of their adequacy. Additionally, an allegation of
improper activity, even if not proven, could result in adverse publicity and damage to our
reputation and business. |
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Government contracts, and the proceedings surrounding them, are often subject to more
extensive scrutiny and publicity than contracts with commercial clients. Negative publicity related
to our government contracts, regardless of its accuracy, may further damage our business by
affecting our ability to compete for new contracts. |
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Political and economic factors such as pending elections, changes in leadership among
key executive or legislative decision makers, revisions to governmental tax policies and reduced
tax revenues can affect the number and terms of new government contracts signed. |
Terms and conditions of government contracts tend to be more onerous and are often more
difficult to negotiate than those for commercial contracts
We are exposed to fluctuations in the market values of our investment portfolio.
Recent turmoil in the financial markets has adversely affected economic activity in the United
States and other regions of the world in which we do business. Deterioration of the credit as well
as debt and capital markets could result in volatility of our investment earnings and impairments
to our investment portfolio, which could negatively impact our financial condition and reported
income.
We are exposed to fluctuations in the interest rates for our borrowings.
Recent turmoil in the financial markets has caused and can cause the borrowings rate to go up
in the future. Deterioration in the interest rates could negatively impact our financial condition
and reported income.
Our financial condition and results of operations may be harmed if we do not successfully
reduce market risks through the use of derivative financial instruments.
Since we conduct operations throughout the world, a substantial portion of our assets,
liabilities, revenues and expenses are denominated in various currencies other than the Indian
rupee. Because our financial statements are denominated in India rupee, fluctuations in currency
exchange rates, especially the U.S. dollar against the Indian rupee, could have a material impact
on our reported results.
We also experience other market risks, including changes in interest rates of securities that
we own. We may use derivative financial instruments to reduce certain of these risks. If our
strategies to reduce market risks are not successful, our financial condition and operating results
may be harmed.
Managements use of estimates may affect our income and financial position.
To comply with IFRS, management is required to make many judgments, estimates, and
assumptions. The facts and circumstances on which management bases these estimates and judgments,
and managements judgment of the facts and circumstances, may change from time to time and this may
result in significant changes in the estimates, with a negative impact on our assets or income.
Current and future accounting pronouncements and other financial reporting standards may adversely
affect the financial information we present. We regularly monitor our compliance with all of the
financial reporting standards that are applicable to us and any new pronouncements that are
relevant to us. Findings of our monitoring activity or new financial reporting standards may
require us to change our internal accounting policies and to alter our operational policy so that
it reflects new or amended financial reporting standards. We cannot exclude the possibility that
this may have a material impact on our assets, income, or cash flows. For a summary of significant
accounting policies, refer Note 3 of the Notes to the Consolidated Financial Statements section.
If the Securities and Exchange Commission were to disagree with the conclusion of KPMG India
and our Audit Committee that KPMG India is independent for purposes of its audit of Wipro, certain
of our financial statements might have to be re-audited by a new independent registered public
accounting firm.
As we disclosed in our Form 6-K dated March 1, 2010, we discovered acts of embezzlement by one
of our junior level employees during the period from November 2006 to December 2009. In response to
the discovery of such acts of embezzlement, our Audit Committee conducted an investigation to
determine, among other things, the materiality of the amounts embezzled, the design and
implementation of internal control processes to detect and prevent similar misappropriations in the
future and certain other issues including the appropriateness of certain accounting entries. During
the course of our investigation of this matter, our Audit Committee learned that this employee had
engaged in a number of personal financial transactions, of relatively small value, with a junior
member of KPMG Indias audit team assigned to the Wipro audit engagement. After being advised
of this information, our independent registered public accountants, KPMG India, commenced an
internal investigation to determine the scope of the problem and to determine whether its
independence with respect to Wipro had been impaired.
During the course of its investigation, KPMG India considered other potential independence
matters and took remedial measures to address issues identified. KPMG India concluded that it did not lack independence with respect to Wipro. Based on its
review of the facts from KMPG Indias investigation and discussions with its external advisors, our
Audit Committee concurred with KPMG Indias conclusion.
KPMG India voluntarily reported the results of its investigation, to the SEC. We have
received a voluntary document request from the SECs Division of Enforcement. The document request
includes, among other things, issues relating to auditor independence. We are cooperating with the
SECs request. The outcome of the SECs review of this matter is uncertain. A conclusion by the
SEC that differs with the conclusions reached by KPMG India and our Audit Committee could have a
material adverse effect on us and could, among other things, require us to retain new auditors and
have our financial statements for one or more years re-audited.
Risks Related to Investments in Indian Companies and International Operations Generally.
We are incorporated in India, and a substantial portion of our assets and our employees are
located in India. Consequently, our financial performance and the market price of our ADSs will be
affected by political, social and
economic developments affecting India, Government of India policies, including taxation and
foreign investment policies, Government currency exchange control and changes in exchange rates and
interest rates.
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Wages in India have historically been lower than wages in the United States and Europe, which
has been one of our competitive advantages. Wage increases in India may prevent us from sustaining
this competitive advantage and may reduce our profit margins.
Our wage costs in India have historically been significantly lower than wage costs in the
United States and Europe for comparably skilled professionals, and this has been one of our
competitive advantages. However, wage increases in India may prevent us from sustaining this
competitive advantage and may negatively affect our profit margins. We may need to increase the
levels of our employee compensation more rapidly than in the past to retain talent. Unless we are
able to continue to increase the efficiency and productivity of our employees, over the long term,
wage increases may reduce our profit margins. Furthermore, increases in the proportion of employees
with lower experience, or source talent from other low cost locations, like Eastern Europe, China
or South-East Asia could also negatively affect our profits.
We would realize lower tax benefits if the special tax holiday scheme for units set up in
special economic zones is substantially modified.
The Government of India introduced a separate tax holiday scheme for units set up in special
economic zones. Under this scheme, units in designated special economic zones which began providing
services on or after April 1, 2005 will be eligible for a
deduction of 100% of profits or
gains derived from the export of services for the first five years from commencement of provision
of services and 50% of such profits or gains for a further five years.
Recently there have been demands by legislators and various political parties in India that
the Government of India should actively regulate the development of special economic zones by
private entities. There have also been demands to impose strict conditions which need to be
complied with before an economic zone developed by a private entity is designated as special
economic zone. If such regulations or conditions are imposed it would adversely impact our ability
to set up new units in such designated special economic zones and avail ourselves of tax benefits.
Our profit for the period would decrease if the Government of India imposes additional taxes
or withdraws or reduces tax benefits or other incentives.
Currently, we benefit from certain tax incentives under Indian tax laws. As a result of these
incentives, our operations have not been subject to significant Indian tax liabilities. These tax
incentives currently include a tax holiday from payment of Indian corporate income taxes for our
Global IT Services and Products business operated from specially designated Software Technology
Parks and Special Economic Zones in India and an income tax deduction of 100% for profits
derived from exporting information technology services. As a result, a substantial portion of our
pre-tax income has not been subject to significant tax in India in recent years.
The Finance Act, 2000 phases out the 10-year tax holiday available to Companies that export
software from specially designated software technology parks, or STPs, in India such that the tax
holiday is available only until the earlier of fiscal year 2009 or 10 years after the commencement
of a companys undertaking. On May 10, 2008, the Finance Minister of India announced that the
Government of India has extended the availability of the 10-year tax holiday by a period of one
year such that the tax holiday will be available until the earlier of fiscal year 2010 or 10 years
after the commencement of a companys undertaking. In July 2009, the Finance Act (No.2), 2009 again
extended the availability of the 10-year tax holiday by a period of one year such that the tax
holiday will be available until the earlier of fiscal year 2011 or 10 years after the commencement
of a companys undertaking.
The Finance Act, 2007 has included income eligible for deductions under sections 10A and 10B
of the Indian Income Tax Act (sections that provide tax holiday benefits) in the computation of
book profits for the levy of a Minimum Alternative Tax, or MAT. The Finance Act, 2010 has increased
the rate of MAT, effective April 1, 2010, to 19.93% (including a surcharge and education cess) on
our book profits determined after including income eligible for deductions under Sections 10A and
10B of the Indian Income Tax Act. The Income Tax Act provides that the MAT paid over normal tax
payable that could be carried forward can be adjusted against our tax liability over the next ten
years. Although MAT paid by us can be set off against our future income tax liability, our cash
flows could be adversely affected.
In the event that the Government of India or the government of another country changes its tax
policies in a manner that is adverse to us, our tax expense may materially increase, reducing our
profitability.
In recent years, the Government of India has introduced a tax on various services provided
within India, including the maintenance and repair of software. In the Finance Act, 2008, the
Government of India has included services provided in relation to information technology software
under the ambit of a service tax, if it is in the course of or in furtherance of the business. Under
this tax, service providers are required to pay a tax of 10% (excluding applicable education cess)
on the value of services provided to customers. The Government of India may expand the services
covered
under the ambit of this tax to include various services provided by us. This tax, if expanded,
could increase our expenses, and could adversely affect our operating margins and revenues.
Although currently there is no material pending or
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threatened claims against us for service taxes,
such claims may be asserted against us in the future. Defending these claims would be expensive and
divert our attention and resources from operating our company.
We are subject to U.S. tax on income, taking into account corresponding deductions,
attributable to the permanent establishment in the United States due to operation of our U.S.
branch. Such tax is assessed at a rate of up to 35%. In addition, we are subject to a 15% Branch
Profit Tax, or BPT, in the United States on the dividend equivalent amount as the term is defined
under U.S. tax laws. Based on the net profits of our United States branch for fiscal 2010 and the
net assets held as of March 31, 2010 and March 31, 2009, we are not currently subject to BPT. In
the event that BPT is triggered, then such after-tax net profits not represented by an increase in
net assets would be treated as a deemed distribution of accumulated profits and we would be liable
to pay additional taxes on all such deemed distributions, thereby increasing our income tax
expenses and affecting our profits negatively.
We operate in jurisdictions that impose transfer pricing and other tax-related regulations on
us, and any failure to comply could materially and adversely affect our profitability.
We are required to comply with various transfer pricing regulations in India and other
countries. Failure to comply with such regulations may impact our effective tax rates and
consequently affect our net margins. Additionally, we operate in several countries and our failure
to comply with the local tax regime may result in additional taxes, penalties and enforcement
actions from such authorities. In the event that we do not properly comply with transfer pricing
and tax-related regulations, our profitability may be adversely affected.
Terrorist attacks or a war could adversely affect our business, results of operations and
financial condition.
Terrorist attacks, such as the attacks of September 11, 2001 in the United States, the attacks
of July 7, 2005 in London, the attacks of June 30, 2007 in Glasgow, the attacks in November 2008 in
Mumbai and other acts of violence or war, such as the continuing conflict in Iraq and Afghanistan,
have the potential to directly impact our clients. To the extent that such attacks affect or
involve the United States or Europe, our business may be significantly impacted, as the majority of
our revenue is derived from clients located in the United States and Europe. In addition, such
attacks may make travel more difficult, may make it more difficult to obtain work visas for many of
our technology professionals who are required to work in the United States or Europe, and may
effectively curtail our ability to deliver our services to our clients. Such obstacles to business
may increase our expenses and negatively affect the results of our operations. Furthermore, any
terrorist attacks in India could cause a disruption in the delivery of our services to our clients,
and could have a negative impact on our business, personnel, assets and results of operations, and
could cause our clients or potential clients to choose other vendors for the services we provide.
Terrorist threats, attacks or war could also delay, postpone or cancel our clients decisions to
use our services.
The markets in which we operate are subject to the risk of earthquakes, floods and other
natural disasters.
Some of the regions that we operate in are prone to earthquakes, flooding and other natural
disasters. In the event that any of our business centers are affected by any such disasters, we may
sustain damage to our operations and properties, suffer significant financial losses and be unable
to complete our client engagements in a timely manner, if at all. Further, in the event of a
natural disaster, we may also incur costs in redeploying personnel and property. In addition if
there is a major earthquake, flood or other natural disaster in any of the locations in which our
significant customers are located, we face the risk that our customers may incur losses, or
sustained business interruption and/or loss which may materially impair their ability to continue
their purchase of products or services from us. A major earthquake, flood or other natural disaster
in the markets in which we operate could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Regional conflicts in South Asia could adversely affect the Indian economy, disrupt our
operations and cause our business to suffer.
South Asia has from time to time experienced instances of civil unrest and hostilities among
neighboring countries, including between India and Pakistan. In recent years there have been
military confrontations between India and Pakistan that have occurred in the region of Kashmir and
along the India-Pakistan border. The potential for hostilities between the two countries is high
due to terrorist incidents in India and the aggravated geopolitical situation in the region. Both
countries have initiated active measures to reduce hostilities. Military activity or terrorist
attacks in the future could influence the Indian economy by disrupting communications and making
travel more difficult and such political tensions could create a greater perception that
investments in Indian companies involve higher degrees of risk. This, in turn, could have a
material adverse effect on the market for securities of Indian companies, including our equity
shares and our ADSs, and on the market for our services.
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Political considerations in the Indian Government could delay the liberalization of the Indian
economy and adversely affect economic conditions in India in general, which could in return impact
our financial results and prospects.
Since 1991, successive Indian Governments have pursued policies of economic liberalization,
including significantly relaxing restrictions on the private sector. Nevertheless, the role of the
Indian Central and State Governments in the Indian economy as producers, consumers and regulators
has remained significant. Although we believe that the process of economic liberalization will
continue, the rate of economic liberalization could change, and specific laws and policies
affecting technology companies, foreign investment, currency exchange and other matters affecting
investment in our securities could change as well. A significant change in Indias economic
liberalization and deregulation policies could adversely affect business and economic conditions in
India generally and our business in particular.
For instance in April 2007, the Government of India announced a number of changes in its
policy relating to the Special Economic Zones (SEZs) including specifying a cap on land
available for SEZs. The Government is also considering making changes in its SEZ policy. We
currently have several facilities operating within SEZs and any adverse change in policy relating
to SEZs could affect our profitability.
Indian law limits our ability to raise capital outside India and may limit the ability of
others to acquire us, which could prevent us from operating our business or entering into a
transaction that is in the best interests of our shareholders.
Indian law constrains our ability to raise capital outside of India through the issuance of
equity or convertible debt securities. Generally, any foreign investment in, or an acquisition of,
an Indian company requires approval from relevant Government authorities in India, including the
Reserve Bank of India. However, subject to certain exceptions, the Government of India currently
does not require prior approvals for IT companies such as ours. If we are required to seek the
approval of the Government of India and the Government of India does not approve the investment or
implements a limit on the foreign equity ownership of IT companies, our ability to seek and obtain
additional equity investment by foreign investors will be limited. In addition, these restrictions,
if applied to us, may prevent us from entering into a transaction, such as an acquisition by a
non-Indian company, which would otherwise be beneficial for our company and the holders of our
equity shares and ADSs.
Our ability to acquire companies organized outside India depends on the approval of the
Government of India. Our failure to obtain approval from the Government of India for acquisition of
companies organized outside India may restrict our international growth, which could negatively
affect our revenue.
The Ministry of Finance of the Government of India and/or the Reserve Bank of India must
approve our acquisition of any company organized outside of India or grant general or special
permission for such acquisition. The Reserve Bank of India permits acquisitions of companies
organized outside of India by an Indian party without approval in the following circumstances:
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if the transaction consideration is paid in cash, up to 400% of the networth of the
acquiring Company; |
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If the acquisition is funded with cash from the acquiring companys existing foreign
currency accounts or with cash proceeds from the issue of ADRs/GDRs; or |
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if the transaction consideration is paid in stock (i.e., by issue of ADRs/GDRs), up
to ten times the acquiring companys previous fiscal years export earnings. |
We cannot assure you that any required approval from the Reserve Bank of India and or the
Ministry of Finance or any other Government agency can be obtained. Our failure to obtain such
approvals from the Government of India for acquisitions of companies organized outside India may
restrict our international growth, which could negatively affect our revenue.
It may be difficult for you to enforce any judgment obtained in the United States against us,
the selling shareholders or our affiliates.
We are incorporated under the laws of India and many of our directors and executive officers,
reside outside the United States. A substantial portion of our assets and the assets of many of
these persons are located outside the United States. As a result, you may be unable to effect
service of process upon us outside of India or upon such persons outside their jurisdiction of
residence. In addition, you may be unable to enforce against us in courts outside of India, or
against these persons outside the jurisdiction of their residence, judgments obtained in courts of
the United States, including judgments predicated solely upon the federal securities laws of the
United States.
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We have been advised by our Indian counsel that the United States and India do not currently
have a treaty providing for reciprocal recognition and enforcement of judgments (other than
arbitration awards) in civil and commercial matters. Therefore, a final judgment for the payment of
money rendered by any federal or state court in the United States on civil liability, whether or
not predicated solely upon the federal securities laws of the United States, would not be
enforceable in India. However, the party in whose favor such final judgment is rendered may bring a
new suit in a competent court in India based on a final judgment that has been obtained in the
United States. The suit must be brought in India within three years from the date of the judgment
in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely
that a court in India would award damages on the same basis as a foreign court if an action is
brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments
if it viewed the amount of damages awarded as excessive or inconsistent with Indian practice. A
party seeking to enforce a foreign judgment in India is required to obtain approval from the
Reserve Bank of India under the Foreign Exchange Management Act, 1999, to execute such a judgment
or to repatriate any amount recovered.
The laws of India do not protect intellectual property rights to the same extent as those of
the United States, and we may be unsuccessful in protecting our intellectual property rights.
Unauthorized use of our intellectual property may result in development of technology, products or
services which compete with our products. We may also be subject to third-party claims of
intellectual property infringement.
Our intellectual property rights are important to our business. We rely on a combination of
copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions
to protect our intellectual property. However, the laws of India do not protect proprietary rights
to the same extent as laws in the United States. Therefore, our efforts to protect our
intellectual property may not be adequate. Our competitors may independently develop similar
technology or duplicate our products or services. Unauthorized parties may infringe upon or
misappropriate our products, services or proprietary information.
The misappropriation or duplication of our intellectual property could disrupt our ongoing
business, distract our management and employees, reduce our revenue and increase our expenses. We
may need to litigate to enforce our intellectual property rights or to determine the validity and
scope of the proprietary rights of others. Any such litigation could be time-consuming and costly.
As the number of patents, copyrights and other intellectual property rights in our industry
increases, and as the coverage of these rights increases, we believe that companies in our industry
will face more frequent infringement claims. Defending against these claims, even if not
meritorious, could be expensive and divert our attention and resources from operating our company.
Although we believe that our intellectual property rights do not infringe on the intellectual
property rights of any other party, infringement claims may be asserted against us in the future.
If we become liable to third parties for infringing their intellectual property rights, we could be
required to pay a substantial damage award and be forced to develop non-infringing technology,
obtain a license or cease selling the applications or products that contain the infringing
technology. We may be unable to develop non-infringing technology or to obtain a license on
commercially reasonable terms, or at all.
Risks Related to the ADSs
Sales of our equity shares may adversely affect the prices of our equity shares and the
ADSs.
Sales of substantial amounts of our equity shares, including sales by insiders, in the public
market, or the perception that such sales may occur, could adversely affect the prevailing market
price of our equity shares or our ADSs or our ability to raise capital through an offering of our
securities. In the future, we may also sponsor the sale of shares currently held by some of our
shareholders, or issue new shares. We can make no prediction as to the timing of any such sales or
the effect, if any, that future sales of our equity shares, or the availability of our equity
shares for future sale, will have on the market price of our equity shares or ADSs prevailing from
time to time.
An active or liquid trading market for our ADSs is not assured.
An active, liquid trading market for our ADSs may not be maintained in the long term. Loss of
liquidity could increase the price volatility of our ADSs.
Indian law imposes foreign investment restrictions that limit a holders ability to convert
equity shares into ADSs, which may cause our ADSs to trade at a premium or discount to the market
price of our equity shares.
Under certain circumstances, the Reserve Bank of India must approve the sale of equity shares
underlying ADSs by a non-resident of India to a resident of India. The Reserve Bank of India has
given general permission to effect sales of existing shares or convertible debentures of an Indian
company by a resident to a non-resident, subject to certain conditions, including the price at
which the shares may be sold. Additionally, except under certain limited circumstances, if an
investor seeks to convert the rupee proceeds from a sale of equity shares in India into foreign
currency and then repatriate that foreign currency from India, he or she will have to obtain an
additional Reserve Bank of India approval for
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each transaction. Required approval from the Reserve Bank of India or any other Government
agency may not be obtained on terms which are favorable to a non-resident investor or at all.
Investors who exchange ADSs for the underlying equity shares and are not holders of record
will be required to declare to us details of the holder of record, and the holder of record will be
required to disclose the details of the beneficial owner. Any investor who fails to comply with
this requirement may be liable for a fine of up to Rs. 1,000 for each day such failure continues.
Such restrictions on foreign ownership of the underlying equity shares may cause our ADSs to trade
at a premium or discount to the equity shares.
An investor in our ADSs may not be able to exercise preemptive rights for additional shares
and may thereby suffer dilution of his or her equity interest in us.
Under the Indian Companies Act, a company incorporated in India must offer its holders of
equity shares preemptive rights to subscribe and pay for a proportionate number of shares to
maintain their existing ownership percentages prior to the issuance of any new equity shares,
unless such preemptive rights have been waived by three-fourths of the shares voting on the
resolution to waive such rights. Holders of ADSs may be unable to exercise preemptive rights for
equity shares underlying ADSs unless a registration statement under the Securities Act is effective
with respect to such rights or an exemption from the registration requirements of the Securities
Act is available. We are not obligated to prepare and file such a registration statement and our
decision to do so will depend on the costs and potential liabilities associated with any such
registration statement, as well as the perceived benefits of enabling the holders of ADSs to
exercise their preemptive rights, and any other factors we consider appropriate at the time. No
assurance can be given that we would file a registration statement under these circumstances. If we
issue any such securities in the future, such securities may be issued to the Depositary, which may
sell such securities for the benefit of the holders of the ADSs. There can be no assurance as to
the value, if any; the Depositary would receive upon the sale of such securities. To the extent
that holders of ADSs are unable to exercise preemptive rights granted in respect of the equity
shares represented by their ADSs, their proportional interests in us would be reduced.
ADS holders may be restricted in their ability to exercise voting rights.
At our request, the Depositary will mail to you any notice of shareholders meeting received
from us along with information explaining how to instruct the Depositary to exercise the voting
rights of the securities represented by ADSs. If the Depositary receives voting instructions from
you in time, relating to matters that have been forwarded to you, it will endeavor to vote the
securities represented by your ADSs in accordance with such voting instructions. However, the
ability of the Depositary to carry out voting instructions may be limited by practical and legal
limitations and the terms of the securities on deposit. We cannot assure that you will receive
voting materials in time to enable you to return voting instructions to the Depositary in a timely
manner. Securities for which no voting instructions have been received will not be voted. There may
be other communications, notices or offerings that we only make to holders of our equity shares,
which will not be forwarded to holders of ADSs. Accordingly, you may not be able to participate in
all offerings, transactions or votes that are made available to holders of our equity shares.
We may be classified as a passive foreign investment company, which could result in adverse
United States federal income tax consequence to U.S. holders.
Based on the current price of our ADSs and the composition of our income and assets, we do not
believe that we are a passive foreign investment company, or PFIC, for United States federal
income tax purposes for our current taxable year ended March 31, 2010. However, a separate
determination must be made each year as to whether we are a PFIC (after the close of each taxable
year). We cannot assure you that we will not be a PFIC for any future taxable year. If we were
treated as a PFIC for any taxable year during which a United States holder held an equity share or
an ADS, certain adverse United States federal income tax consequences could apply to the United
States holder. See Taxation Material United States Federal Tax Consequences Passive foreign
investment company.
Item 4. Information on the Company
History and Development of the Company
Wipro Limited was incorporated on December 29, 1945 as Western India Vegetable Products
Limited under the Indian Companies Act, VII of 1913, which is now superseded by the Companies Act,
1956. We are deemed to be registered under the Companies Act, 1956, or the Companies Act. We are
registered with the Registrar of Companies, Karnataka, Bangalore, India as Company No. 20800. Our
registered office is located at Doddakannelli, Sarjapur Road, Bangalore 560 035, and the telephone
number of our registered office is +91-80-2844-0011. In October 2000, we raised gross aggregate
proceeds of approximately $131 million in our initial U.S. public offering of our ADSs on the New
York Stock Exchange. The name and address of our registered agent in the United States is CT
Corporation, located at 1350 Treat Blvd., Suite 100, Walnut Creek, California 94596.
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Wipro Limited was initially engaged in the manufacture of hydrogenated vegetable oil. Over the
years, we have diversified into the areas of Information Technology or IT services, IT products,
Consumer Care and Lighting Products and Eco-energy. We are headquartered in Bangalore, India and
have operations in North America, Europe and Asia. For the fiscal year ended March 31, 2010, 92% of
our operating income was generated from our IT Services business segment. For the same period, IT
Products business segment represented 3% of our operating income and Consumer Care and Lighting and
Others business segment including reconciling items, represented 5% of our operating income.
We
incurred capital expenditure of Rs. 16,746 million and Rs. 12,631 million during the fiscal
years ended March 31, 2009 and 2010, respectively. These capital expenditures were primarily
incurred on new software development facilities in India for our IT Services and IT Products
business segment. As of March 31, 2010, we had contractual commitments of Rs. 2,782 million ($62
million) related to capital expenditures on construction or expansion of software development
facilities. We currently intend to finance our planned construction and expansion entirely through
our operating cash flows and through cash and investments as of March 31, 2010.
Industry Overview
IT Services
According to NASSCOM Strategic Review Report 2010, IDC forecasts a cumulative annual growth
rate (CAGR) of over 4.08% in worldwide IT services and IT enabled services (IT-ITeS) spending and a
CAGR of over 6.18% in offshore IT spending, for the period 2008-13. The combined market for Indian
IT-ITeS in fiscal 2010 was nearly $63 billion. Key factors supporting this projection are the
growing impact of technology led innovation, the increasing demand for global sourcing and
gradually evolving socio-political attitudes.
IDC forecasts worldwide IT services spending of approximately $695 billion by 2013, reflecting
a compound annual growth rate, or CAGR, of 3.3%. However, Forrester US and Global IT Market Outlook
Q4 2009 , predicts that U.S. IT market will grow by 6.6% in 2010 following a drop of 8.2% in 2009.
Companies are increasingly turning to offshore technology service providers in order to meet their
need for high quality, cost competitive technology solutions. Technology companies have been
outsourcing software research and development and related support functions to offshore technology
service providers to reduce cycle time for introducing new products and services.
Following are key factors contributing to the growth of India-based IT services:
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India based sourcing offers significant cost advantages in terms of accessing highly
skilled talent at lower wage costs and productivity gains that can be derived from
having a very competent employee base. According to NASSCOMs Strategic Review Report
2010, the cost advantage achievable from outsourcing to India is unlikely to go away
due to an absolute cost advantage vis-à-vis other key markets and the prospect of
further reductions in infrastructure and overhead costs. According to NASSCOMs
Strategic Review Report 2010, despite operating cost increase in offshore locations,
India will still have substantial cost arbitrage of around 60% in 2015. |
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India-based IT companies have proven their ability to deliver IT services that
satisfy the requirements of international clients who expect the highest quality
standards. According to NASSCOMs Strategic Review Report 2010, India based centers
(both Indian firms as well as MNC owned captives) have earned more quality
certifications than any other country, over 571 India based centers (both Indian firms
as well as MNC owned captives) had acquired quality certifications with 43% companies
certified SEI CMM Level 5 and 164 companies had acquired security certifications. |
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India has a large, highly skilled English-speaking labor pool that is available at a
relatively low labor cost. According to NASSCOM Strategic Review Report 2010, the
Indian IT industry employed nearly 2,286,000 software professionals as of 2009-10,
making it one of the largest employers in the IT services industry. According to the
same report, India has the largest pool of suitable off-shore talent. |
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With the time differential between India and its largest market, the United States,
Indian companies are able to provide a combination of onsite and offshore services on a
24-hour basis on specific projects. |
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The Indian IT industry has been the primary beneficiary of the rapid transformation
of the telecom sector since it was deregulated to allow private participation, with the
cost of international connectivity declining rapidly and service level quality
improving significantly. This cost advantage is likely to continue due to lower
penetration levels and a growing consumer base. |
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India is also a leading destination for IT enabled services. The proven track record and
client relationships of established Indian IT services companies, favorable wage differentials,
availability of a large, high quality, English
speaking talent pool and a regulatory environment more friendly to investment are facilitating
Indias emergence as a global outsourcing hub. According to NASSCOM Strategic Review Report 2010,
the worldwide BPO market is expected to touch $148 billion by 2013, representing a compounded
annual growth rate, or CAGR, of 6.11%.
According to IDCs report India domestic IT/ITeS market top 10 predictions for 2010, the
India domestic IT/ITeS market growth rate will come down from an average of 24% recorded during
2003-08 to an average of 14.6% from 2009 to 2013.
In India, the IT services market is estimated to account for 39% of the domestic IT industry.
The growth in the Indian IT services market is estimated to be around 12% in US$ terms. The key
verticals driving the growth of the IT services market are Retail, Government, Healthcare, Telecom
and Manufacturing.
IT Products
According to NASSCOM Strategic Review Report 2010, IDC forecasts that worldwide hardware
spending will increase from $600 billion in 2008 to $680 billion in 2013, representing a compounded
annual growth rate, or CAGR, of 2.53%.
According to IDC, the hardware market account for 39% of the Indian hardware industry. The key
components of the hardware industry are servers, clients (desktops and laptops), storage devices,
peripherals and networking equipments. The overall hardware growth is projected at 8% for the India
market with Storage and networking products leading growth within this segment in 2010.
According to NASSCOM Strategic Review Report 2010, the hardware market in India is estimated
to account for 39% of the domestic IT industry, growing at about 3% in 2010. Personal computers
(including desktops and notebooks) continue to be purchased at higher rates than other products in
the hardware market. As prices come down, notebooks are increasingly being adopted as the computing
device of choice. For the desktop segment, consumers are showing an increasing trend of moving away
from locally assembled items towards branded products with relatively higher end configurations.
Consumer Care and Lighting
The consumer care market includes personal care products, soaps, toiletries, infant care
products, modular switch lights and modular office furniture. We have a strong brand presence in a
niche segment and have significant market share in select regions in India. In addition, we have a
strong presence in the market for personal care products in south-east Asia and Middle-East Asia.
AC Nielsen estimates that India is amongst the fastest growing geographies for FMCG, with a
2009 growth rate of 14.0% for the non-food segment, largely led by price increases. This market is
estimated to grow at a CAGR of 8% 10% for the period 2010-2013. The household and personal care
FMCG market in the other Asian countries in which we operate including Malaysia, Vietnam and
Indonesia, are expected to grow at a CAGR of 8% for the period 2010-2013.
The Indian domestic market for institutional lighting and office modular furniture is
estimated at U.S. $600 million and is expected to grow at the rate of 10% to 15% for the period
2010-2011. Key sectors contributing to the growth are expected to be modern work spaces, IT-ITeS,
Retail, Healthcare and Government Infrastructure spending.
We expect to increase our market share organically in our identified geographies. In addition
we continue to look at acquiring established brands which complement our brand presence and
distribution strengths.
Business Overview
We are a leading global IT services company. We also provide outsourced research and
development, infrastructure outsourcing, BPO and business consulting services. We have been
acknowledged among leading offshore providers of technology services by Gartner Inc, Forrester
Research Inc and other leading research and advisory firms. In April 2009, Forrester ranked Wipro
as the leader in Global IT Infrastructure Outsourcing services based on an evaluation of various
criteria including client references. In terms of other achievements, we won the 2010 Global Impact
award from Metro Atlanta chamber of commerce under the category of economic development, foreign
direct investment. In February 2010, we also won NASSCOM IT Innovation Award in process innovation
category for the year 2009.
We provide a comprehensive range of IT services, software solutions, IT consulting, business
process outsourcing or BPO services and research and development services in the areas of hardware
and software design to leading companies worldwide. We combine the business knowledge and industry
expertise of our domain specialists and the technical knowledge and implementation skills of our
delivery team in our development centers located in India and around the
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world, to develop and integrate solutions which enable our clients to leverage IT for
achieving their business objectives. We use our quality processes and global talent pool for
delivering time to development advantage, cost savings and productivity improvements.
Our objective is to be a world leader in providing a comprehensive range of IT services to our
clients. The markets we address are undergoing rapid change due to the pace of developments in
technology, changes in business models and changes in the sourcing strategies of clients. We
believe that these trends provide us with significant growth opportunities.
Our overall business strategy
Aggressively build awareness of the Wipro brand name
We continue to aggressively build awareness among clients and consumers both domestically and
internationally of the Wipro brand name. We believe we can leverage the strength of an
international brand name across all of our businesses by ensuring that our brand name is associated
with Wipros position as a market leader that is committed to high quality standards. And to
achieve this objective, we intend to expand our marketing efforts with advertising campaigns and
promotional efforts that are targeted at specific groups.
Pursue selective acquisition of companies
Acquisitions are an inherent part of our corporate strategy. In the last three fiscal years,
we have made several acquisitions, including the acquisition of Infocrossing Inc. and its
subsidiaries (Infocrossing), Unza Holding Limited (Unza) and Citi Technology Services Limited.
In December 2009, we acquired Lornamead FZE (an entity incorporated in Dubai) and Lornamead
Personal Care Private Limited (an entity incorporated in India), operating in the personal care
category marketing fragrance products, bath and shower products and skin care products. We believe
our acquisition program supports our long-term strategic direction, strengthens our competitive
position, particularly in acquiring new domain expertise, expands our customer base, increases our
ability to expand our service offerings and provides greater scale to grow our earnings and
increase stockholder value. In pursuing acquisitions, we also focus on companies where we can
leverage domain expertise and specific skill sets, and where a significant portion of the work can
be moved out of client premises to leverage our global delivery model and realize higher margins.
Sustain growth in operating income and cash flow of our traditional businesses
We have been in the consumer care business since 1945 and the lighting business since 1992.
The consumer care business has historically generated surplus cash for us to be able to grow our
other businesses. Our strategy is to maintain a steady growth in operating income for these
businesses through efficient capital utilization, strong brand name recognition and expanding our
nationwide distribution network. We have invested in brands which complement our brand and
distribution strengths.
Continue development of our deep industry knowledge
We continue to build specialized industry expertise in the IT service industry. We combine
deep industry knowledge with an understanding of our clients needs and technologies to provide
high value, quality services. Our industry expertise can be leveraged to assist other clients in
the same industries, thereby improving quality and reducing the cost of services to our clients. We
will continue to build on our extensive industry expertise and enter into new industries.
Segment overview
IT Services
Our IT Services segment provide a range of IT and IT enabled services which includes IT
consulting, custom application design, development, re-engineering and maintenance, systems
integration, package implementation, technology infrastructure outsourcing, BPO services and
research and development services in the areas of hardware and software design.
Our IT Services segment accounted for 75% of our total revenues for each of the years
ended March 31, 2009 and 2010, respectively. Our IT Services segment accounted for 93% and 92% of
our total operating income for the years ended March 31, 2009 and 2010, respectively.
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Our strategy
Significantly expand our IT Services business
We expect to continue to grow our IT Services business and the percentage of our total
revenues and profits contributed by this business over the next few years. We believe that we can
achieve this objective through the following means:
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Identify and develop service offerings in emerging growth areas as separate business
opportunities. Currently we are focusing on areas such as business intelligence
services, package implementation, niche consulting, data warehousing and network
storage; |
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Increase our share of the total IT spending by our large customers through focused
account management and more effective selling of all service lines to our existing
customers; |
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Develop industry specific point solutions and use them as entry strategies by
demonstrating industry knowledge and understanding of customer businesses and the
benefits of outsourcing; |
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Offer new pricing models, sharing the risks and rewards of the impact of IT
solutions on business, productivity improvements and timeliness of delivery; |
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Use efficient global sourcing models to source IT services from various geographies
and develop methodologies to develop and integrate solutions from around the globe; |
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Leverage our experience in providing IT infrastructure management services in the
Indian market and data center capabilities of Infocrossing Inc. to expand our
technology infrastructure support services; |
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Grow our research and development services by focusing on high growth markets such
as telecommunications, mobile communications and the Internet, and high growth
technologies such as embedded software; |
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Expand our market presence by providing enterprise application integration and
system integration services; |
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Expand our service line by investing in eBusiness solutions around information
security, business intelligence and information system, service oriented architecture
and web based applications; and |
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Expand our business consulting services and position consulting services as
strategic differentiator over other competing entities. |
Increase the number of clients and penetration with such clients of our IT Services business
We intend to increase the number of our clients through a dedicated sales team focused on new
client acquisition and increasing our presence in Europe and Asia. Our goal is to make new client
accounts generate at least $1 million in annual revenues within twelve months of opening each
account. Through our MEGA and GAMA account initiative our dedicated key account management team
focuses on growing identified customers to over $100 million and $50 million of annualized
revenues, respectively. The number of customers from whom we derived annualized revenues in excess
of $50 million is 16 as of March 31, 2010.
Service offering
Our IT Services business segment is a leader in providing IT services to companies across the
globe. We provide our clients customized IT solutions to improve their business competitiveness.
We offer these services globally through a team of over 108,000 professionals. This business
segment accounted for 75% of our revenue and 92% of our operating income for the year ended March
31, 2010. Our service offerings include:
Consulting: We leverage our domain expertise and knowledge base in specific areas to provide
consulting services. Our service offering includes business transformation services, process
excellence, functional excellence, enterprise architecture consulting, Governance, risk and
compliance and Government consulting.
For example we were engaged by one of the worlds largest brewers for a transformation project to bring in
standardization in the transitioned processes at its shared services center, implement world class
tools and technologies, and bring in process improvement. We have identified various gaps and areas
of improvement in the processes and various sub-projects are
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implemented simultaneously to simplify processes, increase process efficiency and reduce
costs, resulting in reduction in efforts.
Total Outsourcing: Wipro Total Outsourcing (TOS) services are targeted at achieving maximum
value by providing end-to-end best of breed IT practices for your business. From technology
optimization to mitigating risks, we fulfill customer constant IT infrastructure and application
demands while evaluating, deploying and managing flexible, responsive and economical solutions.
Through our acknowledged quality processes and program governance frameworks, we help customer
achieve and sustain business momentum. Through our TOS offering, we have helped organizations
strategize, integrate, manage, maintain and sustain their IT infrastructure to emerge stronger in
their respective domains. Our customers outsource their IT requirements to us, thus enabling them
to focus on their core competencies. Our Total Outsourcing proposition delivers improved business
benefit by effectively managing Information Technology life cycle of the organization and helps
enhance shareholders value.
Enterprise Technology Integration: Our integration services include consultancy, system
integration and project management of IT services that provide application and enterprise systems
integration, business continuity planning, contact center infrastructure, data centers, disaster
recovery services, enterprise management, network integration, platform integration, retail
automation and security infrastructure services. Being a pure-play system Integrator, we deliver
the best of breed solutions to customers with our vendor agnostic approach.
Infrastructure Management Services: Our global delivery model offers best-shore solutions by
leveraging our offshore, onsite and nearshore centers, along with our global alliances. Our
Follow the Sun principle enables round-the-clock productivity making 24x7 support a reality. We
thus ensure business continuity where work can be seamlessly transferred to other support centers.
Our range of alternate delivery models and its strength in process and quality excellence ensure
Service Quality Assurance. Our service delivery models are dedicated to ensure the high
availability of your IT infrastructure and applications. From assuring customers of the highest
security to quality processes, we provide customer businesses a competitive edge in the market. To
meet the varying needs of different organizations, we adopt a flexible approach to service delivery
through onsite, multi-site and offsite engagement models. We offer Remote Monitoring and Support
Services from our Global Command Centers (GCC) and Global Service Management Centers (GSMC) spread
across India, Middle East, Malaysia, US, UK and Eastern Europe.
Enterprise Application Services: Our Enterprise Application Services (EAS) proactively assists
organizations in their business transformation initiatives and offers strategic vision which aims
at redesigning business processes, thus helping reduce total cost of ownership (TCO), increase ROI
and improve productivity. We offer skilled resources and best-in-class technology for
implementation, upgrades, consolidation and enhancement.
Our services under EAS include:
Enterprise Resource Planning: Our ERP expertise is driven by dedicated partnerships with ERP
software providers like SAP, Oracle (including PeopleSoft and JD Edwards) and Microsoft. Mapping
functionalities of ERP applications against business requirements, we provide consulting,
implementation, upgrades, application management and SOA services across financial management and
human capital management domains.
Supply Chain Management: We deliver business consulting and technical integration services for
Supply Chain Management (SCM) through our strategic alliances with SAP, Oracle, i2, Ariba and
Manugistics. We recognize our customers need for a strong supply chain management that would
release entrapped value in the supply chain and facilitate collaboration, between the internal and
external stakeholders of the company. Our SCM services include collaboration demand and supply
planning, integrated manufacturing planning and execution, Logistics and fulfillment management,
strategic sourcing, procurement and spend analysis and supply chain visibility.
Customer Relationship Management: Our CRM project execution is mainly driven by our in-depth
experience in providing end-to-end CRM solutions to Fortune 500 companies. We are leading partners
with Oracle Siebel, SAP CRM, Microsoft Dynamics CRM and salesforce.com and leverage these partnerships
to provide CRM services, ranging from consulting and implementation to upgrades and application
management services.
Testing Services: We are one of the largest Offshore Testing Services providers, with over
8,300 dedicated employees and over 350 customers across the globe, including engagements with many
Fortune 500 companies. Our service portfolio in testing covers many user needs from product/
application concept to deployment, and across the stages of the product/ application life cycle.
Product Engineering Services: With our strong domain knowledge, leading connectivity IP
portfolio and a strong manufacturing ecosystem (Silicon, PCB, and product assembly) and consulting
practice, we are suitably placed to provide customers the lowest possible TCO without sacrificing
product quality. We have the technical capability and domain knowledge to quickly turn around a
product design from requirements to proof of concept or prototypes. We have a dedicated product
development teams for Telecom, computing and embedded industry segments.
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Customized applications: We enable our clients to leverage IT to achieve business goals and to
align their IT systems with their business strategy by creating customized solutions, selecting
appropriate technologies, implementing systems on a fast-track basis, and ensuring overall quality.
Application Development: We offer well-defined and mature application development processes
over a broad spectrum of technology areas that include client or server applications,
object-oriented software, Internet or intranet applications and mainframe applications.
Application Management Services: Our proven application maintenance capability, offers unique
and innovative solutions for managing customers application IT estate efficiently. We have invested
on customer-centric business models (FlexDelivery) to provide predictable, scalable and cost
effective delivery paradigms.
Business Technology Services (BTS): We provide a comprehensive range of Business Technology
Services primarily to Fortune 1000 and Global 500 companies to meet their business needs. Business
Technology Services helps customers realize high business value by incorporating information
strategy, business collaboration, business integration and managing IT risk, across the value chain
of the enterprise. We are at the forefront of building business and technology solutions and IPs,
applying advanced technology areas including cloud computing, sustainability, mobility, social
computing and analytics among others. Our solutions enable organizations to drive critical business
outcomes leveraging information technology. Our business technology services have served clients
from a range of industries including Energy and Utilities, Retail, Financial Services, Technology,
Media and Entertainment and Healthcare. Our delivery capabilities are supplemented by a holistic
quality approach that integrates quality processes like Six Sigma, SEI CMM Level 5 and CMM to
eliminate defects in execution.
Our offerings under BTS include:
Business Intelligence and Information Management: Our Information Strategy framework is geared
to move organizations from a network of silos to an enterprise that unleashes value by leveraging
information as a Strategic Enterprise Asset.
We offer comprehensive services across:
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Information lifecycle management which includes Enterprise Data Warehousing Master Data
and Metadata Management etc. |
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Business intelligence that helps organization improve operational efficiencies |
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Business Analytics that helps organizations plan and optimize business outcomes |
Enterprise Performance Management to measure financial performance and other strategic target.
Portals and content management: We provide consulting, design development, integration and
support services for portal services and content management solutions to clients across a multitude
of industries. Our enterprise portal capabilities enhance value to customers through innovative
offerings in areas of usability, Web 2.0 offerings, enterprise portals, enterprise search and
e-commerce.
Enterprise business integration: Our business integration solutions and services have enabled
clients to collaborate with business processes across the extended supply chain and access
accurate, real- time information exchange. The services offerings span Enterprise Application
Integration, Business to Business Integration, Packaged Application Integration, Appliance Based
Integration, Service Oriented Architecture (SOA), Legacy Modernization, e-Mobility, RFID, GRID
Computing and GIS.
Enterprise security solutions: We offer comprehensive security solutions that streamline
security technologies and management processes to mitigate security risks. Our services span the
entire IT Security spectrum and include Advisory, Transformation and Managed Solutions and
services. The objective is to enhance IT security while ensuring maximum Return On Security
Investment (ROSI).
Business Process Management (BPM): As one of the leading global BPM solution providers, we
provide a comprehensive set of business process engineering and management solutions. Our
combination of strong industry knowledge, business process consulting expertise, technology
leadership and proven best practices enable customers to reduce time to market, achieve greater
agility and accelerate ROI from their Business Process Management initiatives.
Service Oriented Architecture(SOA): We view SOA as the key to enable business benefits. It
helps organizations to strategically align IT to their business process transformation needs. We
provide consulting, business process and
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technology transformation solutions based on SOA leveraging our business, technology &
infrastructure assets. The comprehensive service set includes Enterprise SOA Transformation
Services, SOA Business Process Services, SOA Package Application and Application Integration
Solution, SOA System Integration services, Legacy migration and infrastructure services and
platform enabled BPO services.
Legacy Modernization: Our Legacy Modernization Services provide organizations a strong
foundation for business growth while preserving existing investments and lowering costs of
operation. Our Legacy Modernization Services is about preserving the business logic of existing
systems while adapting to modern technologies like J2EE/.NET using a SOA framework and extending
the value of existing legacy systems through different approaches.
eMobility: We help customers by delivering mobile solutions for Business to Business (B2B) and
Business to Consumer solutions (B2C). We provide consulting, system integration, development and
support services in the wireless and mobile application space.
Project and Portfolio Management: Our Project and Portfolio Management Solutions (PPM) group
provides technology-enabled solutions for Enterprise Portfolio Management (EPM), IT Governance,
Program Management Office (PMO) initiatives, project management, new product development, and
related areas. We assists our global customers in implementing PPM best practices to better manage
their portfolio of business investments and align business with IT. The PPM group engages with
customers to conduct PPM assessments, build roadmaps, select the technology (PPM tool) and conduct
multi-phase implementations.
Business Process Outsourcing (BPO) Services: Wipro BPO is one of Indias leading offshore BPO
providers. Wipro BPO enables clients to improve the quality of their processes, reduce costs and
realize benefits of scale. Wipro BPO is uniquely positioned to service customer requirements by
leveraging its quality and innovation, talented employees, self sustaining process framework and
domain knowledge. We offer customized service offerings; that translate into flexible and cost
effective services of the highest quality for our customers. For example, for a leading telecom
company located in multiple locations and operating in multiple languages, we transitioned the back
office work related to finance and accounting, order management and procurement streams. We have
transformed the business in three phases understanding operations capabilities, process
improvement approach deployment and accelerated transformation. These phases involve resource
realignment and cross skilling to optimize the capacity utilization, standardization of similar
processes for multiple locations to allow optimization of resources and eliminating redundancies,
automation/transformation of the processes to reduce the manual efforts using our Base)))
methodology, value stream mapping to re-engineer the processes resulting in reduction in turnaround
time and releasing bandwidth. We also applied Six Sigma methodology to reduce defects in the
processes, right shoring to benefit from outsourcing to low cost geographies, IT transformation and
application rationalization. This has resulted into sustained cost saving to the customer.
Our service offerings include:
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customer interaction services, such as IT-enabled customer services,
marketing services, technical support services and IT helpdesks; |
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finance and accounting services, such as accounts payable and accounts receivable
processing; |
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process improvement services that provide benefits of scale for repetitive
processes like claims processing, mortgage processing and document management; and |
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knowledge process outsourcing services which involve high-end knowledge
work on intellectual property, equity and finance, analytics, market research and data
management. |
For BPO projects, we have a defined framework to manage the complete BPO process migration and
transition. The process has been developed based on our experience over the past several years in
migrating remote business processes to India. This defined framework is designed to ensure process
integrity and minimize inherent migration risks. The framework includes a proprietary transition
toolkit, which ensures that there is a documented methodology with formats, tools, guidelines and a
repository of past experiences to aid the transition team during the transition phase.
In many large outsourcing deals, BPO services are an integral part of the total services
outsourced. Integrating BPO services into our portfolio of service offerings has provided us with a
strong competitive advantage over other IT services providers.
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Our Global Delivery Model
In our IT service offerings, we assume primary project management responsibility for all
stages of implementation of a project. Typically, a project team consists of a small number of IT
professionals based at the clients location, who define the scope of the project, track changes to
specifications and requirements during project implementation, assist in
installing the software or system at the clients site and ensure its continued operation. A
large proportion of the development work on a project is performed at one of our dedicated offshore
development centers, or ODCs, located in India. Our project management techniques, risk management
processes and quality control measures enable us to complete projects on time, seamlessly and
qualitatively across multiple locations.
The Offshore Development Center. We are among the few IT services companies in India which
pioneered the offshore development model for delivering high-quality services at a relatively low
cost to our international clients. Our ODC is a virtual extension of the clients working
environment with a dedicated facility and dedicated hardware and software infrastructure that
replicates the clients facilities. This is further enhanced by a dedicated high-speed
telecommunication link with the clients onsite facilities and a secure working environment. In all
of our projects, we endeavor to increase the proportion of work performed at the ODCs in order to
take advantage of the various benefits associated with this approach, including higher gross
margins and increased process control. Due to the level of investment required by our clients in an
ODC and the quality of services we provide, the ODC model has provided us a high percentage of
repeat business and a stable revenue stream.
The Nearshore Development Center. Based on specific client needs, we have established
dedicated development centers in close proximity to our clients business locations, which we call
nearshore development centers. These nearshore development centers have employees with specialized
functional expertise and provide on-call support to our customers. We currently have nearshore
development centers in various locations including Atlanta and Nashville in the USA, Monterry in
Mexico, Curitiba in Brazil, Reading in the U.K., Kiel in Germany, Shanghai and Chengdu in China,
Cebu in the Philippines, Bucharest in Romania, Sydney, Adelaide and Melbourne in Australia and
Yokohama in Japan. In addition to providing software development services, these centers, with
their significant local talent, also provide a local customer interface.
Our Clients
We provide IT software solutions to clients from a broad array of industry sectors. Several of
our clients purchase our services across several of our business divisions. We seek to expand the
level of business with our existing clients by increasing the type and range of services we provide
to them. The table below illustrates the size of our client project engagement size as measured by
revenues.
|
|
|
|
|
|
|
|
|
|
|
Number of clients in |
|
|
Year ended |
|
Year ended |
|
|
March 31, |
|
March 31, |
Per client revenue($) |
|
2009 |
|
2010 |
1-3 million |
|
|
207 |
|
|
|
180 |
|
3-5 million |
|
|
67 |
|
|
|
60 |
|
>5 million |
|
|
153 |
|
|
|
166 |
|
|
|
|
|
|
|
|
|
|
Total > 1 million |
|
|
427 |
|
|
|
406 |
|
|
|
|
|
|
|
|
|
|
The largest client of our IT Services segment accounted for 3% of the total revenues from such
segment for the fiscal years ended March 31, 2009 and 2010, respectively. For the same periods, the
five largest clients of our IT Services segment accounted for 11% of total IT Services revenues.
Sales and Marketing
Our headquarters are located in Bangalore, India. We sell and market our IT Services primarily
through our direct sales force, across several locations worldwide, including in the United States,
France, Germany, Holland, Japan, Sweden and the United Kingdom. Our sales teams are organized in
three ways:
|
|
|
by the vertical market segment of our clients business; |
|
|
|
|
by the geographic region in which our client is located; and |
|
|
|
|
by the specific practice specialization or skill set that our client requires. |
We use an integrated team sales approach that allows our sales teams to pass a client over to
an execution team once the sale is completed. Our sales personnel work together with the
appropriate software professionals and technical managers in analyzing potential projects and
selling our expertise to potential clients. Through our MEGA and GAMA account initiatives our
dedicated key account management team focuses on growing identified customers to over U.S. $100
million and U.S. $50 million of annualized revenues, respectively. For our MEGA and GAMA customers,
we have dedicated Client Engagement Managers who own responsibility to both sell a value
proposition to the customer and then
29
delivering the same. Our IT Services business also gets support from our corporate marketing
team to assist in brand building and other corporate level marketing efforts. Our sales and
marketing team in IT Services excluding Indian IT Services and Infocrossing has increased from 498
personnel as of March 31, 2009 to 511 personnel as of March 31, 2010. We intend to expand our
global marketing efforts through increased presence in targeted geographical regions. In addition,
we have a global programs team which is focused on identifying and winning large outsourcing
engagements across verticals. Our Consulting team also works with clients to assist them in
charting out best-in-class IT and functional architecture, processes and infrastructure
requirements.
Competition
The market for IT services is highly competitive and rapidly changing. Our competitors in this
market include consulting firms, big four accounting firms, global IT services companies, such as
Accenture, IBM Global Services and India based IT services companies such as Cognizant, Infosys and
Tata Consultancy Services.
These competitors are located internationally as well as in India. We expect that competition
will further increase and will potentially include companies from other countries that have lower
personnel costs than those currently in India. A significant part of our competitive advantage has
historically been a wage cost advantage relative to companies in the United States and Europe.
Because wage costs in India are presently increasing at a faster rate than those in the United
States our ability to compete effectively will increasingly become dependent on our ability to
provide high quality, on-time, complex deliverables that depend on increased expertise in certain
technical areas. We also believe that our ability to compete will depend on a number of factors not
within our control, including:
|
|
|
the ability of our competitors to attract, retain and motivate highly skilled IT
services professionals; |
|
|
|
|
the extent to which our international competitors expand their operations in India
and benefit from the favorable wage differential; |
|
|
|
|
the price at which our competitors offer their services; and |
|
|
|
|
the extent to which our competitors can respond to a clients needs. |
We believe we compete favorably with respect to each of these factors and believe our success
has been driven by quality leadership, our ability to create client loyalty and our expertise in
targeted select markets.
IT Products
Our IT Products segment provides a range of IT products encompassing computing, storage,
networking, security, and software products. Under this segment, we sell IT products manufactured
by us and third-party IT products. Our IT Products segment accounted for 13% and 14% of our total
revenues for the year ended March 31, 2009 and 2010, respectively. Our IT Products segment
accounted for 3% of our operating income for each of the year ended March 31, 2009 and 2010,
respectively.
Our Strategy
We plan to grow in the IT Products market by focusing on:
|
|
|
Positioning build enhanced solution capabilities to position ourselves as a Valued
Added System Integrator; |
|
|
|
|
Geo expansion we are expanding our market address into newer geographies; |
|
|
|
|
Vertical focus higher customer engagement through industry focused solutions; |
|
|
|
|
Product-line expansion |
|
o |
|
new form factors and functionalities to address a broader spectrum of users branded under e.go |
|
|
o |
|
high-end Itanium servers and modular storage |
|
|
|
Alliances realign existing and form new alliances, leverage alliance partnerships
for joint GTM with Wipro. Partner with emerging technology providers to improve market
address and develop new streams of revenue; |
|
|
|
|
Delivery and Operational Excellence- drive delivery and operational excellence
through industry standard processes and global best practices for better customer
satisfaction (CSAT) and cost optimization. |
30
Products
Our range of IT Product comprises the following:
Wipro Manufactured Products. Our manufactured range of products comprises desktops, notebooks,
NetPower servers and super computers. To cater to a wider range of customers, under the personal
computing category, we have launched a new series branded as e.go. We now offer form, factors and
functionalities that cater to the entire spectrum of users from individuals to high-end
corporate entities.
Enterprise Platform. Our products under this category comprise design and deployment services
for RISC servers, Application servers, Databases, Unix OS and Server computing resource management
software.
Networking Solutions. Our products under this category comprise design, deployment and audit
of enterprise wide area network (WAN), wireless LAN and unified communication systems.
Software Products. Our products in this category, comprise enterprise application, data
warehousing and business intelligence software from worlds leading software product companies.
Data Storage. Our products under this category comprise network storage, secondary and near
line storage, backup and storage fabrics.
Contact Centre Infrastructure. Our offerings include Switch Integration, Voice Response
Solutions, Computer Telephony Interface (CTI), Customized Agent Desktop Application, Predictive
Dialer, Customer Relationship Management, Multiple Host Integration, Voice Logger interface.
Enterprise Information Security. Security products include single signon, firewalls.
Emerging Technologies. Technology optimization in web and WAN acceleration, virtual computing
in data centre, IP video solutions
Our Clients
The clients for our IT Products segment range from single users to large enterprises. We
provide our offerings to enterprises in the Government, defence, IT and IT- enabled services,
telecommunications, manufacturing, utilities, education and BFSI sectors. We have a diverse range
of clients, none of whom account for more than 10% of our IT Products business segment revenues.
Sales and Marketing
We sell and market our manufactured products through our direct sales force, national
distributor network and resellers. The direct and indirect teams are distributed geographically. We
resell the enterprise products through our direct sales force.
Our direct sales teams are organized in three ways:
|
|
|
by customer segment Uber, Enterprise and Corporate; |
|
|
|
|
by geography region in which our client is located; and |
|
|
|
|
by verticals vertical the client may fall under eg; BFSI , Telecom. The vertical
teams are aligned to the Uber and Enterprise accounts. |
We use an integrated team sales approach that allows us to deliver a complete sales and
delivery experience to the customer with a single point of accountability. Global Products gets
support from our corporate marketing team to assist in brand building and other corporate level
marketing efforts for various market segments.
Competition
The IT products market is a dynamic and highly competitive market. In the marketplace, we
compete with both international and local providers. Our local competition comes from HCL, TCS, CMC
and Redington. The international competitors are IBM, Esys, Ingram, Dell, HP, Lenovo, Acer, Sony,
and Toshiba.
31
We are witnessing higher pricing pressures due to:
|
|
|
commoditization of manufactured products business; |
|
|
|
|
increasing number of players in the IT Products market; and |
|
|
|
|
higher focus on Indian markets by all leading IT companies |
Nonetheless, we are favorably positioned due to our quality leadership, expertise in targeted
select markets and our ability to create client loyalty by delivering value to the customer.
Consumer Care and Lighting
Our Consumer Care and Lighting business segment focuses on niche profitable market segments in
personal care in specific geographies in Asia and Africa, as well as office solutions in India. We
successfully leverage our brands and distribution strengths to sustain a profitable presence in the
personal care sector, including personal wash, fragrances, hair and skin care, male toiletries and
household lighting products. Our office solutions include lighting products, modular switches,
modular furniture and security solutions. Our Santoor brand is the third largest in India in the
soap category, and Safi brand is the largest Halal toiletries brand of Malaysia. With the
acquisition of Yardley, we have a stronger presence in the Middle East, and have made our first
foray into the luxury segment of personal care. Our Consumer Care and Lighting segment accounted
for 8% of our total revenue for each of the years ended March 31, 2009 and 2010, respectively. Our
Consumer Care and Lighting segment accounted for 6% of our operating income for each of the year
ended March 31, 2009 and 2010, respectively.
Our Consumer Care and Lighting business segment focuses on niche profitable market segments.
We began with the hydrogenated oil business in 1945, and have continued to expand our business,
currently offering a mix of consumer products including hydrogenated cooking oil, soaps and
toiletries, personal care products, wellness products, light bulbs and fluorescent tubes, and
lighting accessories.
Products
Personal care products. Our range of personal care products include deodorants and fragrances,
hair care, bath and shower, skin care and other personal care products. We have about 48 brands
including brands like Yardley, Enchanteur, Safi, Eversoft and Romano.
Soaps and toiletries. Our product lines include soaps and toiletries, as well as baby
products, using ethnic ingredients. Our umbrella brands include Santoor, Chandrika, Wipro Active,
Wipro Baby Soft, a line of infant and child care products that includes soap, talcum powder, oil,
diapers and feeding bottles and the Wipro Sanjeevani line of wellness products.
Lighting. Our product line includes modular switches, incandescent light bulbs, compact
fluorescent lamps and luminaries. We operate both in commercial and retail markets. We have also
developed commercial lighting solutions for pharmaceutical production centers, retail stores,
software development centers and other industries. We have also rolled out security solutions for
household and institutional consumers.
Office Modular Furniture. Our product line of modular furniture is for office use such as
workstations, storage and chairs. We operate both in commercial and retail markets. We sell our
products to software development centre, banks and financial institutions, insurance companies and
manufacturing companies who are in the process of setting up new facilities or expanding their
current workspaces.
Sales and Marketing
We market and sell our personal care products through a host of distribution channels which
include modern retail outlets, hypermarts, supermarts, traditional retailers, van operators and
wholesalers. We sell and market our consumer care products primarily through our distribution
network in India, which has access to 4,700 distributors and 1.6 million retail outlets throughout
the country. We sell significant portion of our lighting products to major industrial and
commercial customers through our direct sales force, from 34 sales offices located throughout
India.
In our other geographies, led by Malaysia, Vietnam, Indonesia and Greater China, we have
direct access to over 180,000 retail outlets, with a significant presence in the fast growing
modern trade.
In India, we leverage our brand recognition by successfully incorporating the Wipro identity
with our consumer brands. We intend to expand our marketing efforts with the aid of advertising
campaigns and promotional efforts targeted at specific regions of India. We intend to introduce
acquired personal care product brands to establish our presence in the markets for personal care
products in India.
32
Competition
In the personnel care products market, we face competition primarily from multinational
companies like Unilever, Proctor and Gamble, Johnson & Johnson and Loreal, and in office solutions
and lighting products market from multinational companies like Philips and General Electric.
Certain competitors have recently focused on sales strategies designed to increase sales volumes
through lower prices. Sustained price pressures by competitors may require us to respond with
similar or different pricing strategies. We cannot be reasonably certain that we will be able to
compete successfully against such competitors or that continued competition may not adversely
affect our gross and operating profits.
Raw Materials and Manufacturing
The primary raw materials for our soap and personal care products are agricultural
commodities, such as vegetable oils. We purchase these raw materials domestically and
internationally through various supplier contracts. Prices of vegetable oils and other agricultural
commodities tend to fluctuate due to seasonal, climatic and economic factors.
Our lighting products are manufactured from glass and industrialized parts. We purchase these
parts from various domestic and foreign distributors and manufacturers, pursuant to a combination
of requirement and other supply contracts.
Our furniture products are manufactured from Wood in form of particle or medium density fiber
boards, steel, aluminum, fabric, plastics and glass. We purchase these items from various domestic
and foreign distributors and manufacturers, pursuant to a combination of requirement and other
supply contracts.
We have 13 manufacturing locations with 8 factories in India, 2 in Malaysia and 1 each in
Vietnam, Indonesia and China, and deal with over 60 third party manufacturers to source our
extensive product range.
Others
Our Others segment includes our infrastructure engineering business. We are the worlds
largest third-party manufacturer of hydraulic cylinders. The Others segment is centered on our
mobile construction equipment business and our material handling business. We manufacture and sell
cylinders and truck hydraulics, and we also distribute hydraulic steering equipment and pumps,
motors and valves for international companies. We have a global footprint in terms of manufacturing
facilities in Europe and India and sell to customers across the globe. Our main competitors
include, UT Limited (India), Dongyong, Sundaram Hydraulics and Dantal and overseas suppliers such
as the Kayaba, Precision Hydraulics Company, Hyva (in tipping business).
While the current financial year has seen a decline in global sales volumes, we believe that
the fundamentals of the infrastructure engineering business remain intact. Our strategy is to
increase our global market share through:
|
|
|
strengthening relationship with global original equipment manufacturers (OEMs) who
are likely to seek stable suppliers like Wipro in the current economic environment; and |
|
|
|
|
diversification into newer segments organically and/or inorganically. |
We are also in the water solutions business, which addresses the entire spectrum of treatment
solutions, systems and plants for water and waste water for industries.
We also provide consulting on comprehensive renewable energy and efficiency solutions.
Our Others segment, including reconciling items accounted for 4% and 3% of our total revenues
for the year ended March 31, 2009 and 2010, respectively. Our Others segment, including reconciling
items accounted for (2)% and (1)% of our operating income for each of the year ended March 31, 2009
and 2010, respectively.
Raw Materials and Manufacturing
The primary raw material for our hydraulic cylinder products are steel tubes, rods, casting
and cylinder bottom. We purchase these raw materials domestically and internationally through
various supplier contracts. Prices of most raw materials vary due to various economic factors.
We have 8 manufacturing facilities across Asia and Europe with 3 facilities in India, 4 in
Sweden and 1 in Finland. We also have a sales office in China.
33
Investment in Affiliates
In 1990, we formed a joint venture with General Electric called Wipro GE Medical Systems
Private Limited to learn new technologies and management processes from world class companies like
General Electric and to enter new markets. General Electric currently holds 51% of the equity in
the joint venture and we hold 49%. The joint venture partners have equal representation on the
board of directors and the chairman of the joint venture is the chairman of Wipro Limited. The
joint venture provides customers in the South Asian markets after-sales services for all GE Medical
Systems products sold to them. Products offered in this market consist of GE Medical Systems
products manufactured world wide and portable ultrasound equipment manufactured in India by this
joint venture for the global markets. This venture also leverages our strength in software
development to develop embedded software for medical equipment designed and developed by General
Electric for their global product portfolio. The main competitors of Wipro GE Medical Systems
Private Limited include Siemens and Philips.
Our Competitive Strengths
We believe that the following are our principal competitive strengths:
Comprehensive range of IT services
We provide a comprehensive and integrated suite of IT solutions, ranging from consulting to
application development and maintenance and take end-to-end responsibility for project execution
and delivery. We have more than two decades of experience in product engineering, software
development, re-engineering and maintenance for our corporate customers and provide managed IT
support services at the clients site through our offshore development centers in India and several
near shore development centers located in countries closer to our clients offices. We believe that
this integrated approach positions us to take advantage of key growth areas in enterprise
solutions, including IT services data warehousing, implementation of enterprise package application
software such as enterprise resource planning, or ERP, supply chain management or SCM and customer
relationship management or CRM. In many large outsourcing deals, BPO services are an integral part
of the total services outsourced. Integrating BPO services into our portfolio of service offerings
has provided us with a strong competitive advantage over other IT services providers.
World-class quality as measured by SEI-CMM and Six Sigma initiatives
One of the crucial factors in our success has been our commitment to pursue the highest
quality standards in all aspects of our business. We were assessed at SEI-CMM Level 5, the highest
level of quality certification, in January 1999, making us the first IT services provider in the
world to achieve this standard. SEI-CMM is widely accepted in the software industry as a standard
to measure the maturity and effectiveness of software processes. Our SEI-CMM Level 5 rating is
supported by our Six Sigma initiative, which is an internationally recognized program focusing on
defect reduction and cycle time reduction. Our Six Sigma program was launched in 1998. Six Sigma
represents a quality standard of less than 3.4 defects per million opportunities in which a defect
may arise. In our continuous quest to do more with less, we pioneered the application of LEAN
thinking in software services and support transactions. We believe that LEAN is a proven
manufacturing philosophy that has been sustained over several decades. The focus is on streamlining
activities solely from the customers viewpoint, eliminating waste, and a collaborative way of
working and have found that this enhances productivity. We believe that our approach of continuous
enrichment through effective experimentation has proven fruitful.
Service offerings in emerging growth areas
We focus on identifying emerging growth areas and developing service offerings in these areas.
Our strategy to enable the 21st century global enterprise centers around delivering
systems integration and transformation led solutions. We believe that technology innovation and
service delivery innovation form key elements of these solutions.
We are heavily focused in investing in technologies that enable the 21st century enterprise.
The technology areas include cloud, collaboration technologies, green technologies, mobility,
social computing, information management and security solutions. In addition we continue to
innovate our delivery model towards building differentiation capability in our offerings. The
innovation focus in delivery is centered around 4 areas i.e. non-linearity, productized solutions,
development accelerators & systems integration.
Non linearity: in Service delivery is achieved through creating IP, differentiated services
and platforms, automation through accelerators and flex delivery for driving standardized outcomes.
Productized Solutions: These include Business solutions (Transformation, Process): Telco in a
box, Retail ecommerce, Remote diagnostics, Carbon management as well as Technology solutions that
comprise (Platform, Product Engg): wSaaS, base, Digital TV solutions, Bluetooth IP.
34
Systems Integration: These include Domain solutions implementation (Core banking BFSI,
OSS/BSS-Telecom, HIS-Healthcare, PoS-Retail, MES Manufacturing, Smart metering E&U), Major ERP
upgrades, Infrastructure systems integration, Enterprise management system & Private application
cloud.
Development Accelerators: These include process accelerators and frameworks for automating and
hence speeding up delivery.
Broad range of research and development services
Due to our strengths in research and development services we are well positioned to benefit
from the recovery in global research and development spending. We are one of a few major IT
services companies in the world capable of providing an entire range of research and development
services from concept to product realization. According to NASSCOMs Strategic Review Report 2010,
Indian Research and Development and Engineering services comprising embedded systems/solution as
well as other product engineering development services is estimated to reach U.S. $7.9 billion in
revenues in 2010. The recurring nature of revenues from research and development services helps in
mitigating the cyclical nature of IT services. We provide IT services for designing, enhancing and
maintaining platform technologies including servers and operating systems, communication
subsystems, local area and wide area network protocols, optical networking systems, Internet
protocol based switches, routers and embedded software, including software used in mobile phones,
home or office appliances, industrial automation and automobiles.
Global delivery model
One of our strengths is our global delivery model, which includes our offshore development
centers, or ODCs, and our nearshore development centers. We were among the first India-based IT
services companies to implement the offshore development model as a method for delivering
high-quality services at a relatively low cost to international clients. Our global delivery model
has many features that are attractive to our clients, including:
|
|
|
a time difference between the client site and the ODC which allows a 24-hour work
schedule for specific projects; |
|
|
|
|
the ability to quickly increase the scale of development operations; |
|
|
|
|
increased access to our large pool of highly skilled IT professionals located in
India; and |
|
|
|
|
physical and operational separation from all other client projects, providing
enhanced security for a clients intellectual property. |
Established track record with premier international customer base
As of March 31, 2010, our IT Services segment had 845 active clients. We have approximately
166 customers from whom we derived annualized revenues in excess of $5 million for the fiscal year
ended March 31, 2010. We believe that having an established base of high quality, high technology
clients provides us with the following competitive advantages:
|
|
|
the type of clients we target are likely to maintain or increase their IT
outsourcing budgets; |
|
|
|
|
our ODCs support critical IT applications of our large clients, so the clients are
therefore likely to provide a high level of repeat business; and |
|
|
|
|
our IT professionals are consistently exposed to the latest technologies that we are
then able to leverage to procure business from other clients. |
Ability to access, attract and retain skilled IT professionals
We have continued to develop innovative methods for accessing and attracting skilled IT
professionals. We partnered with a leading Indian university to establish a program for on the job
training and a Masters degree in software engineering. We believe that our ability to retain highly
skilled personnel is enhanced by our leadership position, opportunities to work with leading edge
technologies and focus on training and compensation. In February 2007, we were awarded the Dale
Carnegie Global Leadership Award in recognition of our emphasis on the development of human
resources, innovation and organizational creativity. As of March 31, 2010, in our IT Services
business we had over 108,000 professionals. We expect to grow these numbers in the foreseeable
future. One of the keys to attracting and retaining qualified personnel is our variable and
performance linked compensation programs. We have had an employee stock purchase program since 1984
and an employee stock option plan and a productivity bonus plan since October 1999.
35
Robust systems and processes to support growth in business
We have proactively invested in systems, processes and infrastructure to support growth in our
business. We have developed systems and processes to ensure that we have adequate infrastructure,
robust recruitment systems and processes to maintain our culture of ethical behavior, openness and
transparency. We calibrate our recruitment strategies based on the demand outlook. This has
resulted in industry leading resource utilization levels. Our employee base in our IT Services
segment grew from approximately 9,900 employees as of March 31, 2001 to approximately 108,000
employees as of March 31, 2010. During the same period, our revenues from our IT Services segment
have grown from Rs. 17,816 million to Rs. 202,490 million.
Broad distribution network and strong sales force in India
We have a large and growing distribution network for our domestic businesses. For our Indian
IT Services and Products business segment, our direct sales force targets large corporate clients
and over 175 channel partners throughout India, and focuses on medium and small enterprises. For
our Consumer Care and Lighting products segment, we have access to more than 1.6 million retail
outlets in India. This distribution reach provides us with a significant competitive advantage and
allows us to grow our business with minimal increases in personnel.
Strong brand recognition in the Indian market
We believe that our brands are some of the most well recognized brands in the Indian market.
We have been operating in the Indian market for over 60 years and believe that customers equate our
brand with high quality standards and a commitment to customer service. We enhance the value of our
brands through aggressive and selective advertising and promotions.
Markets and Sales Revenue
Our revenues for the last two fiscal years by geographic areas are as follows:
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
|
|
Year ended March 31, |
|
|
|
2009 |
|
|
2010 |
|
India |
|
Rs. |
54,945 |
|
|
Rs. |
62,179 |
|
United States |
|
|
115,022 |
|
|
|
119,537 |
|
Europe |
|
|
57,109 |
|
|
|
56,780 |
|
Rest of the world |
|
|
28,262 |
|
|
|
32,745 |
|
|
|
|
|
|
|
|
|
|
Rs. |
255,338 |
|
|
Rs. |
271,241 |
|
|
|
|
|
|
|
|
Intellectual Property
Our intellectual property rights are important to our business. We rely on a combination of
patent, copyright, trademark and design laws, trade secrets, confidentiality procedures and
contractual provisions to protect our intellectual property. We require employees, independent
contractors and, whenever possible, vendors to enter into confidentiality agreements upon the
commencement of their relationships with us. These confidentiality agreements generally provide
that any confidential or proprietary information being developed by us or on our behalf be kept
confidential. These agreements also provide that any confidential or proprietary information
disclosed to third parties in the course of our business be kept confidential by such third
parties. However, our clients usually own the intellectual property in the software we develop for
them.
Our efforts to protect our intellectual property may not be adequate. Our competitors may
independently develop similar technology or duplicate our products and/or services. Unauthorized
parties may infringe upon or misappropriate our products, services or proprietary information. In
addition, India has now complied with all World Trade Organization, or WTO, requirements, which
means, that India meets the international mandatory and statutory requirements regarding the
protection of intellectual property rights.
We could be subject to intellectual property infringement claims as the number of our
competitors grows and our product or service offerings overlap with competitive offerings. In
addition, we may become subject to such claims since we may not always be able to verify the
intellectual property rights of third parties from which we license a variety of technologies.
Defending against these claims, even if not meritorious, could be expensive and divert our
attention from operating our company. If we become liable to third parties for infringing their
intellectual property rights, we could be required to pay substantial damage awards and be forced
to develop non-infringing technology, obtain a license or cease
36
selling the applications that contain the infringing technology. The loss of some of our
existing licenses could delay the introduction of software enhancements, interactive tools and
other new products and services until equivalent technology could be licensed or developed. We may
be unable to develop non-infringing technology or obtain a license on commercially reasonable
terms, if at all.
As of March 31, 2010, we hold more than 1,100 registered trademarks, including registered
community trademarks in India, Japan, the U.S., Malaysia and the British Virgin Islands. We also have
18 registered copy rights and 11 registered Designs. We have about 12 applications and 5
applications pending for registration of Designs and Copyrights respectively.
We have 115 registrations completed with respect to WIPRO and the Flower logo trade marks in
80 territories across the world (including Madrid protocol countries) and more than 200 trademark
applications pending registration. These overseas registrations also include our applications in
the EU (via the Community Trade Mark). We have also more than 200 trademark applications pending in
India, Iran, Vietnam, Iraq, Malaysia, Singapore, Nepal, Sri Lanka, etc. We have been granted about
67 registered patents (including patents granted to our subsidiaries) and have about 72 pending
patent applications (including unpublished applications). We cannot guarantee that we will obtain
registration for trademarks including service marks, patent, design and copyright registration for
any of our pending applications.
Effect of Government Regulation on our Business
Regulation of our business by the Indian Government affects our business in several ways. We
benefit from certain tax incentives promulgated by the Government of India, including a ten-year
tax holiday from Indian corporate income taxes for the operation of most of our Indian facilities
and a partial taxable income deduction for profits derived from exported IT services under Indian
tax laws and tax holiday for operations in notified economic zones. The tax holiday for our
facilities located in STPs is due to expire in fiscal 2011. As a result of these incentives, our
operations have been subject to relatively insignificant Indian tax liabilities. We have also
benefited from the liberalization and deregulation of the Indian economy by the successive Indian
Governments since 1991, including the current Indian Government. Further, there are restrictive
parts of the Indian law that affect our business, including the fact that we are generally required
to obtain approval under the Factories Act and the Shops and Establishment Act, from the Reserve
Bank of India and/or the Ministry of Finance of the Government of India to acquire companies
organized outside India, and we are generally required, subject to some exceptions, to obtain
approval from relevant Government authorities in India in order to raise capital outside India. The
conversion of our equity shares into ADSs is governed by guidelines issued by the Reserve Bank of
India.
Finally, we are subject to several legislative provisions relating to the Prevention of Food
Adulteration, Weights and Measures, Drugs and Cosmetics, Storage of Explosives, Environmental
Protection, Pollution Control, Essential Commodities and operation of manufacturing facilities.
Non-compliance with these provisions may lead to civil and criminal liability. We are and generally
have been in compliance with these provisions.
Please see the section titled Risk Factors in Item 3, Key Information, as well as the
section titled Additional Information in Item 10, for more information on the effects of
Governmental regulation of our business.
Organizational Structure
Our
subsidiaries as of September 30, 2010 are provided in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
Direct Subsidiaries |
|
Step Subsidiaries |
|
Incorporation |
Wipro Inc.
|
|
|
|
|
|
U.S. |
|
|
Wipro Gallagher Solutions Inc
|
|
|
|
U.S. |
|
|
Enthink Inc.
|
|
|
|
U.S. |
|
|
Infocrossing Inc.
|
|
|
|
U.S. |
|
|
|
|
Infocrossing. LLC,
|
|
U.S. |
cMango Pte Limited
|
|
|
|
|
|
Singapore |
Wipro Japan KK
|
|
|
|
|
|
Japan |
Wipro Shanghai Limited
|
|
|
|
|
|
China |
Wipro Trademarks Holding Limited
|
|
|
|
|
|
India |
|
|
Cygnus Negri Investments
Private Limited
|
|
|
|
India |
Wipro Travel Services Limited
|
|
|
|
|
|
India |
Wipro Consumer Care Limited
|
|
|
|
|
|
India |
Wipro Holdings (Mauritius) Limited
|
|
|
|
|
|
Mauritius |
|
|
Wipro Holdings UK Limited
|
|
|
|
U.K. |
|
|
|
|
Wipro Technologies UK Limited
|
|
U.K. |
37
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
Direct Subsidiaries |
|
Step Subsidiaries |
|
Incorporation |
|
|
|
|
Wipro Holding Austria GmbH(A)
|
|
Austria |
|
|
|
|
3D Networks (UK) Limited
|
|
U.K. |
Wipro Cyprus Private Limited
|
|
|
|
|
|
Cyprus |
|
|
Wipro Technologies S.A DE C.V
|
|
|
|
Mexico |
|
|
Wipro BPO Philippines LTD.
Inc
|
|
|
|
Philippines |
|
|
Wipro Holdings Hungary
Korlátolt Felelősségű
Társaság
|
|
|
|
Hungary |
|
|
Wipro Technologies Argentina
SA
|
|
|
|
Argentina |
|
|
Wipro Information Technology
Egypt SAE
|
|
|
|
Egypt |
|
|
Wipro Arabia Limited*
|
|
|
|
Saudi Arabia |
|
|
Wipro Poland Sp Zoo
|
|
|
|
Poland |
|
|
Wipro Information Technology
Netherlands BV
(formerly RetailBox BV)
|
|
|
|
Netherlands |
|
|
|
|
Wipro Portugal S.A.(A)
(Formerly Enabler Informatica SA)
|
|
Portugal |
|
|
|
|
Wipro Technologies Limited, Russia
|
|
Russia |
|
|
Wipro Technologies Oy
|
|
|
|
Finland |
|
|
Wipro Infrastructure
Engineering AB
|
|
|
|
Sweden |
|
|
|
|
Wipro Infrastructure Engineering Oy
|
|
Finland |
|
|
|
|
Hydrauto Celka San ve Tic
|
|
Turkey |
|
|
Wipro Technologies SRL
|
|
|
|
Romania |
|
|
Wipro Singapore Pte Limited
|
|
|
|
Singapore |
|
|
|
|
PT WT Indonesia
|
|
Indonesia |
|
|
|
|
Wipro Unza Holdings Limited (A)
|
|
Singapore |
|
|
|
|
Wipro Technocentre (Singapore) Pte
Limited
|
|
Singapore |
|
|
|
|
Wipro (Thailand) Co Limited
|
|
Thailand |
|
|
|
|
Wipro Bahrain Limited WLL
|
|
Bahrain |
|
|
Wipro Yardley FZE
|
|
|
|
Dubai |
Wipro Australia Pty Limited
|
|
|
|
|
|
Australia |
Wipro Networks Pte Limited (formerly 3D
Networks Pte Limited)
|
|
|
|
|
|
Singapore |
Planet PSG Pte Limited
|
|
|
|
|
|
Singapore |
|
|
Planet PSG SDN BHD
|
|
|
|
Malaysia |
Wipro Chengdu Limited
|
|
|
|
|
|
China |
Wipro Chandrika Limited
|
|
|
|
|
|
India |
WMNETSERV Limited
|
|
|
|
|
|
Cyprus |
|
|
WMNETSERV (U.K.) Limited.
|
|
|
|
U.K. |
|
|
WMNETSERV INC
|
|
|
|
U.S. |
Wipro Technology Services Limited
|
|
|
|
|
|
India |
Wipro Airport IT Services Limited
|
|
|
|
|
|
India |
Wipro Yardley Consumer Care Private Limited
|
|
|
|
|
|
India |
Wipro
Infrastructure Engineering Machinery (Changzhou) Co., Ltd
|
|
|
|
|
|
China |
All the above direct subsidiaries are 100% held by the Company except that we hold 66.67% of
the equity securities of Wipro Arabia Limited, 90% of the equity securities of Wipro Chandrika
Limited and 76% of the equity securities of Wipro Airport IT Services Limited.
As of March 31, 2010, we also held 49% of the equity securities of Wipro GE Medical Systems Private
Limited that is accounted for as an equity method investment.
|
|
|
(A) |
|
Step Subsidiary details of Wipro Unza Holdings Limited,
Wipro Holding Austria GmbH and Wipro Portugal S.A, are as follows : |
38
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
Step Subsidiaries |
|
Step Subsidiaries |
|
Incorporation |
Wipro Unza Company Pte Limited
|
|
|
|
|
|
Singapore |
Wipro Unza Indochina Pte Limited
|
|
|
|
|
|
Singapore |
|
|
Wipro Unza Vietnam Co., Limited
|
|
|
|
Vietnam |
Wipro Unza Cathay Limited
|
|
|
|
|
|
Hong Kong |
Wipro Unza (China) Limited
|
|
|
|
|
|
Hong Kong |
|
|
Wipro Unza (Guangdong)
Consumer
Products Limited
|
|
|
|
China |
PT Unza Vitalis
|
|
|
|
|
|
Indonesia |
Wipro Unza (Thailand) Limited
|
|
|
|
|
|
Thailand |
Unza Overseas Limited
|
|
|
|
|
|
British virgin
islands |
Unzafrica Limited
|
|
|
|
|
|
Nigeria |
Wipro Unza Middle East Limited
|
|
|
|
|
|
British virgin
islands |
Unza International Limited
|
|
|
|
|
|
British virgin
islands |
Unza Nusantara Sdn Bhd
|
|
|
|
|
|
Malaysia |
|
|
Unza Holdings Sdn Bhd
|
|
|
|
Malaysia |
|
|
Unza (Malaysia) Sdn Bhd
|
|
|
|
Malaysia |
|
|
|
|
UAA (M) Sdn Bhd
|
|
Malaysia |
|
|
Manufacturing Services Sdn Bhd
|
|
|
|
Malaysia |
|
|
|
|
Shubido Pacific Sdn
Bhd(a)
|
|
Malaysia |
|
|
Gervas Corporation Sdn Bhd
|
|
|
|
Malaysia |
|
|
|
|
Gervas (B) Sdn Bhd
|
|
Malaysia |
|
|
Formapac Sdn Bhd
|
|
|
|
Malaysia |
Wipro Holding Austria, GmbH
|
|
|
|
|
|
Austria |
|
|
New Logic Technologies GmbH
|
|
|
|
Austria |
|
|
New Logic Technologies SARL
|
|
|
|
France |
Wipro Portugal S.A. |
|
|
|
|
|
|
|
|
SAS Wipro France
(formerly Enabler France SAS)
|
|
|
|
France |
|
|
Wipro Retail UK Limited
(formerly Enabler UK Limited)
|
|
|
|
U.K. |
|
|
Wipro do Brasil Technologia Ltda
(formerly Enabler Brazil Ltda)
|
|
|
|
Brazil |
|
|
Wipro Technologies Gmbh
(formerly
Enabler & Retail Consult GmbH)
|
|
|
|
Germany |
a) All the above subsidiaries are 100% held by the Company except Shubido Pacific Sdn Bhd in
which the Company holds 62.55% of the equity securities.
The List of controlled trusts are:
|
|
|
|
|
|
|
Name of Entity |
|
|
Nature |
|
|
Country of
Incorporation |
Wipro Equity Reward Trust
|
|
|
Trust |
|
|
India |
Wipro Inc Benefit Trust
|
|
|
Trust |
|
|
USA |
Property, Plant and Equipment
Our headquarters and corporate offices are located at Doddakannelli, Sarjapur Road, Bangalore,
India. The offices are approximately 300,000 square feet. We have approximately 1.3 million square
feet of land adjoining our corporate offices for future expansion plans.
In addition we have approximately 40 million square feet of land and approximately 9.6 million
square feet of owned software development facilities in India and approximately 1 million square
feet of leased software development premises in India. We have approximately 1,100,000 square feet
of leased software development facilities in 11 countries outside India. We have approximately
313,000 square feet of leased data center facilities at various locations in United States of
America.
We have one sales and marketing office located in each of the following countries: Canada,
France, Germany, Japan, Sweden, Italy, Switzerland, Finland, the Netherlands, the United Kingdom
and China. In addition, we have eleven sales and marketing offices in the United States.
39
We operate fifteen manufacturing sites, aggregating approximately 1.4 million square feet and
approximately 4.2 million square feet of land. We own eight of these facilities, located in
Amalner, Tumkur, Bangalore, Mysore, Hindupur,
Mumbai, Chennai and Pondicherry, India. We have leased on a long-term basis four facilities
located in Waluj, Haridwar, Kotdwar and Baddi, India. We own approximately 946,090 square feet of
production and warehousing facilities in Indonesia, Vietnam and Malaysia. We also own approximately
344,000 square feet of production facilities in Sweden.
Our software development and manufacturing facilities are equipped with a world class
technology infrastructure that includes networked workstations, servers, data communication links,
captive power generators and other plants and machinery.
We believe that our facilities are optimally utilized and that appropriate expansion plans are
being planned and undertaken to meet our future growth.
Material Plans to Construct, Expand and Improve Facilities
As of March 31, 2010, we have capital commitments of Rs. 2,782 million ($62 million) related
to the construction or expansion of our software development facilities. We currently intend to
finance our additional expansion plans entirely through our cash and cash equivalents and
investments in liquid and short term mutual funds as of March 31, 2010.
Legal Proceedings
In the ordinary course of business, we may from time to time become involved in certain legal
proceedings. As of the date of this Annual Report on Form 20-F, we are not party to any pending
legal proceedings whose resolution can have a material impact on our financial position. Please see
the description of our tax proceedings before the Deputy Commissioner of Income, Tax, Bangalore,
India, under the section titled Income Taxes under Item 5 of this Annual Report.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
(in millions, except share data and where otherwise stated)
Managements Discussion and Analysis of Financial Condition and Results of Operations
Introduction
As discussed elsewhere in this report, in addition to historical information, this Annual Report on
Form 20-F contains certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are not
historical facts but instead represent our beliefs regarding future events, many of which are, by
their nature, inherently uncertain and outside our control. As a result, the forward-looking
statements contained herein are subject to certain risks and uncertainties that could cause actual
results to differ materially from those reflected in the forward-looking statements, and reported
results should not be viewed as an indication of future performance. For a discussion of some of
the risks and important factors that could affect the firms future results and financial
condition, please see the sections entitled Risk Factors.
The forward-looking statements contained herein are identified by the use of terms and phrases such
as anticipate, believe, could, estimate, expect, intend, may, plan, objectives,
outlook, probably, project, will, seek, target and similar terms and phrases. Such
forward-looking statements include, but are not limited to, all of the statements set forth above
under the heading Forward-Looking Statements May Prove Inaccurate.
We wish to ensure that all forward-looking statements are accompanied by meaningful cautionary
statements, so as to ensure to the fullest extent possible the protections of the safe harbor
established in the Private Securities Litigation Reform Act of 1995. Accordingly, all
forward-looking statements are qualified in their entirety by reference to, and are accompanied by,
the discussion of certain important factors that could cause actual results to differ materially
from those projected in such forward-looking statements in this report, including the section
entitled Risk Factors and this section. We caution the reader that this list of important factors
may not be exhaustive. We operate in rapidly changing businesses, and new risk factors emerge from
time to time. We cannot predict every risk factor, nor can we assess the impact, if any, of all
such risk factors on our business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those projected in any forward-looking statements.
40
Overview
We are a leading global information technology, or IT, services company, headquartered in
Bangalore, India. We provide a comprehensive range of IT services, software solutions and research
and development services in the areas of hardware and software design to leading companies
worldwide. We use our development centers located in India and around the world, quality processes
and global resource pool to provide cost effective IT solutions and deliver time-to-market and
time-to-development advantages to our clients. We also provide business process outsourcing, or
BPO, services.
Our IT Products segment is a leader in the Indian IT market and focuses primarily on meeting
requirements for IT products of companies in India and Middle East region.
We also have a notable presence in the markets for consumer products and lighting and
infrastructure engineering.
Recent Developments
Audit committee investigation
As we disclosed in our Form 6-K dated March 1, 2010, we discovered acts of embezzlement by one
of our junior level employees during the period from November 2006 to December 2009. In response
to the discovery of such acts of embezzlement, our Audit Committee
conducted an investigation through an internal investigation team to
determine, among other things, the materiality of the amounts embezzled, the design and
implementation of internal control processes to detect and prevent similar misappropriations in the
future and certain other issues including the appropriateness of certain accounting entries. Based
on our review of the facts
discovered during the investigation, we believe that the amounts embezzled were not material.
We have since recovered substantially all of the embezzled amounts.
As a result of the investigation of the embezzlement, our Audit Committee also commenced an
external investigation, and engaged independent legal counsel and the forensic accountants they
engaged, to evaluate certain issues that were discovered during the internal investigation,
including the appropriateness of certain accounting entries pertaining to our exchange rate
fluctuation and outstanding liability accounts. This investigation has since been concluded and the
report of the independent legal counsel engaged to conduct the investigation was submitted to our
Audit Committee on November 10, 2010. Our Audit Committee discussed and agreed with the findings
and conclusions of this report.
Findings and conclusions
Based on its investigation, the Audit Committee concluded there were certain accounting
entries that were either erroneous, unsupported by documentation, or both, primarily in two
accounts. However, our Audit Committee concluded there was insufficient evidence to support a
conclusion that any member of current management engaged in intentional wrongful conduct. These
accounting entries have been corrected as of March 31, 2010.
Further, based on our review of the findings and conclusions made by the independent legal
counsel and the forensic accountants they engaged, we believe that
the impact of the misstatements identified during the investigations together with other uncorrected audit adjustments are
not material, individually or in the aggregate, (based on assessments of both quantitative and
qualitative factors) to our annual consolidated financial statements prepared under IFRS for the
years ended March 31, 2010 and March 31, 2009 as reported in this Form 20-F. If we were to make these
corrections to the consolidated financial statements in the respective annual periods, the profit
before tax and profit after tax for the year ended March 31, 2010 reported in this Form-20F would
have been higher by 1.0% and 2.1%, respectively. Similarly, the profit before tax and profit after
tax for the year ended March 31, 2009 would have been higher by 1.9% and 1.5%, respectively. The
impact on the operating income of our IT Services segment would have been 1.7% and 3.1% for the
years ended March 31, 2010 and March 31, 2009, respectively. The impact has been computed based on the
roll-over method prescribed under SAB 108.
Similarly, if we were to make these corrections to our financial statements prepared under
U.S. GAAP for the fiscal year ended March 31, 2009, the reported profit before tax, profit after tax and operating income of our IT services segment would have been higher by 2.5%, 2.3% and 3.4%,
respectively. We believe these misstatements are not material, individually or in the aggregate,
(based on assessments of both quantitative and qualitative factors) to our annual consolidated
financial statements prepared under U.S. GAAP for the
year ended March 31, 2009. The impact has been computed based on the roll-over method prescribed under SAB
108.
We have also evaluated the impact of the above matters and the financial statement
misstatements with respect to our condensed consolidated quarterly financial statements prepared
under IFRS for all the quarterly periods during the years ended March 31, 2010 and March 31, 2009,
as reported in our Form 6-Ks.
The impact of the financial statement misstatements identified during the investigations,
together with other uncorrected audit adjustments resulted in an overstatement of the reported
profit before tax by 2.2% in one quarterly period and understatement of the reported profit before
tax ranging from 1.5% to 2.4% in the other quarterly periods during the fiscal year ended March 31,
2010. Additionally, the impact of the financial statement misstatements identified during the
investigations, together with other uncorrected audit adjustments, resulted in an overstatement of
the reported profit after tax by 1.8% in one quarterly period and understatement of reported profit
after tax ranging from 1.1% to 3.1% in the other
quarterly periods during the fiscal year ended March 31, 2010. The impact of the
misstatements has been computed based on the roll-over method prescribed under SAB 108.
Similarly, the impact of the financial statement misstatements together with other uncorrected
audit adjustments resulted in an over statement of the reported profit before tax by 1.8% in one
quarterly period and understatement of the reported profit before tax ranging from 0.1% to 5.8% in
the other quarterly periods during the fiscal year ended March 31, 2009. Additionally, the impact
of the financial statements misstatement together with uncorrected audit adjustments resulted in an
overstatement of the reported profit after tax ranging from 0.5% to 1.7% and understatement of the
reported profit after tax ranging from 3.1% to 5.4% in the quarterly periods during fiscal year
ended March 31, 2009. The impact of the misstatements has been computed based on the roll-over
method prescribed under SAB 108.
The impact on our reported operating income of our IT Services segment resulted in an
overstatement of 1.3% in one quarterly period and understatement ranging from 1.6% to 4.0% in the
other quarterly periods during the fiscal year ended March 31, 2010. Similarly, the impact on our
reported operating income of our IT Services segment resulted in an overstatement of 0.5% in one
quarterly period and understatement ranging from 1.0% to 9.4% in the other quarterly periods
during the fiscal year ended March 31, 2009. We have determined that these misstatements are not
material based on assessments of quantitative and qualitative factors. We have therefore not made
any corrections or adjustments to these condensed consolidated quarterly IFRS financial statements.
The impact of the misstatements has been computed based on the roll-over method prescribed under
SAB 108.
The impact of the resulting financial statement misstatements identified during the
investigations, together with other uncorrected audit adjustments, resulted in an overstatement of
the reported U.S. GAAP profit before tax by 4.9% in one quarterly period and understatement of the
reported U.S. GAAP profit before tax ranging from 3.4% to 6.0% in the other quarterly periods
during the fiscal year ended March 31, 2009. Additionally, the impact of the resulting financial
statement misstatements identified during the investigations, together with other uncorrected audit
adjustments, resulted in an overstatement of the reported U.S. GAAP profit after tax by 5.3% in one
quarterly period and understatement of the reported U.S. GAAP reported profit after tax ranging
from 3.6% to 6.2% in the other quarterly periods during the fiscal year ended March 31, 2009. The
impact on our reported U.S.GAAP operating income of our IT Services segment resulted in an
overstatement of 4.1% in one quarterly period and understatement ranging from 4.7% to 7.7% in the
other quarterly periods during the fiscal year ended March 31, 2009. We have determined that these
misstatements are not material based on assessments of quantitative and qualitative factors. We
have therefore not made any corrections or adjustments to these condensed consolidated quarterly
U.S. GAAP financial statements. The impact of the misstatements has been computed based on the
roll-over method prescribed under SAB 108.
We and our independent registered public accounting firm also identified the lack of internal
controls that gave rise to the embezzlement and financial statement misstatements as material
weaknesses in internal control over financial reporting. We have taken steps to remediate these
material weaknesses as of March 31, 2010. See also Item 15 Controls and Procedures.
Results of Operations
Our revenue and profit for the years ended March 31, 2009 and 2010 are provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wipro Limited and subsidiaries |
|
|
|
|
|
|
|
|
|
|
Year on |
|
|
Years ended March 31, |
|
Year |
|
|
2009 |
|
2010 |
|
change |
|
|
(in millions except earnings |
|
|
|
|
|
|
per share data) |
|
|
|
|
Revenue |
|
Rs. |
255,338 |
|
|
Rs. |
271,241 |
|
|
|
6.23 |
% |
Cost of revenue |
|
|
(180,215 |
) |
|
|
(186,299 |
) |
|
|
3.38 |
% |
Gross profit |
|
|
75,123 |
|
|
|
84,942 |
|
|
|
13.07 |
% |
Selling and marketing expenses |
|
|
(17,313 |
) |
|
|
(18,608 |
) |
|
|
7.48 |
% |
General and administrative expenses |
|
|
(14,510 |
) |
|
|
(14,823 |
) |
|
|
2.16 |
% |
Operating income |
|
|
43,300 |
|
|
|
51,511 |
|
|
|
18.96 |
% |
Profit attributable to equity holders |
|
|
38,761 |
|
|
|
45,931 |
|
|
|
18.50 |
%(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
6.78 |
% |
|
|
6.86 |
% |
|
|
(8 |
) bps |
General and administrative
expenses |
|
|
5.68 |
% |
|
|
5.46 |
% |
|
|
22 |
bps |
Gross margins |
|
|
29.42 |
% |
|
|
31.32 |
% |
|
|
190 |
bps |
Operating Margin |
|
|
16.96 |
% |
|
|
18.99 |
% |
|
|
203 |
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15.99 |
|
|
|
18.91 |
|
|
|
|
|
Diluted |
|
|
15.90 |
|
|
|
18.75 |
|
|
|
|
|
|
|
|
(1) |
|
Our adjusted non-GAAP profit for the year ended March 31, 2010 is Rs. 45,862, an
increase of 17.83% over the year ended March 31, 2009. See discussion below. |
Our revenue and operating income by business segment expressed in terms of percentages are
provided below for the years ended March 31, 2009 and 2010, respectively:
41
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
2009 |
|
2010 |
|
|
(In Percentage) |
Revenue: |
|
|
|
|
|
|
|
|
IT Services and Products |
|
|
|
|
|
|
|
|
IT Services |
|
|
75 |
|
|
|
75 |
|
IT Products |
|
|
13 |
|
|
|
14 |
|
Total |
|
|
88 |
|
|
|
89 |
|
Consumer Care and Lighting |
|
|
8 |
|
|
|
8 |
|
Others, including reconciling items |
|
|
4 |
|
|
|
3 |
|
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
Operating Income: |
|
|
|
|
|
|
|
|
IT Services and Products |
|
|
|
|
|
|
|
|
IT Services |
|
|
93 |
|
|
|
92 |
|
IT Products |
|
|
3 |
|
|
|
3 |
|
Total |
|
|
96 |
|
|
|
95 |
|
Consumer Care and Lighting |
|
|
6 |
|
|
|
6 |
|
Others, including reconciling items |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
|
100 |
|
|
|
100 |
|
This Annual Report on Form 20-F contains, and future filings with the SEC may contain,
non-GAAP financial measures within the meaning of Regulation G and Item 10(e) of Regulation S-K.
Such non-GAAP financial measures are measures of our historical or future performance, financial
position or cash flows that are adjusted to exclude or include amounts that are excluded or
included, as the case may be, from the most directly comparable financial measure calculated and
presented in accordance with IFRS.
The following table provides our adjusted profit for the year, which is a non-GAAP financial
measure that excludes the impact of accelerated amortization in respect of stock options that vest
in a graded manner. This non-GAAP financial measure is not based on any comprehensive set of
accounting rules or principles and should not be considered a substitute for, or superior to, the
most directly comparable financial measure calculated in accordance with IFRS. In addition to this
non-GAAP financial measure, readers should carefully review and evaluate our financial statements
prepared in accordance with IFRS as well as the reconciliation of this non-GAAP financial measure
with the most directly comparable IFRS financial measure.
A reconciliation of adjusted non-GAAP profit, which excludes the impact of accelerated
amortization in respect of stock options that vest in a graded manner, with profit as calculated
and presented in accordance with IFRS, is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
2009 |
|
|
2010 |
|
|
|
|
Profit attributable to equity holders
for the year as per
IFRS |
|
Rs. |
38,761 |
|
|
Rs. |
45,931 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Accelerated amortization of stock
options that vest in a graded
manner |
|
|
161 |
|
|
|
(69 |
) |
|
|
|
|
|
|
|
Adjusted non-GAAP profit |
|
Rs. |
38,922 |
|
|
Rs. |
45,862 |
|
|
|
|
|
|
|
|
The Company believes that the presentation of this non-GAAP adjusted profit, when shown
in conjunction with the corresponding IFRS measure, provides useful information to investors and
management regarding financial and business trends relating to the Companys profit for the period.
The Company considers a stock option award with a graded vesting schedule to be a single award and
not multiple stock option awards. Further, the Company considers the services of the employee in
each year, covered by the stock option award to be equally valuable and accordingly believes that
straight line amortization reflects the economic substance of the stock awards. However, under
IFRS, the Company records the related stock compensation expenses on an accelerated basis.
Therefore, we believe that making available an adjusted profit number that excludes the impact of
accelerated amortization from profit provides useful supplemental information to both management
and investors about our financial and business trends.
For our internal budgeting process, our management also uses financial statements that do not
include the impact of accelerated amortization relating to stock options that vest in a graded
manner. The management of the Company also uses non-GAAP adjusted profit, in addition to the
corresponding IFRS measures, in reviewing our financial results.
A material limitation associated with the use of non-GAAP profit as compared to the IFRS
measure of profit is that it does not include costs which are recurring in nature and may not be
comparable with the calculation of profit for other companies in our industry. The Company
compensates for these limitations by providing full disclosure of the effects
42
of non-GAAP measures, by presenting the corresponding IFRS financial measure and by providing
a reconciliation to the corresponding IFRS measure.
Results of operations for the years ended March 31, 2010 and 2009
|
§ |
|
Our total revenues increased by 6.23%. This was driven primarily by a 17%, 11% and
6% increase in revenue from our Consumer Care and Lighting, IT Products and IT Services
business segments respectively. This increased revenue was partially offset by a
decline in revenue from our Others segment, including reconciling items. |
|
|
§ |
|
Our gross profit as percentage of our total revenue increased by 190 basis points
(bps). This was primarily on account of an increase in gross profit as a percentage of
revenue from our Consumer Care and Lighting segment by 374 bps, an increase in gross
profit as a percentage of revenue from our IT Services segment by 179 bps and an
increase in gross profit as a percentage of revenue from our IT Products segment by 72
bps. This increase was partially offset by a decline in gross profit as a percentage of
revenue from our Others segment, including reconciling items. |
|
|
§ |
|
Our selling and marketing expenses as a percentage of revenue increased marginally
from 6.78% for the year ended March 31, 2009 to 6.86% for the year ended March 31,
2010. In absolute terms selling and marketing expenses increased by 7.48%, primarily
due to an increase in the Consumer Care and Lighting segment. This increase was
partially offset by a decline in the IT Products segment, IT Services segment and
Others segment, including reconciling items. |
|
|
§ |
|
Our general and administrative expenses as a percentage of revenue decreased from
5.68% for the year ended March 31, 2009 to 5.46% for the year ended March 31, 2010. In
absolute terms general and administrative expenses increased by 2.16%, primarily due to
increased expenses in the IT Services segment, IT Products segment and Consumer Care
and Lighting segment. This increase was partially offset by a decline in the Others
segment, including reconciling items. |
|
|
§ |
|
As a result of the foregoing factors, our operating income increased by 18.96%, from
Rs. 43,300 for the year ended March 31, 2009 to Rs. 51,511 for the year ended March 31,
2010. |
|
|
§ |
|
Our finance expenses declined from Rs. 3,824 for the year ended March 31, 2009 to
Rs. 991 for the year ended March 31, 2010. This is primarily due to lower interest
rates on our loans and borrowings during the year ended March 31, 2010 as compared to
year ended March 31, 2009. |
|
|
§ |
|
Our finance and other income declined from Rs. 5,057 for the year ended March 31,
2009 to Rs. 4,360 for the year ended March 31, 2010. Our dividend income declined by Rs
823 during the year ended March 31, 2010 as compared to year ended March 31, 2009. This
was partially offset by an increase of Rs 646 in the interest income during the same
period. |
|
|
§ |
|
Our income taxes increased by Rs. 3,259, from Rs. 6,035 for the year ended March 31,
2009 to Rs. 9,294 for the year ended March 31, 2010. Adjusted for tax write-backs our
effective tax rate increased from 12.6% for the year ended March 31, 2009 to 16.9% for
the year ended March 31, 2010. The increase is primarily attributable to increase in
proportion of income subject to income taxes. |
|
|
§ |
|
Our equity in earnings of affiliates for the years ended March 31, 2009 and 2010 was
Rs. 362 and Rs. 530, respectively. Equity in earnings of affiliates primarily relates
to the equity in earnings of Wipro GE. |
|
|
§ |
|
As a result of the foregoing factors, our profit attributable to equity holders
increased by Rs. 7,170, or 18.50%, from Rs. 38,761 for the year ended March 31, 2009 to
Rs. 45,931 for the year ended March 31, 2010. |
Segment Analysis
IT Services
We provide IT services to our customers located in various markets around the world. The range
of IT services we provide includes IT consulting, custom application design, development,
re-engineering and maintenance, systems integration, package implementation, technology
infrastructure total outsourcing, testing services and research and development services in the
areas of hardware and software design. We also provide business process outsourcing or BPO
services. Our services offerings within the business process outsourcing area include customer
interaction services, finance and accounting services and business process improvement services for
repetitive processes.
43
Our IT Services segment accounted for 75% of our total revenue for each of the years ended
March 31, 2009 and 2010, respectively. Our IT Services segment accounted for 93% and 92% of our
total operating income for the years ended March 31, 2009 and 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
Year on Year |
|
|
2009 |
|
2010 |
|
change |
Revenue |
|
Rs. |
191,613 |
|
|
Rs. |
202,490 |
|
|
|
5.68 |
% |
Gross profit |
|
|
63,140 |
|
|
|
70,346 |
|
|
|
11.41 |
% |
Selling and marketing expenses |
|
|
(10,672 |
) |
|
|
(10,492 |
) |
|
|
(1.69 |
)% |
General and administrative expenses |
|
|
(12,271 |
) |
|
|
(12,446 |
) |
|
|
1.43 |
% |
Operating income |
|
|
40,197 |
|
|
|
47,408 |
|
|
|
17.94 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
5.57 |
% |
|
|
5.18 |
% |
|
|
39 |
bps |
General and administrative expenses |
|
|
6.40 |
% |
|
|
6.15 |
% |
|
|
25 |
bps |
Gross margin |
|
|
32.95 |
% |
|
|
34.74 |
% |
|
|
179 |
bps |
Operating margin |
|
|
20.98 |
% |
|
|
23.41 |
% |
|
|
243 |
bps |
In our segment reporting only, management has included the impact of exchange rate
fluctuations in revenue. Excluding the impact of exchange rate fluctuations, revenue, as reported
in our statements of income, is Rs. 193,009 and Rs. 202,990 for the years ended March 31, 2009 and
2010, respectively.
Results of operations for the years ended March 31, 2010 and 2009
|
§ |
|
Our revenue from IT Services increased by 5.68%. In USD terms our revenue increased
by 1.55% from $4,323 million to $4,390 million. Our average USD/INR realization
increased from Rs. 44.32 for the year ended March 31, 2009 to Rs. 46.12 for the year
ended March 31, 2010. |
|
|
|
|
This increase of 1.55% was primarily due to a 14% increase in revenue from healthcare
and services, a 13% increase in revenue from energy and utilities services, a 11%
increase in revenue from CMSP services, an 8% increase in revenue from retail and
transportation services and a 2% increase in revenue from financial services. These
increases were partially offset by an 19% decline in revenue from technology services
and 13% decline from telecom services. In our IT Services segment, we added 121 new
clients during the year ended March 31, 2010. |
|
|
§ |
|
Our gross profit as a percentage of our revenue from our IT Services segment
increased by 179 bps. The improvement in gross margin as percentage of revenue is
primarily on account of improvement in average USD/INR realization and improvement in
utilization rates during the year ended March 31, 2010 as compared to year ended March
31, 2009. |
|
|
|
|
Our average utilization of billable employees improved from 69.1% for the year ended
March 31, 2009 to 71.5% for the year ended March 31, 2010. Further, the onsite price
realization improved approximately 3.68% during the year ended March 31, 2010. These
increases were partially offset by a decline in off-shore price realization by
approximately 1.42% and an increase in personnel cost due to increased compensation as
part of our annual compensation review. |
|
|
§ |
|
Selling and marketing expenses as a percentage of revenue from our IT Services
segment declined from 5.57% for the year ended March 31, 2009 to 5.18% for the year
ended March 31, 2010. This decline is primarily attributable to cost rationalization
measures adopted by the company; for example we used video conferencing and virtual
meeting tools to reduce our travel spends. |
|
|
§ |
|
General and administrative expenses as a percentage of revenue from our IT Services
segment declined from 6.40% for the year ended March 31, 2009 to 6.15% for the year
ended March 31, 2010. This decline is primarily attributable to higher provision for
doubtful debts during the year ended March 31, 2009 as compared to March 31, 2010. |
|
|
§ |
|
As a result of the above, operating income of our IT Services segment increased by
17.94%. |
IT Products
We leverage our strong distribution channel to sell a range of Wipro personal desktop
computers, Wipro servers and Wipro notebooks. We are also a value added reseller of desktops,
servers, notebooks, storage products, networking
44
solution and packaged software. Our IT Products segment accounted for 13% and 14% of our total
revenue for the years ended March 31, 2009 and 2010, respectively. Our IT Products segment
accounted for 3% of our operating income for each of the years ended March 31, 2009 and 2010,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
Year on Year |
|
|
2009 |
|
2010 |
|
change |
Revenue |
|
Rs. |
34,277 |
|
|
Rs. |
38,205 |
|
|
|
11.46 |
% |
Gross profit |
|
|
3,391 |
|
|
|
4,054 |
|
|
|
19.55 |
% |
Selling and marketing expenses |
|
|
(1,361 |
) |
|
|
(1,275 |
) |
|
|
(6.32 |
)% |
General and administrative expenses |
|
|
(667 |
) |
|
|
(1,015 |
) |
|
|
52.17 |
% |
Operating income |
|
|
1,363 |
|
|
|
1,764 |
|
|
|
29.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses |
|
|
3.97 |
% |
|
|
3.34 |
% |
|
|
63 |
bps |
General and administrative
expenses |
|
|
1.95 |
% |
|
|
2.66 |
% |
|
|
(71 |
) bps |
Gross margin |
|
|
9.89 |
% |
|
|
10.61 |
% |
|
|
72 |
bps |
Operating margin |
|
|
3.98 |
% |
|
|
4.62 |
% |
|
|
64 |
bps |
In our segment reporting only, management has included the impact of exchange rate
fluctuations in revenue. Excluding the impact of exchange rate fluctuations, revenue, as reported
in our statements of income, is Rs. 34,417 and Rs. 38,361 for the years ended March 31, 2009 and
2010, respectively.
Results of operations for the years ended March 31, 2010 and 2009
|
|
|
Our revenue from the IT Products segment increased by 11.46% primarily due to higher
demand for IT Products in India and Middle East markets, for both traded and
manufactured products. |
|
|
|
|
Our gross profit as a percentage of our revenue of our IT products segment increased
by 72 bps. Our gross margin as a percentage of revenue increased both in traded and
manufactured product. This increase is primarily due to an increase in the proportion
of revenues from outsourcing and system integration contracts, which are higher value
added offerings. |
|
|
|
|
Selling and marketing expenses as a percentage of revenue from our IT Products
segment declined marginally from 3.97% for the year ended March 31, 2009 to 3.34% for
the year ended March 31, 2010. In absolute terms selling and marketing expenses
declined by Rs. 86. |
|
|
|
|
General and administrative expenses as a percentage of revenue from our IT Products
segment increased from 1.95% for the year ended March 31, 2009 to 2.66% for the year
ended March 31, 2010. In absolute terms general and administrative expenses increased
by Rs. 348. |
|
|
|
|
As a result of the above, operating income of our IT products segment increased by
29.42%. |
Consumer Care and Lighting
We leverage our brand name and distribution strengths to sustain a profitable presence in
niche markets in the areas of soaps, toiletries and lighting products. With the acquisitions of
Unza group and Yardley, we are increasing our presence in personal care products sector in
south-east Asia and the Middle-East. Our Consumer Care and Lighting segment accounted for 8% of our
revenue for each of the years ended March 31, 2009 and 2010, respectively. Our Consumer Care and
Lighting segment accounted for 6% of our operating income for each of the years ended March 31,
2009 and 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
Year on Year |
|
|
2009 |
|
2010 |
|
change |
Revenue |
|
Rs. |
19,249 |
|
|
Rs. |
22,584 |
|
|
|
17.33 |
% |
Gross profit |
|
|
8,467 |
|
|
|
10,779 |
|
|
|
27.31 |
% |
Selling and marketing expenses |
|
|
(4,750 |
) |
|
|
(6,492 |
) |
|
|
36.67 |
% |
General and administrative expenses |
|
|
(1,125 |
) |
|
|
(1,207 |
) |
|
|
7.29 |
% |
Operating income |
|
|
2,592 |
|
|
|
3,080 |
|
|
|
18.83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
24.68 |
% |
|
|
28.75 |
% |
|
|
(407 |
) bps |
General and administrative
expenses |
|
|
5.84 |
% |
|
|
5.34 |
% |
|
|
50 |
bps |
Gross margin |
|
|
43.99 |
% |
|
|
47.73 |
% |
|
|
374 |
bps |
Operating margin |
|
|
13.47 |
% |
|
|
13.64 |
% |
|
|
17 |
bps |
45
In our segment reporting only, management has included the impact of exchange rate
fluctuations in revenue. Excluding the impact of exchange rate fluctuations, revenue, as reported
in our statements of income, is Rs. 19,303 and Rs. 22,591 for the years ended March 31, 2009 and
2010, respectively.
We have been in the consumer care business since 1945 and the lighting business since 1992.
The consumer care business has historically generated surplus cash. Our strategy is to sustain
operating margins, continue generating positive operating cash flows and increase the proportion of
revenues from high margin products. With the acquisition of Unza and Yardley, our strategy is to
sustain and expand our market share in south-east Asia and Middle-East and introduce premium
personal care products of Unza and Yardley in the Indian markets.
Results of operations for the years ended March 31, 2010 and 2009
|
|
|
Our Consumer Care and Lighting revenue increased by 17.33%. This increase is
attributable to an increase of approximately 16.16% in revenue from consumer products
sold in Indian markets and an increase of approximately 14.34% in revenue from personal
care products sold in south-east Asian markets. Further, our acquisition of Yardley
contributed an additional 1.7% of our total revenue from the Consumer Care and Lighting
segment. |
|
|
|
|
The growth in revenues in Indian markets is primarily due to an increase in revenue from
toilet soap products partially offset by a decline in revenues from lighting and
furniture products. |
|
|
|
|
Our gross profit as a percentage of our revenues from the Consumer Care and Lighting
segment increased by 374 bps. The expansion in gross margins is primarily due to a
decrease in major input costs and a change in the mix of products sold in favor of
products which typically have higher gross margins in both Indian and South Asian
markets. |
|
|
|
|
Selling and marketing expense as a percentage of revenue from our Consumer Care and
Lighting segment increased from 24.68% for the year ended March 31, 2009 to 28.75% for
the year ended March 31, 2010. This increase is primarily due to higher brand promotion
and advertisement spends in select geographies to further establish and expand our
market base for our new personal care brands. |
|
|
|
|
General and administrative expense as a percentage of revenue from our Consumer Care
and Lighting segment declined from 5.84% for the year ended March 31, 2009 to 5.34% for
the year ended March 31, 2010. In absolute terms general and administrative expenses
increased by Rs. 82. This increase is primarily due to increased expenses incurred by
our India operations. |
|
|
|
|
As a result of the above, operating income from our Consumer Care and Lighting
increased by 18.83%. |
Others, including reconciling items
Results of operations for the years ended March 31, 2010 and 2009
|
|
|
Revenue from our Others segment, including reconciling items, decreased by 21.93%,
from Rs. 10,199 for the year ended March 31, 2009 to Rs. 7,962 for the year ended March
31, 2010. The decline in revenue is attributable to a slowdown in the global markets
which has impacted the market for infrastructure engineering products in India and
Europe. |
|
|
|
|
Operating income/(loss) from our Others segment, including reconciling items,
decreased from Rs. (852) for the year ended March 31, 2009 to Rs. (741) for the year
ended March 31, 2010. This decrease is primarily due to the abolishment of the Fringe
Benefit Tax in accordance with the Finance Act (No. 2), 2009. The FBT expense during
the year ended March 31, 2009 was Rs. 412 recorded under reconciling items. The
decrease was partially offset by higher losses in our hydraulic cylinders and tipping
gear systems business during the year ended March 31, 2010, primarily due to
contraction in the sales volume of the infrastructure engineering business due to the
slowdown in the global market. |
46
Acquisitions
An active acquisition program is an important element of our corporate strategy. In the last
two fiscal years, we have invested in the aggregate, over Rs. 8,500 to acquire companies including
the acquisition of Citi Technology Services Limited. In December 2009, the Company acquired 100% of
the equity of Lornamead FZE (an entity incorporated in Dubai) and Lornamead Personal Care Private
Limited (an entity incorporated in India) from UK-based Lornamead Group Limited. Yardley is a
strong heritage global brand that was established in approximately 1770 and operates in the
personal care category marketing fragrance products, bath and shower products and skin care
products. Typically, the significant majority of our integration activities related to an
acquisition are substantially completed within three to six months after the closing of the
acquisition.
We believe our acquisition program supports our long-term strategic direction, strengthens our
competitive position, particularly in acquiring new domain expertise, expands our customer base,
increases our ability to expand our service offerings and provide a greater scale to grow our
earnings and increase stockholders value. See Note 6 of our Notes to Consolidated Financial
Statements for additional information related to our acquisitions.
We routinely review potential acquisitions. We currently expect to finance our acquisitions
through cash generated from operations, cash and cash equivalents and investments in liquid and
short-term mutual funds as of March 31, 2010. However, for strategic acquisitions, we could decide
to or be required to obtain additional debt or equity financing. We cannot be certain that
additional financing, if needed, will be available on favorable terms, or if at all.
Foreign exchange gains / (losses), net
Foreign exchange gains/(losses), net, comprise:
|
|
|
exchange differences arising from the translation or settlement of transactions in
foreign currency, except for exchange differences on debt denominated in foreign
currency (which are reported within finance expense, net); and |
|
|
|
|
the changes in fair value for derivatives not designated as hedging derivatives and
ineffective portion of the hedging instruments. For forward foreign exchange contracts
which are designated and effective as cash flow hedges, the marked to market gains and
losses are deferred and reported as a component of other comprehensive income in
stockholders equity and subsequently recorded in the income statement when the hedged
transactions occur, along with the hedged items. |
Finance expense
|
|
|
Our finance expense comprise interest expense on borrowings, impairment losses
recognized on financial assets, gains / losses on translation or settlement of foreign
currency borrowings and changes in fair value and gains / losses on settlement of
related derivative instruments. Borrowing costs are recognized in the statement of
income using the effective interest method. |
Finance and other income
|
|
|
Our finance and other income comprises interest income on deposits, dividend income
and gains on disposal of available-for-sale financial assets. Interest income is
recognized using the effective interest method. Dividend income is recognized when the
right to receive payment is established. |
Equity in Earnings/Losses of Affiliates
Wipro GE Medical Systems Private Limited. (Wipro GE). We hold a 49% equity interest in Wipro
GE Medical Systems Private Limited, a venture in which General Electric, USA holds the balance of
51%.
Income Taxes
Our profit for the period earned from providing services at client premises outside India is
subject to tax in the country where we perform the work. Most of our tax paid in countries other
than India can be applied as a credit against our Indian tax liability to the extent that the same
income is liable to tax in India.
Currently, we benefit from certain tax incentives under Indian tax laws. As a result of these
incentives, our operations have not been subject to significant Indian tax liabilities. These tax
incentives currently include a tax holiday from payment of Indian corporate income taxes for our
businesses operating from specially designated Software Technology and Hardware Technology Parks
and Special Economic Zones. We are currently also eligible for exemptions from other taxes,
including customs duties.
47
Software Technology and Hardware Technology Parks. There is an income tax deduction of 100%
for profits derived from exporting information technology services for the first ten years
from the commencement of provision of services. Previously, the tax holiday for these parks was
scheduled to expire in stages with a mandated maximum expiry period of March 31, 2010. The Finance
(No. 2) Act, 2009 has extended the availability of the 10-year tax holiday by a period of one year
such that the tax holiday will now be available until the earlier of fiscal year 2011 or ten years
after the commencement of a tax holiday for an individual undertaking.
Special Economic Zone. Under this scheme, units in designated special economic zones which
begin providing services on or after April 1, 2005, will be eligible for a deduction of 100%
of profits or gains derived from the export of services for the first five years from commencement
of provision of services and 50% of such profits or gains for a further five years. Certain
tax benefits are also available for a further five years subject to the unit meeting defined
conditions.
As a result, a substantial portion of our pre-tax income has not been subject to a significant
tax in India in recent years. When our tax holiday and income tax deduction exemptions expire or
terminate, our costs will increase. Additionally, the Government of India could enact laws in the
future, which could impair the tax incentives which benefit our business.
The Company had received tax demands from the Indian income tax authorities for the financial
years ended March 31, 2001, 2002, 2003 and 2004, aggregating to Rs. 11,127 (including interest of
Rs. 1,503). The tax demand was primarily on account of Indian income tax authoritys denial of deduction claimed by the Company
under Section 10A of the Income Tax Act 1961, in respect of profits earned by its undertakings in
Software Technology Park at Bangalore. The appeals filed by the Company for the above years to the
first appellate authority were allowed in favour of the Company, thus deleting a substantial
portion of the demand raised by the Income tax authorities. On further appeal filed by the income
tax authorities, the second appellate authority upheld the claim of the Company for the years ended
March 31, 2001, 2002, 2003 and 2004. In December 2008, the Company received, on similar grounds, an
additional tax demand of Rs. 5,388 (including interest of Rs. 1,615) for the financial year ended
March 31, 2005. The Company has filed an appeal against the said demand which is pending before the first appellate authority.
In December 2009, the Company received the draft assessment order, on similar grounds, with a
demand of Rs. 6,757 (including interest of Rs. 2,050) for the financial year ended March 31, 2006.
The Company filed an objection against the said order before the
Dispute Resolution Panel, which has issued directions confirming the
position of the assessing officer. Subsequently, the assessing
officer passed the final assessment order raising a tax demand of Rs.
7,218 (including interest of Rs 2,510). The Company will
file an appeal against the said order before the tribunal within the
time limit permitted under the statute.
Considering the facts and nature of disallowance and the order of the first appellate
authority upholding our claims for earlier years, we believe that the final outcome of the above
disputes should be in our favour and there should not be any material impact on the financial
statements.
Although we currently believe we will ultimately prevail in our appeals, the result of such
appeals, and any subsequent appeals, cannot be predicted with certainty. Should we fail to prevail
in our appeal, or any subsequent appeals, in any reporting period, the operating results of such
reporting period could be materially adversely affected.
Pursuant to the changes in the Indian income tax laws, Minimum Alternate Tax (MAT) has been
extended to income in respect of which a deduction is claimed under section 10A and 10B;
consequently, we have calculated our domestic tax liability after considering MAT and accordingly,
a deferred tax asset of Rs. 126 and Rs. 363 has been recognized in the statement of financial
position as of March 31, 2009 and 2010, respectively. The excess tax paid under MAT provisions over
and above normal tax liability can be carried forward for a period of ten years and set-off against
future tax liabilities computed under normal tax provisions.
The Indian tax laws levy an additional income tax on companies called a Fringe Benefit Tax
or FBT. Pursuant to this tax, companies are deemed to have provided fringe benefits to their
employees if certain defined expenses and employee stock option expenses are incurred. These
expenses, or a portion thereof, are deemed to be fringe benefits to the employees and subject a
company to tax at a rate of 30%, exclusive of applicable surcharge and cess. The Finance Act
(No.2), 2009 has abolished the levy of FBT. The perquisites provided to the employees are taxable
as salary in the hands of employees.
Liquidity and Capital Resources
The Companys cash flow from its operating, investing and financing activities, as reflected
in the Consolidated Statement of Cash Flows on page 100, is summarized in the table below:
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year on |
|
|
Year ended March 31, |
|
Year |
|
|
2009 |
|
2010 |
|
Change |
Net cash provided by/(used in) continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
Rs. |
36,099 |
|
|
Rs. |
50,998 |
|
|
Rs. |
14,899 |
|
Investing activities |
|
|
(24,183 |
) |
|
|
(33,815 |
) |
|
|
(9,632 |
) |
Financing activities |
|
|
(3,259 |
) |
|
|
(601 |
) |
|
|
2,658 |
|
Net change in cash and cash equivalents |
|
|
8,657 |
|
|
|
16,582 |
|
|
|
7,925 |
|
Effect of exchange rate changes on cash and cash
equivalent |
|
|
663 |
|
|
|
(1,258 |
) |
|
|
(1,921 |
) |
As of March 31, 2010, we had cash and cash equivalent and
short-term investments of Rs.
95,298. Cash and cash equivalent and short-term investments, net of debt was Rs. 32,787. In
addition we have unused credit lines of Rs. 98,795. To utilize these lines of credit we require the
consent of the lender and compliance with certain financial covenants. We have historically
financed our working capital and capital expenditure through our operating cash flows and through
bank debt, as required.
Cash provided by operating activities increased by Rs. 14,899, while profit for the year
increased by Rs. 7,256 during the same period. The increase in cash provided by operating
activities was primarily due to adjustment of Rs. 6,017 during the year ended March 31,
2010 as against (12,196) during the year ended March 31, 2009, on account of roll-over of cash flow
hedges pursuant to our roll over hedging strategy and cash flows from net investment hedges. This
was partially offset by an increase in the net other operating assets during the year ended March
31, 2010, which was mainly due to an increase in current receivables, attributable to an increase
in number of receivable days in the IT Services segment from 60 days in March 2009 to 61 days in
March 2010, and an increase in receivables in our IT Products business primarily due to sales
growth. Receivable days as of a particular reporting date is the proportion of receivables,
adjusted for unbilled and unearned revenue to the revenues for the respective fiscal quarter
multiplied by 90.
Cash used in investing activities for the year ended March 31, 2010 was Rs. 33,815. Cash
provided by operating activities was utilized for the net purchase of investments and
inter-corporate deposits amounting to Rs. 20,921 and payment for acquisitions and earn-outs
amounting to Rs. 4,399. We also purchased property, plant and equipment amounting to Rs. 12,631,
which was primarily driven by the growth strategy of the Company.
Cash used in financing activities for the year ended March 31, 2010 was Rs. 601 as against Rs.
3,259 for the year ended March 31, 2009. This decrease is primarily due to increase in net proceeds
from loans and borrowings amounting to Rs. 7,350. This was partially offset by payment of dividend
amounting to Rs. 6,823.
On
April 23, 2010, our Board proposed a cash dividend of Rs. 6 ($0.13) per
equity share and ADR. This proposal was approved by our shareholders
at the Annual General Meeting held on July 22, 2010 and a dividend (including dividend tax thereon) amounting to approximately Rs. 10,070 has
subsequently been paid.
We
maintain a debt/borrowing level that we have established through consideration of a number of
factors including cash flow expectations, cash required for operations and investment plans. We
continually monitor our funding requirement and strategies are executed to maintain sufficient
flexibility to access global funding sources, as needed. Please refer to Note 12 of our Notes to
the Consolidated Financial Statements for more details on our borrowings.
As discussed above, cash generated from operations is our primary source of liquidity. We
believe that our cash and cash equivalent along with cash generated from operations will be
sufficient to meet our working capital requirements as well as repayment obligations in respect of
debt / borrowings.
As of March 31, 2010, we had contractual commitments of Rs. 2,782 ( $62) related to capital
expenditures on construction or expansion of software development facilities, Rs. 8,269 ( $184)
related to non-cancelable operating lease obligations and Rs. 5,110 ( $114) related to other
purchase obligations. Plans to construct or expand our software development facilities are dictated
by business requirements.
In relation to our acquisitions, a portion of the purchase consideration is payable upon
achievement of specified earnings targets in future. We expect that our cash and cash equivalents,
investments in liquid and short-term mutual funds and the cash flows expected to be generated from
our operations in future will generally be sufficient to fund the earn-out payments and our
expansion plans.
In the normal course of business, we transfer accounts receivables, net investment in
sale-type finance receivable and employee advances (financial assets). Please refer Note 15 of our
Notes to Consolidated Financial Statements.
Our liquidity and capital requirements are affected by many factors, some of which are based
on the normal ongoing operations of our businesses and some of which arise from uncertainties
related to global economies and the
49
markets that we target for our services. We cannot be certain
that additional financing, if needed, will be available on favorable terms, if at all.
As of March 31, 2009 and 2010, our cash and cash equivalent were primarily held in Indian
Rupees, U.S. Dollars, Pound Sterling, Euro, Japanese Yen and Saudi Riyals.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements as defined by SEC Final Rule 67
(FR-67), Disclosure in Managements Discussion and Analysis about Off-Balance Sheet Arrangements
and Aggregate Contractual Obligations.
Contractual obligations
The table of future payments due under known contractual commitments as of March 31, 2010,
aggregated by type of contractual obligation, is given below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Payments due in |
|
|
contractual |
|
|
2015-16 |
Particulars |
|
payment |
|
2010-11 |
|
2011-13 |
|
2013-15 |
|
onwards |
|
Short-term borrowings |
|
|
43,836 |
|
|
|
43,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
17,963 |
|
|
|
340 |
|
|
|
17,501 |
|
|
|
108 |
|
|
|
14 |
|
Obligations under capital leases |
|
|
712 |
|
|
|
228 |
|
|
|
268 |
|
|
|
157 |
|
|
|
59 |
|
Estimated interest payment (1) |
|
|
1,473 |
|
|
|
356 |
|
|
|
1,083 |
|
|
|
31 |
|
|
|
3 |
|
Capital commitments |
|
|
2,782 |
|
|
|
2,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cancelable operating lease
obligation |
|
|
8,269 |
|
|
|
1,396 |
|
|
|
2,593 |
|
|
|
1,726 |
|
|
|
2,554 |
|
Purchase obligations |
|
|
5,110 |
|
|
|
5,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities(2) |
|
|
266 |
|
|
|
|
|
|
|
266 |
|
|
|
|
|
|
|
|
|
|
Our purchase obligations include all commitments to purchase goods or services of either
a fixed or minimum quantity that meet any of the following criteria: (1) they are non-cancelable,
or (2) we would incur a penalty if the agreement was terminated. If the obligation to purchase
goods or services is non-cancelable, the entire value of the contract has been included in the
above table. If the obligation is cancelable, but we would incur a penalty if cancelled, the amount
of the penalty is included as a purchase obligation.
|
|
|
(1) |
|
Interest payments for long-term fixed rate debts have been calculated based
on applicable rates and payment dates. Interest payments on floating rate
debt have been calculated based on the payment dates and implied forward interest rates
as of March 31, 2010 for each relevant debt instrument. |
|
(2) |
|
Other non-current liabilities in the statement of financial position include
Rs. 2,967 in respect of employee benefit obligation and Rs. 3,065 towards uncertain tax
position. For these amounts the extent of the amount and timing of repayment/settlement
is not reliably estimatable or determinable at present and accordingly have not been
disclosed in the table above. |
Research and Development
Research and Development investments in IT Services and Products business is directed towards
developing solutions that have broad applications across various industry segments and developing
expertise in emerging technologies. Over a period of two to three years Research and Development
efforts in identified areas are focused on developing in-depth solutions, frameworks and
applications.
Research and Development initiatives are executed through Centers of Excellence or CoE and the
Innovation Initiative.
CoEs are designed to enable growth of an existing practice and/or create a new practice. CoEs
focus on creating competencies in specific existing and emerging technologies and domains. CoEs
create thought leadership by publishing white papers and participating in industry forums.
Currently, we have CoEs focusing on Wireless and Broadband
Communication, Computing Platforms like Grid Computing, e-Biz technologies like Web services,
Retail Supply chain management and other similar areas.
The Innovation Initiative is directed towards creating new solutions and intellectual property
which potentially expand our service offerings. The Innovation Initiative covers the entire cycle
of Idea Generation, Incubation and
50
Successful Execution. We focus on Process Innovations, Delivery
Innovations, Technology Innovations, Product Innovations and Business Innovations.
Trend Information
IT Services. Recently, the Indian IT companies experienced opportunity in transforming
business from merely support and maintenance business, driving productivity gains and helping
create new business models. This has led to IT becoming a strategic differentiator for customers.
The increasing acceptance of outsourcing and off-shoring of activities as an economic necessity has
contributed to the continued growth in our revenue.
The recent financial and credit crisis has resulted in an economic slowdown in US and Europe.
In an economic slowdown, our clients could reduce, postpone or defer decisions on IT spending and
outsourcing. However, the economic slowdown is gradually easing and recovery has started in the US
and around the world. According to advance estimates of Bureau of Economic Analysis, the US economy
is estimated to grow by 3.2% in first quarter of 2010. We anticipate that IT spends will stabilize
and grow over a period of time.
Worldwide IT spending is forecast to reach $3.4 trillion in 2010, a 5.3% increase from
IT spending of $3.2 trillion in 2009, according to Gartner, Inc. The IT industry will continue to
show steady growth with IT spending in 2011 projected to surpass $3.5 trillion, a 4.2%
increase from 2010.
We expect increased competition among IT companies, which may limit our ability to increase
prices. We continually strive to differentiate ourselves from the competition by developing
innovative service delivery models, adopting new pricing strategies and demonstrating our value
proposition to clients to sustain prices and profits. We have also acquired businesses to augment
our existing services and capabilities.
Gross profit as a percentage of revenues in our IT Services segment for the year ended March
31, 2010 is 34.74%. We anticipate difficulties in significantly improving our gross profits, among
other things, due to the following reasons:
|
|
|
Our limited ability to increase prices; |
|
|
|
|
Increases in salaries, a cost which accounts for a major part of our expense line;
and |
|
|
|
|
The impact of exchange rate fluctuations on our rupee realizations |
In response to the possible reduction in demand for IT services, pressure on gross margins and
the increased competition from other IT services companies, we are focusing on;
|
|
|
Investing in customer relationship teams to penetrate deeper and offer a wide range
of services; |
|
|
|
|
strengthening our delivery model; |
|
|
|
|
developing cost containment initiatives and driving higher employee productivity; |
|
|
|
|
aligning our resources to expected demand; and |
|
|
|
|
increasing the utilization of our IT professionals. |
IT Products. In our IT Products business segment, we have experienced pricing pressures due to
increased competition among IT companies. Large multinational corporations like IBM, HP and Dell
have identified India as a key focus area. Our gross margin in this business segment is also
impacted by the proportion of our business derived from the sale of traded and manufactured
products.
Our IT Products business segment is also subject to seasonal fluctuations. Our revenue in this
business segment is driven by the capital expenditure budgets and spending patterns of our clients,
who often delay or accelerate purchases in reaction to tax depreciation benefits on capital
equipment.
Consumer Care and Lighting. Our Consumer Care and Lighting business segment is also subject to
seasonal fluctuations. Our revenues in this segment are also subject to commodity price
fluctuations.
Our quarterly revenue, operating income and profit for the period have varied significantly in
the past and we expect that they are likely to vary in the future. You should not rely on our
quarterly operating results as an indication of future performance. Such quarterly fluctuations may
have an impact on the price of our equity shares and ADSs.
51
Dividends. Final dividends on common stock are recorded as a liability on the date of
declaration by the stockholders and interim dividends are recorded as a liability on the date of
declaration by the board of directors.
New accounting standards not yet adopted
In January 2008, the IASB issued the revised standards IFRS 3, Business Combinations (IFRS 3,
(2008)) and IAS 27 Consolidated and Separate Financial Statements (IAS 27, (2008)). The
revisions result in several changes in the accounting for business combinations. IFRS 3 and IAS 27
will be effective for fiscal years beginning on or after July 1, 2009, with early adoption
permitted. Historically, we have rarely entered into business combinations in which we did not
fully acquire the target. Should this history continue, the main impacts from applying the revised
IFRS 3 (2008) and IAS 27 (2008) should be those resulting from changes (if any) in acquired income
tax risks in accordance with IAS 12 as well as additional expenses resulting from the new guidance
in the revised IFRS 3 (2008), under which acquisition-related expenses are no longer to be recorded
as part of the purchase price in a business combination. The amount of these expenses mainly
depends on the number and size of our future business combinations as well as the extent of use of
third-party resources in the acquisition process.
In July 2008, the IASB issued an amendment to IAS 39, Financial Instruments: Recognition and
Measurement: Eligible Hedged Items (IAS 39). The amendment addresses the designation of a
one-sided risk in a hedged item in particular situations. The amendment applies to hedging
relationships in the scope of IAS 39. The amendment is effective for fiscal years beginning on or
after July 1, 2009. Earlier application is permitted. The adoption of this amendment will not have
a material impact on the financial statements.
In April 2009, the IASB issued Improvements to IFRSs a collection of amendments to twelve
International Financial Reporting Standards as part of its program of annual improvements to its
standards, which is intended to make necessary, but non-urgent, amendments to standards that will
not be included as part of another major project. The latest amendments were included in exposure
drafts of proposed amendments to IFRS published in October 2007, August 2008, and January 2009. The
amendments resulting from this standard mainly have effective dates for annual periods beginning on
or after April 1, 2010, although entities are permitted to adopt them earlier. We are currently
determining the impact these amendments will have on our consolidated financial statements.
In November 2009, the IASB issued an amendment to IAS 24 (revised 2009) Related Party
Disclosures (IAS 24). The purpose of the revision is to simplify the definition of a related party,
clarifying its intended meaning and eliminating inconsistencies from the definition. The revision
is effective for fiscal years beginning on or after January 1, 2011. Earlier application is
permitted. We are currently determining the impact these amendments will have on our consolidated
financial statements.
In November 2009, the IASB issued IFRS 9 Financial Instruments on the classification and
measurement of financial assets. The new standard represents the first part of a three-part project
to replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) with IFRS 9 Financial
Instruments (IFRS 9). IFRS 9 uses a single approach to determine whether a financial asset is
measured at amortized cost or fair value, replacing the many different rules in IAS 39. The
approach in IFRS 9 is based on how an entity manages its financial instruments (its business model)
and the contractual cash flow characteristics of the financial assets. IFRS 9 is effective for
fiscal years beginning on or after January 1, 2013. Earlier application is permitted. We are
currently determining the impact, these amendments will have on our consolidated financial
statements.
Exemptions to which we have availed in accordance with IFRS 1, First time adoption of IFRS
Exemptions from retrospective application
For transition to IFRS our previous GAAP is considered as Indian GAAP. Following are the
optional exemptions which we have opted.
|
a. |
|
Business combinations We have applied the exemption as provided in IFRS 1 towards
non-application of IFRS 3, Business Combinations to business combinations consummated prior
to April 1, 2008 (Transition Date). Accordingly, the business combinations prior to the
transitions date have been accounted for as per Previous GAAP. |
|
|
b. |
|
Share-based payment exemption We have applied the shared based payment exemption on
application of IFRS 2, Share based payment, to only grants made after November 7, 2002,
which remained unvested as of the transition date. |
|
|
c. |
|
Borrowing costs We have capitalized the borrowing cost in respect of qualifying
assets prior to the transition date. |
52
Exceptions from retrospective application
|
a) |
|
Hedge accounting We followed the hedge accounting under Previous GAAP which is
aligned to IFRS. Accordingly, this exception of not reflecting in its opening IFRS
statement of financial position a hedging relationship of a type that does not qualify for
hedge accounting under IAS 39, is not applicable to us. |
|
|
b) |
|
Estimates exception Upon an assessment of the estimates made under Previous GAAP, we
concluded that there was no necessity to revise such estimates under IFRS, except where
estimates were required by IFRS and not required by Previous GAAP. |
Critical accounting policies
Critical accounting policies are defined as those that in our view are the most important for
portrayal of the Companys financial condition and results and which place the most significant
demands on managements judgment. For a detailed discussion on the application of these and other
accounting policies, please refer to Note 3 to the Notes to Consolidated Financial Statements.
While preparing financial statements we make estimates and assumptions that affect the
reported amount of assets, liabilities, disclosure of contingent liabilities at the date of
financial statements and the reported amount of revenues and expenses for the reporting period.
Such critical accounting estimates could change from period to period and have a material impact on
the Companys results of operation, financial position and cash flows. Actual results may differ
from estimates. Revision to accounting estimates are recognized in the period in which estimate is
revised and future period affected.
Revenue:
We derive revenue primarily from:
|
- |
|
software development and maintenance services; |
|
|
- |
|
BPO services; and |
|
|
- |
|
Sale of IT and other products. |
|
a) |
|
Services: We recognize revenue when the significant terms of the arrangement are enforceable,
services are being delivered and the collectability is reasonably assured. The method for
recognizing revenues and costs depends on the nature of the services rendered: |
|
(i) |
|
Time and materials contracts: Revenues and costs relating to time and
materials contracts are recognized as the related services are rendered. |
|
|
(ii) |
|
Fixed-price contracts: Revenues from fixed-price contracts, including
systems development and integration contracts are recognized using the
percentage-of-completion method. Percentage of completion is determined based on
direct project costs incurred to date as a percentage of total estimated project
costs required to complete the project. The cost expended (or input) method has been
used to measure progress towards completion as there is a direct relationship between
input and productivity. Costs which relate to future activity on the contract are
recognized as contract work in progress. If we do not have a sufficient basis to
measure the progress of completion or to estimate the total contract revenues and
costs, revenue is recognized only to the extent of contract cost incurred for which
recoverability is probable. When total cost estimates exceed revenues in an
arrangement, the estimated losses are recognized in the income statement in the
period in which such losses become probable based on the current contract estimates. |
|
|
|
|
Unbilled revenues represent cost and earnings in excess of billings as at the end of
the reporting period. Unearned revenues included in other current liabilities
represent billing in excess of revenue recognized. |
|
|
(iii) |
|
Maintenance contract: Revenue from maintenance contracts is recognized
ratably over the period of the contract using the percentage of completion method. |
|
b) |
|
Products: Revenue from products are recognized when: |
|
- |
|
we have transferred the significant risks and rewards of ownership to the
buyer; |
|
|
- |
|
continuing managerial involvement usually associated with ownership and
effective control have ceased; |
53
|
- |
|
amount of revenue can be measured reliably; |
|
|
- |
|
it is probable that economic benefits associated with the transaction will flow to the Company; and |
|
|
- |
|
costs incurred or to be incurred in respect of the transaction can be measured reliably. |
|
c) |
|
Multiple element arrangements: We allocate revenue to each separately identifiable component
of the transaction based on the guidance in IAS 18. We allocate the arrangement consideration
to separately identifiable components based on their relative fair values or on the residual
method. Fair values are determined based on sale prices for the components when it is
regularly sold separately, third-party prices for similar components or cost plus, an
appropriate business-specific profit margin related to the relevant component. |
|
d) |
|
Others: The company accounts for volume discounts and pricing incentives to customers by
reducing the amount of discount from the amount of revenue recognized at the time of sale. |
Revenues are shown net of sales tax, value added tax, service tax and applicable
discounts and allowances. Revenue includes excise duty and shipping and handling costs.
Income tax:
Income tax comprises current and deferred tax. Income tax expense is recognized in profit or
loss except to the extent it relates to items directly recognized in equity, in which case it is
recognized in equity.
|
a) |
|
Current income tax: As part of the process of preparing our consolidated financial
statements we are required to estimate our income taxes in each of the jurisdictions in which
we operate. We are subject to tax assessments in each of these jurisdictions. A tax
assessment can involve complex issues, which can only be resolved over extended time periods.
Though we have considered all these issues in estimating our income taxes, there could be an
unfavorable resolution of such issues that may affect results of our operations. |
|
|
|
|
Current income tax for the current and prior periods are measured at the amount expected to
be recovered from or paid to the taxation authorities based on the taxable income for that
period. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the reporting date. |
|
|
b) |
|
Deferred income tax: We recognize deferred income tax using the balance sheet approach.
Deferred tax is recognized on temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes.
We recognize a deferred tax asset only to the extent that it is probable that future taxable
profits will be available against which the deductible temporary differences and tax loss
carry forwards can be utilized. |
|
|
|
|
The measurement of deferred tax assets involves judgment regarding the deductibility of
costs not yet subject to taxation and estimates regarding sufficient future taxable income
to enable utilization of unused tax losses in different tax jurisdictions. We consider the
expected reversal of deferred tax liabilities and projected future taxable income in making
this assessment. All deferred tax assets are subject to review of probable utilization. |
|
|
|
|
Deferred income tax assets and liabilities are measured at the tax rates that are expected
to apply in the period when the asset is realized or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted at the reporting date. |
|
|
|
|
We recognize deferred income tax liabilities for all taxable temporary differences except in
respect of taxable temporary differences associated with investments in subsidiaries and
associates where the timing of the reversal of the temporary difference can be controlled
and it is probable that the temporary difference will not reverse in the foreseeable future. |
|
|
c) |
|
Others: In addition to the U.S. federal income tax at a rate of up to 35% arising from our
income attributed to our U.S. branch, we are subject to a 15% branch profit tax in the United
States on the dividend equivalent amount as that term is defined under U.S. tax law. We
have not triggered the branch profit tax and, consistent with our
business plan, we intend to maintain the current level of our net assets in the United
States. Accordingly, we did not record a provision for branch profit tax as of March 31,
2010. |
Share based payment transaction:
Our employees receive remuneration in the form of equity instruments, for rendering services
over a defined vesting period. Equity instruments granted is measured by reference to the fair
value of the instrument at the date of grant.
54
Since these are granted at a nominal exercise price,
the intrinsic value on the date of grant approximates the fair value. The expense is recorded by a
compensating increase to the share based payment reserve, a component of equity.
The equity instruments generally vest in a graded manner over the vesting period. The fair
value determined at the grant date is expensed over the vesting period of respective tranches
(accelerated amortization). The stock compensation expense is determined based on our estimate of
equity instruments that will eventually vest.
In
accounting for amortization of stock compensation, we estimate stock
option forfeitures. Any
revisions of our estimates could impact our results of operations and our financial position.
Derivative financial instruments
Although our functional currency is the Indian rupee, we transact a significant portion of our
business in foreign currencies, particularly the U.S. dollar. The exchange rate between the rupee
and the dollar has changed substantially in recent years and may fluctuate substantially in the
future. Consequently, the results of our operations are affected as the rupee fluctuates against
the U.S. dollar. Our exchange rate risk primarily arises from our foreign currency revenues, cash
balances, payables and debt. We enter into derivative instruments to primarily hedge our forecasted
cash flows denominated in certain foreign currencies, foreign currency debt and net investment in
overseas operations.
Changes in fair value of derivatives not designated as hedging derivatives and ineffective
portion of the hedging instruments are recognized in consolidated statements of income of each
period. We assess the hedge effectiveness at the end of each reporting period generally using the
dollar offset method.
Hedge ineffectiveness could result from forecasted transactions not happening in the same
amounts or in the same periods as forecasted or changes in the counterparty credit rating. Further,
change in the basis of designating derivatives as hedges of forecasted transactions could alter the
proportion of derivatives which are ineffective as hedges. Hedge ineffectiveness increases
volatility of the consolidated statements of income since the changes in fair value of an
ineffective portion of derivatives is immediately recognized in the consolidated statements of
income.
As of March 31, 2010, there were no significant gains or losses on derivative transactions or
portions thereof that have become ineffective as hedges, or associated with an underlying exposure
that did not occur.
Derivatives are recognized initially at fair value; attributable transaction costs are
recognized in statement of income when incurred. Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are accounted for as described below.
|
a) |
|
Cash flow hedges: Changes in the fair value of the derivative hedging instrument
designated as a cash flow hedge are recognized directly in equity to the extent that the
hedge is effective. To the extent that the hedge is ineffective, changes in fair value are
recognized in statement of income. If the hedging instrument no longer meets the criteria
for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is
discontinued prospectively. The cumulative gain or loss previously recognized in equity is
transferred to statement of income upon the occurrence of the forecasted transaction. |
|
|
b) |
|
Hedges of net investment in foreign operations: We designate derivative financial
instruments as hedges of net investments in foreign operations. We have also designated a
combination of foreign currency denominated borrowings and related cross currency swaps as
hedge of net investment in foreign operations. Changes in the fair value of the derivative
hedging instrument and gains/losses on translation or settlement of foreign currency
denominated borrowings designated as hedge of net investment in foreign operations are
recognized directly in equity to the extent that the hedge is effective. The cumulative
gain or loss previously recognized in equity is transferred to statement of income upon
sale or disposal of the related net investment in foreign operation. To the extent that
the hedge is ineffective, changes in fair value are recognized in the statement of income. |
|
|
c) |
|
Others: Changes in fair value for derivatives not designated as hedging derivatives are
recognized in consolidated statements of income of each period. |
Business combination, goodwill and intangible assets:
Business combinations are accounted for using the purchase method. The cost of an acquisition
is measured as the fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.
We exercise judgment in identifying whether an identifiable intangible asset is
to be recorded separately from goodwill. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at fair values at
the date of acquisition, based on information available at acquisition date and based on
expectations and assumptions that are deemed reasonable by management.
|
a) |
|
Goodwill: Goodwill is initially measured at cost being the excess of the cost of the
business combination over the Companys share in the net fair value of the acquirees
identifiable assets, liabilities and contingent liabilities. If |
55
|
|
|
the cost of acquisition is
less than the fair value of the net assets of the business acquired, the difference is
recognized immediately in the income statement. |
|
|
|
|
Goodwill is tested for impairment at least annually and when events occur or changes in
circumstances indicate that the recoverable amount of the cash generating unit is less than
its carrying value. The goodwill impairment test is performed at the level of
cash-generating unit or groups of cash-generating units which represent the lowest level at
which goodwill is monitored for internal management purposes. |
|
|
|
|
We use market related information and estimates (generally risk adjusted discounted cash flows)
to determine the fair values. Cash flow projection take into account past experience and
represents managements best estimate about future developments. Key assumptions on which
management has based its determination of fair value less costs to sell and value in use
include estimated growth rates, weighted average cost of capital and tax rates. These
estimates, including the methodology used, can have a material impact on the respective
values and ultimately the amount of any goodwill impairment. |
|
|
b) |
|
Intangible: Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is fair value as at
the date of acquisition. Following initial recognition, intangible assets are carried at
cost less any accumulated amortization and any accumulated impairment losses. |
|
|
|
|
Intangible assets with finite lives are amortized over the estimated useful life and
assessed for impairment whenever there is an indication that the intangible asset may be
impaired. The amortization of an intangible asset with a finite useful life reflects the
manner in which the economic benefit is expected to be generated and consumed. These
estimates are reviewed at least at each financial year end. Intangible assets with
indefinite lives are not amortized, but instead tested for impairment at least annually and
written down to the fair value as required. |
|
|
|
|
The estimated useful lives of the amortizable intangibles assets are as follows: |
|
|
|
Category |
|
Useful life |
Customer-related intangibles
|
|
2 to 11 years |
Marketing related intangibles
|
|
20 to 30 years |
Other estimates:
We make estimates of the uncollectability of our accounts receivable by analyzing historical
payment patterns, customer concentrations, customer credit-worthiness and current economic trends.
If the financial condition of a customer deteriorates, additional allowances may be required.
We provide for inventory obsolescence, excess inventory and inventories with carrying values
in excess of market values based on our assessment of the future demands, market conditions and our
specific inventory management initiatives. If market conditions and actual demands are less
favorable than our estimates, additional inventory write-downs may be required. In all cases
inventory is carried at the lower of historical cost or market value.
Goodwill Impairment Testing
We test goodwill for impairment annually in accordance with our procedure for determining the
recoverable value of such assets. For the purpose of impairment testing, goodwill is allocated to
cash generating unit (CGU) representing the lowest level within the Group at which goodwill is
monitored for internal management purposes, and which is not higher than the Groups operating
segment. The recoverable amount of the CGU is the higher of its fair value less cost to sell
(FVLCTS) and its value-in-use (VIU). The FVLCTS of the CGU is determined based on the market
capitalization approach, using the turnover and earnings multiples derived from observed market
data. The VIU is determined based on discounted cash flow projections. Key assumptions used by us
to determine the VIU includes:
|
a. |
|
Estimated cash flows for five years based on formal/approved internal
management budgets with extrapolation for the remaining period, wherever such budgets were
shorter than 5 years period. |
56
|
b. |
|
Terminal value arrived by extrapolating last forecasted year cash flows to perpetuity
using long-term growth rates: 2%-6%. These long terms growth rates takes into
consideration external macroeconomic sources of data. Such long-term growth rate
considered does not exceed that of the relevant business and industry sector. |
|
|
c. |
|
The discount rates used are based on the our weighted average cost of capital as an
approximation of the weighted average cost of capital of a comparable market participant,
which are adjusted for specific country risks 10.5% to 15%. |
Based on the above, no impairment was identified as of March 31, 2010 as the recoverable value
of the CGUs exceeded the carrying value. An analysis of the calculations sensitivity to a change
in the key parameters (Revenue growth, operating margin, discount rate and long term growth rate)
based on reasonably probable assumptions, did not identify any probable scenarios where the CGUs
recoverable amount would fall below its carrying amount
Item 6. Directors, Senior Management and Employees
Directors and Senior Management
Our directors and executive officers, their respective ages and positions as of September 30, 2010
were as follows:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Azim H. Premji
|
|
|
65 |
|
|
Chief Executive Officer, Chairman of the Board and
Managing Director (designated as Chairman) |
Dr. Ashok S Ganguly
|
|
|
75 |
|
|
Director |
B.C. Prabhakar
|
|
|
67 |
|
|
Director |
Dr. Jagdish N. Sheth
|
|
|
72 |
|
|
Director |
Narayanan Vaghul
|
|
|
74 |
|
|
Director |
William Arthur Owens
|
|
|
70 |
|
|
Director |
P.M. Sinha
|
|
|
70 |
|
|
Director |
Dr. Henning Kagermann
|
|
|
63 |
|
|
Director |
Suresh C. Senapaty
|
|
|
53 |
|
|
CFO and Director |
Suresh Vaswani
|
|
|
50 |
|
|
Joint CEO, IT Business and Director |
Girish S Paranjpe
|
|
|
52 |
|
|
Joint CEO, IT Business and Director |
Shyam Saran
|
|
|
64 |
|
|
Director |
Anurag Behar
|
|
|
41 |
|
|
Chief sustainability officer |
Vineet Agrawal
|
|
|
48 |
|
|
President, Wipro Consumer Care and Lighting |
Pratik Kumar
|
|
|
44 |
|
|
Executive Vice President
Human Resources and President Wipro Infrastructure Engineering |
T K Kurien
|
|
|
50 |
|
|
President, Wipro Eco Energy |
Martha Bejar
|
|
|
48 |
|
|
President, Global Sales & Operations, Wipro Technologies |
S. Deb
|
|
|
52 |
|
|
Chief Global Delivery Officer, Wipro Technologies |
Azim H. Premji has served as our Chief Executive Officer, Chairman of our Board of Directors
and Managing Director (designated as Chairman) since September 1968. Mr. Premji holds a Bachelor of
Science, or B.S. in Electrical Engineering from Stanford University, U.S.A.
Dr. Ashok Ganguly has served as a Director on our Board since 1999. He is the Chairman of our
Board Governance & Nomination Committee and Compensation Committee. He is currently the Chairman
of First Source Solutions Limited and ABP Pvt. Ltd (Ananda Bazar Patrika Group). Dr. Ganguly also
currently serves as a non-executive Director of Mahindra & Mahindra Limited, Tata AIG Life
Insurance Co Ltd, Hemogenomics Pvt. Ltd, The Blackstone Group(Advisory), Dr. Reddy Laboratories
Limited, and Director on the Advisory Board of Microsoft Corporation (India) Pvt. Ltd. Dr. Ganguly
is also the Chairman of the Compensation and Board Governance Committee,
57
Investors/Shareholders
Grievances Committee of First Source Solutions Limited. He is also chairman of Research and
Development Committee of Mahindra and Mahindra Ltd and Remuneration Committee of Tata AIG Life
Insurance Company Limited. He is a member of the Prime Ministers Council on Trade and Industry
and the India-USA CEO Council, set up by the Prime Minister of India and the President of the USA.
Dr. Ganguly is a Rajya Sabha Member. He is a former member of the Board of British Airways Plc
(1996-2005) and Unilever Plc/NV (1990-97); Dr. Ganguly was formerly Chairman of Hindustan Unilever
Limited (1980-90). Dr. Ganguly was on the Central Board of Directors of the Reserve Bank of India
(2000-2009). In 2006, Dr. Ganguly was awarded the CBE (Hon) by the United Kingdom. In 2008, Dr.
Ganguly received the Economic Times Lifetime Achievement Award and, more recently, he was the
recipient of the Padma Vibhushan, Indias second highest civilian award during the year 2008-09.
B.C. Prabhakar has served as a Director on our Board since February 1997. He is been a
practicing lawyer since April 1970. Mr. Prabhakar holds a B.A. in Political Science and Sociology
and a BL. from Mysore University, India. Mr. Prabhakar serves as a non-executive Director of
Automotive Axles Limited and 3M India Limited. He is also a member of the Audit, Risk and
Compliance Committee and Chairman of the Administrative and Shareholder / Investor Grievances
Committee.
Dr. Jagdish N. Sheth has served as a Director on our Board since January 1999. He has been a
professor at Emory University since July 1991. Dr. Sheth is also on the Boards of Innovolt Inc and
Safari Industries. Dr. Sheth holds a B. Com (Honors) from Madras University, a M.B.A. and a Ph.D in
Behavioral Sciences from the University of Pittsburgh, U.S.A.
Narayanan Vaghul has served as a Director on our Board since June 1997. He is the Chairman of
our Audit, Risk and Compliance Committee, member of the Board Governance & Nomination Committee and
member of the Compensation Committee. He was the Chairman of the Board of ICICI Bank Limited from
September 1985 till April 2009. Mr. Vaghul is also on the Boards of Mahindra and Mahindra Ltd.,
Mahindra World City Developers Limited, Piramal Healthcare Limited, and Apollo Hospitals Enterprise
Limited. Mr. Vaghul is the Chairman of the Compensation Committee of Mahindra and Mahindra Limited
and Nicholas Piramal India Limited. Mr. Vaghul is also the member of the Audit Committee in
Nicholas Piramal India Limited. Mr. Vaghul is also the lead independent Director of our
Company. Mr. Vaghul holds Bachelor (Honors) degree in Commerce from Madras University, Mr Vaghul
was the recipient of the Padma Bhushan, Indias third highest civilian award during the year
2009-10. Mr. Vaghul also received the Economic Times Lifetime Achievement Award.
William Arthur Owens has served as a Director on our Board since July 1, 2006. He is also a
member of Board Governance and Nomination Committee. He has held senior leadership positions at
large multinational corporations. From April 2004 to November 2005, Mr. Owens served as Chief
Executive Officer and Vice Chairman of the Board of Directors of Nortel Networks Corporation, a
networking communications company. From August 1998 to April 2004, Mr. Owens served as Chairman of
the Board of Directors and Chief Executive Officer of Teledesic LLC, a satellite communications
company. From June 1996 to August 1998, Mr. Owens served as President, Chief Operating Officer and
Vice Chairman of the Board of Directors of Science Applications International Corporation (SAIC), a
research and engineering firm. Presently, Mr. Owens serves as a member of the Board of Directors of
Polycom Inc, Intelius and Chairman of Century Link Inc, a media communications company. Mr. Owens
holds a M.B.A. (Honors) degree from George Washington University, a B.S. in Mathematics from the
U.S. Naval Academy and a B.A. and M.A. in Politics, Philosophy and Economics from Oxford
University.
Priya Mohan Sinha has served as a Director on our Board since January 1, 2002. He is a member of our
Audit, Risk and Compliance Committee, Board Governance & Nomination Committee and Compensation
Committee. He has served as the Chairman of PepsiCo India Holdings Limited and President of Pepsi
Foods Limited since July 1992. From October 1981 to November 1992, he was on the Executive Board of
Directors of Hindustan Lever Limited (currently Hindustan Unilever Limited). From 1981 to 1985 he
also served as Sales Director of Hindustan Lever Limited (currently Hindustan Unilever Limited).
Currently, he is also on the Boards Bata India Limited, Lafarge India Pvt. Limited. He was also
the Chairman of Reckett Coleman India Limited and Chairman of Stephan Chemicals India Limited. Mr.
Sinha holds a Bachelor of Arts from Patna University and he has also attended Advanced Management
Program in the Sloan School of Management, Massachusetts Institute of Technology. Mr. Sinha is also
the Chairman of the Nomination, Governance and Compensation Committee of Bata India Limited. Mr.
Sinha is also on the Advisory Board of Rieter India.
Dr. Henning Kagermann has served as a Director on our Board since October 27, 2009. He has
served as Chief Executive officer of SAP AG till 2009. He has been a member of SAP Executive Board
since 1991. He is also President of Acatech (German Academy of Science and Technology) and
currently a member of supervisory boards of
Deutsche Bank AG, Munich Re, Deutsche Post and BMW Group in Germany. Dr. Henning Kagermann
is extra-ordinary professor for Theoretical Physics at the Technical University Braunschweig,
Germany and has received honorary doctorate from the university of Magdeburg, Germany.
Suresh C. Senapaty has served as our Chief Financial Officer and Director since April 2008 and
served with us in other positions since April 1980. Mr. Senapaty holds a B. Com. from Utkal
University in India, and is a Fellow Member
58
of the Institute of Chartered Accountants of India.
Mr. Senapaty is on the Boards of the following India subsidiary companies: Wipro Trademarks
Holding Limited, Wipro Chandrika Limited, Wipro Travel Services Limited, Cygnus Negri Investments
Private Limited, Wipro Technology Services Limited, Wipro Consumer Care Limited and Wipro GE
Healthcare Private Limited. Mr. Senapaty is also the Chairman of the Audit Committee of Wipro
Technology Services Limited.
Suresh Vaswani has served as Joint CEO, IT Business and Director since April 2008 and has
served with us in other positions since June 1987. Mr. Vaswani holds a Bachelor of Technology, or
B.Tech. from the Indian Institute of Technology, or IIT, Kharagpur, India and a Post Graduate
Diploma in Management from the Indian Institute of Management, Ahmedabad, India. He is a member of
our Administrative/Shareholders & Investor Grievance Committee. He is also a director on the
Board of our few overseas subsidiary companies.
Girish S Paranjpe has served as Joint CEO, IT Business and Director since April 2008 and has
served with us in other positions since July 1990. Mr. Paranjpe holds a B.Com. from Bombay
University, India and is a Fellow Member of Institute of Chartered Accountants of India and
Institute of Cost and Works accountants of India. He is also a director on the Board of our few
overseas subsidiary companies.
Shyam
Saran has served as a Director on our Board since July 1, 2010. Mr. Saran
is a career diplomat who has served in significant positions in the Indian government for
over three decades. Mr. Saran belongs to the 1970 batch of Indian
Foreign Service. Mr. Saran last served as special Envoy of the Prime Minister of India (October 2006 to March
2010) specializing in nuclear issues, and he also was the Indian Envoy on climate change.
Prior to this appointment, Mr. Saran was the Foreign Secretary, Government of India
(2004-2006). Mr. Saran also served as the Ambassador of India to Nepal, Indonesia,
Myanmar and Mauritius. Mr. Sarans diplomatic stints have taken
him to Indian missions in
Geneva, Beijing and Tokyo. Mr. Saran has been a fellow of the United Nations Disarmament program in Geneva, Vienna and New York. Mr. Saran holds a Post Graduate degree in economics.
Anurag Behar has served as CEO of Wipro Infrastructure Engineering and in other positions since May 20, 2002. Mr. Anurag Behar holds a Masters Degree
in Business Administration (MBA) from XLRI-Jamshedpur and Bachelors degree in Engineering from
Regional Engineering College, Trichy.
Vineet Agrawal has served as President of Wipro Consumer Care and Lighting since July 2002 and
has served with us in other positions since December 1985. Mr. Agrawal holds a B.Tech. from IIT,
New Delhi, India and an M.B.A. from Bajaj Institute of Management Studies, Mumbai, India.
Pratik Kumar has served as our Executive Vice-President, Human Resources, since April 2002,
and has served with us in other positions since November 1991. Mr. Pratik Kumar holds a B. A. from
Delhi University and an M.B.A. from Xavier Labour Relations Institute (XLRI), Jamshedpur, India.
T.
K. Kurien has served as President WCS, Global Programs & Strategic Initiative of Wipro since
June 23, 2008 and has served with us in other positions since February 11, 2000. Mr.
Kurien is a Chartered Accountant and holds a Bachelors Degree in Engineering.
Martha
Bejar has served as President-Sales & Global Operations
since July 1, 2009. Ms. Bejar has
served earlier in Microsoft Corporation from June 2007 to June 2009 as Corporate Vice President
for the Communications Sector at Microsoft. Ms. Bejar also served as President of Nortels Caribbean
and Latin America regions. Ms. Bejar is a Graduate from Harvard School of Business School
Management Advance Program, and holds M.B.A Degree from Nova Southeastern University (USA) and BSIE
from University of Miami (USA).
S. Deb has served as Chief Global Delivery Officer of Wipro since April 30, 2008 and has
served with us in other positions since June 29, 1982. Mr. S Deb is a Management Graduate and
holds M.B.A Degree from IIM Ahmedabad and B.Tech from IIT Kharagpur.
Compensation
Director Compensation
Our Board Governance and Compensation Committee determines and recommends to our Board of
Directors the compensation payable to our directors. All board-level compensation is subject to
approval by our shareholders. Each of our non-employee directors receive an attendance fee per
meeting of $444 during the current year for every Board and Committee meeting they attend. Our
directors are reimbursed for travel and out-of-pocket expenses in connection with their attendance
at Board and Committee meetings. Additionally, we also compensate non-employee directors by way of
commission, which is limited to a fixed sum payable as approved by the Board subject to a maximum
of 1% of the net profits of the Company as approved by the shareholders.
In the fiscal year ended March 31, 2010, we paid an aggregate of $0.43 million (Rs. 19.7
million) as commission to our non-employee directors.
59
Executive Compensation
The annual compensation of our executive directors is approved by our Board Governance and
Compensation Committee, within the parameters set by the shareholders at the shareholders meetings,
and the annual compensation of our other executive officers is approved by our Board Governance and
Compensation Committee. Remuneration of our executive officers, including our employee directors,
consists of a fixed component, performance bonus and a variable performance linked incentive. The
following tables present the annual and long-term compensation earned, awarded or paid for services
rendered to us for the fiscal year 2010 by our Executive Directors and members of our
administrative, supervisory or management bodies. For the convenience of the readers, the amounts
in the below table has been translated into U.S. dollars based on the certified foreign exchange
rates published by Federal Reserve Board of New York on March 31, 2010, which was Rs. 44.95 per $
1.00.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation ($) |
|
|
|
|
|
|
|
|
Salary and |
|
Commission/ |
|
|
|
|
|
|
|
|
|
Long-term compensation |
Name |
|
allowances |
|
Incentives (1) |
|
Housing (2) |
|
Others |
|
(Deferred Benefit (3)&(4)) |
|
Azim H. Premji |
|
$ |
95,888 |
|
|
$ |
1,449,346 |
|
|
$ |
90,100 |
|
|
$ |
15,230 |
|
|
$ |
100,202 |
|
Suresh C. Senapaty |
|
|
202,399 |
|
|
|
158,019 |
|
|
|
|
|
|
|
255,740 |
|
|
|
38,691 |
|
Pratik Kumar |
|
|
184,194 |
|
|
|
135,191 |
|
|
|
|
|
|
|
223,303 |
|
|
|
25,296 |
|
Vineet Agrawal |
|
|
198,735 |
|
|
|
135,235 |
|
|
|
|
|
|
|
3,583 |
|
|
|
36,721 |
|
Suresh Vaswani |
|
|
257,276 |
|
|
|
186,017 |
|
|
|
|
|
|
|
172,542 |
|
|
|
43,299 |
|
Martha Bejar |
|
|
416,167 |
|
|
|
354,631 |
|
|
|
|
|
|
|
370,000 |
|
|
|
27,602 |
|
Girish S. Paranjpe |
|
|
237,612 |
|
|
|
174,962 |
|
|
|
12,627 |
|
|
|
2,618 |
|
|
|
42,586 |
|
S. Deb |
|
|
140,676 |
|
|
|
99,779 |
|
|
|
|
|
|
|
192,103 |
|
|
|
24,911 |
|
T. K. Kurien |
|
|
210,682 |
|
|
|
115,279 |
|
|
|
|
|
|
|
122,605 |
|
|
|
24,340 |
|
Anurag Behar |
|
|
160,411 |
|
|
|
92,497 |
|
|
|
|
|
|
|
141,919 |
|
|
|
18,349 |
|
|
|
|
1. |
|
Azim H. Premji was paid commissions at the rate of 0.3% on incremental net profits of the
Company over the previous year computed based on the method approved by the Board Governance
and Compensation Committee and in accordance with the provisions of the Indian Companies Act,
1956. All other executives were paid incentives under a Quarterly Performance Linked Scheme
based on achievement of pre-defined profit targets. |
|
2. |
|
The value of housing perquisite accounts for more than 25% of the total value of all
perquisites and personal benefits received in fiscal 2010. |
|
3. |
|
Deferred benefits are payable to employees by way of our contribution to the Provident Fund
and Pension Fund. The Provided Fund is a statutory fund to which Wipro and our employees
contribute every month. A lump sum payment on separation and a pension payment on attaining
the age of superannuation are payable from the balance standing to the credit of the Fund, as
per the Employee Provident Fund and Miscellaneous Provisions Act, 1952. |
|
4. |
|
Under our pension plans, any pension that is payable to an employee is not computed on the
basis of final compensation, but on the accumulated pension fund to the credit of the employee
as the date of separation, death, disability or retirement. We annually contribute 15% of Mr.
Premjis base salary and commission earned for that year to our pension fund for the benefit
of Mr. Premji. For all other employees, we contribute 15% of their respective base salaries
to our pension for their benefit. These contributions are included in this column. |
We operate in numerous countries and compensation for our officers and employees may vary
significantly from country to country. As a general matter, we seek to pay competitive salaries in
all the countries in which we operate.
Board Composition
Our Articles of Association provide that the minimum number of directors on our board of
directors shall be four and the maximum number shall be fifteen. As of September 30, 2010, we had
twelve directors on our Board. Our Articles of Association provide that at least
two-thirds of our
directors shall be subject to retirement by rotation.
One third of these directors must retire from office at each Annual General Meeting of
the shareholders, but each retiring director is eligible for re-election at such meeting. Mr.
N. Vaghul, Dr. Ganguly and Mr. P. M. Sinha each retired by rotation and were
immediately re-elected at our Annual General Meeting of shareholders held on July 22, 2010.
Dr. Henning Kagermann and Mr. Shyam Saran were also elected as retiring directors at
such meeting. In addition to retiring directors, up to one third of our directors are non-retiring directors.
Currently, Mr. Azim H. Premji is a non-retiring director.
The term and expiration date of each director is as follows:
60
|
|
|
|
|
|
|
Expiration of current term of |
|
|
Name |
|
office |
|
Term of office |
Azim H. Premji
|
|
July 30, 2011
|
|
2 years |
Dr. Jagdish Sheth
|
|
Annual General Meeting 2012
|
|
Retirement by rotation |
Dr. Ashok S. Ganguly
|
|
Annual General Meeting 2013
|
|
Retirement by rotation |
B. C. Prabhakar
|
|
Annual General Meeting 2012
|
|
Retirement by rotation |
N. Vaghul
|
|
Annual General Meeting 2013
|
|
Retirement by rotation |
P. M. Sinha
|
|
Annual General Meeting 2013
|
|
Retirement by rotation |
William Arthur Owens
|
|
Annual General Meeting 2012
|
|
Retirement by rotation |
Shyam
Saran
|
|
Annual General Meeting 2014
|
|
Retirement by rotation |
Dr. Henning Kagermann
|
|
Annual General Meeting 2014
|
|
Retirement by rotation |
Suresh C. Senapaty
|
|
April 17, 2013
|
|
5 years from the date of appointment |
Girish S. Paranjpe
|
|
April 17, 2013
|
|
5 years from the date of appointment |
Suresh Vaswani
|
|
April 17, 2013
|
|
5 years from the date of appointment |
Option Grants
There were no option grants to our Chief Executive Officer, Chairman and Managing Director
(designated as Chairman) in the fiscal years 2009 and 2010. Details of options granted to other
senior management executives as of September 30, 2010 are reported elsewhere in this Item 6 under the
section titled Share Ownership.
Option Exercises and Holdings
Our
Chairman did not exercise or hold any options during the period ended as September 30, 2010.
The details of stock options held and exercised until September 30, 2010 with respect to other senior
management executives are reported elsewhere in this Item 6 under the section titled Share
Ownership.
Terms of Employment Arrangements and Indemnification Agreements
Under the Companies Act, our shareholders must approve the salary, bonus and benefits of all
employee directors at a General Meeting of Shareholders. Each of our employee directors have signed
an agreement containing the terms and conditions of employment, including a monthly salary,
performance bonus and benefits including vacation, medical reimbursement and pension fund
contributions. These agreements have varying terms ranging from a two to five year period, but
either we or the employee director may generally terminate the agreement upon six months notice to
the other party.
The terms of our employment arrangements with Azim H. Premji, Pratik Kumar, Suresh C.
Senapaty, Martha Bejar, Suresh Vaswani, Anurag Behar, Girish S.
Paranjpe, T.K. Kurien, S. Deb and
Vineet Agrawal provide for up to a 180-day notice period, up to 21 days of leave per year in
addition to statutory holidays, and an annual compensation review. Additionally, employees are
required to relocate as we may determine, and to comply with confidentiality provisions.
We also have entered into agreements to indemnify our directors and officers for claims
brought under any rule of law to the fullest extent permitted by applicable law. These agreements,
among other things, indemnify our directors and officers for certain expenses, judgments, fines and
settlement amounts incurred by any such person in any action or proceeding, including any action by
or in the right of Wipro Limited, arising out of such persons services as our director or officer,
including claims which are covered by the Insurance Policy on Directors and Officers Liability
Insurance taken by the Company.
Board Committee Information
Audit/Risk and Compliance Committee
The Audit Committee of our Board of Directors, which was formed in 1987, reviews, acts on and
reports to our Board of Directors with respect to various auditing and accounting matters. The
primary responsibilities are:
|
|
|
Auditing and accounting matters, including recommending the appointment of our
independent auditors to the shareholders, |
|
|
|
|
Compliance with legal and statutory requirements, |
|
|
|
|
Integrity of the Companys financial statements, discussing with the independent
auditors the scope of the annual audits, and fees to be paid to the independent
auditors, |
|
|
|
|
Performance of the Companys Internal Audit function, Independent Auditors and
accounting practices, |
|
|
|
|
Review of related party transactions, functioning of Whistle Blower mechanism, and |
61
|
|
|
Implementation of the applicable provisions of the Sarbanes Oxley Act, 2002
including review on the progress of internal control mechanisms to prepare for
certification under Section 404 of the Sarbanes Oxley Act, 2002. |
All members of our Audit/Risk and Compliance Committee are independent non-executive directors
and financially literate. The Chairman of our Audit/Risk and Compliance Committee has the
accounting or related financial management expertise.
Independent Auditors as well as Internal Auditors always have independent meetings with the
Audit/Risk and Compliance Committee and also participate in the Audit/Risk and Compliance Committee
meetings.
Our CFO & Director and other Corporate Officers make periodic presentations to the Audit/Risk
and Compliance Committee on various issues.
The Audit/Risk and Compliance Committee is comprised of the following three non-executive
directors:
|
|
|
|
|
Mr. N. Vaghul
|
|
|
|
Chairman of the Audit Committee |
|
|
|
|
|
Mr. P. M. Sinha and B. C. Prabhakar
|
|
|
|
Members of the Audit Committee |
Our Audit/Risk and Compliance Committee held seven meetings during our 2010 fiscal year. The
charter of the Audit/Risk and Compliance Committee is available under the investor relations
section on our website at www.wipro.com.
Board Governance and Nomination Committee
In April 2009, the Board Governance and Compensation Committee was split into two separate
committees and reconstituted as the Board Governance & Nomination Committee and the Compensation
Committee. The charter of the Board Governance and Nomination Committee is available on our
website under www.wipro.com. The Board Governance & Nomination Committee is comprised of the
following four non-executive directors:
|
|
|
Dr. Ashok S. Ganguly
|
|
Chairman of the Board Governance and Nomination Committee |
|
|
|
Mr. N. Vaghul, P.M. Sinha and Bill Owens
|
|
Members of the Board Governance and Nomination Committee |
The primary responsibilities of the Board Governance and Nomination Committee are:
|
|
|
Develop and recommend to the Board Corporate Governance Guidelines applicable to
the Company, |
|
|
|
|
Evaluate the Board on a continuing basis including an assessment of the
effectiveness of the full Board, operations of the Board Committees and contributions
of individual directors, |
|
|
|
|
Lay down policies and procedures to assess the requirements for induction of new
members on the Board, |
|
|
|
|
Implement policies and processes relating to corporate governance principles, |
|
|
|
|
Ensure that appropriate procedures are in place to assess Board membership needs
and Board effectiveness, |
|
|
|
|
Review the Companys policies that relate to matters of Corporate Social
Responsibility, including public issues of significance to the Company and its
stakeholders, |
|
|
|
|
Develop and recommending to the Board of Directors for its approval an annual
evaluation process of the Board and its Committees, and |
|
|
|
|
Formulate the Disclosure Policy, its review and approval of disclosures. |
During the year 2009-10, our Board Governance and Nomination Committee held four meetings.
Compensation Committee
The members of the Compensation Committee are as follows:
|
|
|
Dr. Ashok S. Ganguly
|
|
Chairman of the Board Governance and Compensation Committee |
|
|
|
Mr. N. Vaghul and P.M. Sinha
|
|
Members of the Board Governance and Compensation Committee |
62
The charter of the Compensation Committee is available on our website under www.wipro.com. The
primary responsibilities of the Compensation Committee are:
|
|
|
Determine and approve salaries, benefits and stock option grants to senior
management employees and Directors of our Company. |
|
|
|
|
Approve and evaluate the compensation plans, policies and programs for Whole-time
Directors and Senior Management. |
|
|
|
|
Act as Administrator of the Companys Employee Stock Option Plans and Employee
Stock Purchase Plans drawn up from time to time. |
Our Executive Vice President-Human Resources makes periodic presentations to the Compensation
Committee on compensation reviews and performance linked compensation recommendations. All members
of the Compensation Committee are independent non-executive directors. During the year 2009-10, our
Compensation Committee held four meetings.
Employees
As of March 31, 2009 and 2010, we had over 90,000 and over 108,000 employees including our
subsidiaries and over 70,000 and over 77,000 IT professionals, respectively. Highly trained and
motivated people are critical to the success of our business. To achieve this, we focus on
attracting and retaining the best people possible. A combination of strong brand name, a congenial
working environment and competitive compensation programs enables us to attract and retain these
talented people.
Our human resources department is centralized at our corporate headquarters in Bangalore and
functions across all of our business segments. We have implemented corporate-wide recruiting,
training, performance evaluation and compensation programs that are tailored to address the needs
of each of our business segments.
Our relationship with employees and employee groups are based on mutual trust and respect and
we continue to maintain the same spirit at all times. We continue to fulfill all requirements and
commitments which could arise out of collective bargaining as required across various development
centers and manufacturing facilities and other such agreements in specific geographies across
Americas, Europe and Asia.
Recruiting
We hire entry level graduates from both the top engineering and management universities in
India, as well as more experienced lateral hires through employee referral programs,
advertisements, placement consultants, our website postings and walk-ins. To facilitate employee
growth within Wipro Limited, all new openings are first offered to our employees. The nature of
work, skill sets requirements and experience levels are highlighted to the employees. Applicants
undergo the regular recruitment process and, if selected, get assigned to their new roles.
Training
Each of our new recruits must attend an eight week intensive training program when they begin
working with us. New or recent graduates must also attend additional training programs that are
tailored to their area of technology. We also have a mandatory continuing education program that
requires each IT professional to attend at least 40 hours of continuing education classes to
improve their understanding and competency of new technologies, as well as to develop leadership
and personal self-development skills. We supplement our continuing education program for existing
employees by sponsoring special programs at leading educational institutions, such as the Indian
Institute of Management, Bangalore, Birla Institute of Technology and Science, Pilani, Symbiosis
Institute of Business Management, Pune and others, to provide special skill set training in areas
such as Business Skills and Project management to any of our IT professionals who choose to enroll
and meet the eligibility criteria of these Institutes.
Performance Evaluations
Employees receive written performance objectives that they develop in cooperation with their
respective managers. They are measured against these criteria annually in a formal review process
which includes self-reviews and reviews from peers, managers and subordinates.
63
Compensation
We continually strive to provide our employees with competitive and innovative compensation
packages. Our compensation packages include a combination of salary, stock options, pension, and
health and disability insurance. We measure our compensation packages against industry standards
and seek to match or exceed them. We adopted an employee stock purchase plan in 1984, employee
stock option plan in 1999 and 2000 and restricted stock unit option plan in 2004, 2005, 2007. We
have devised both business segment performance and individual performance linked incentive programs
that we believe more accurately link performance to compensation for each employee. For example, we
link cash compensation to a business segments quarterly operating margin objectives.
Share Ownership
The
following table sets forth, as of September 30, 2010, for each director and executive officer,
the total number of equity shares, ADSs and vested and unexercised options to purchase equity
shares and ADSs. Beneficial ownership is determined in accordance with the rules of the Securities
and Exchange Commission. All information with respect to the beneficial ownership of any principal
shareholder has been furnished by such shareholder and, unless otherwise indicated below, we
believe that persons named in the table has sole voting and sole investment power with respect to
all the shares shown as beneficially owned, subject to community property laws, where applicable.
The shares beneficially owned by the directors include the equity shares owned by their family
members to which such directors disclaim beneficial ownership. The number of shares beneficially
owned includes equity shares, equity shares underlying ADSs and the shares subject to vested
options that are currently exercisable. For the convenience of the readers, the stock option grant
price has been translated into U.S. dollars based on the certified foreign exchange rates published
by Federal Reserve Board of New York on March 31, 2010, which was Rs. 44.95 per $1.00. The share
numbers and percentages listed below are based on 2,451,995,801 equity shares outstanding as of
September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
Equity |
|
|
|
|
|
|
|
|
|
|
of Total |
|
Shares |
|
|
|
|
|
|
Equity Shares |
|
Equity |
|
Underlying |
|
|
|
|
|
|
beneficially |
|
Shares |
|
Options |
|
Exercise |
|
|
Name |
|
owned |
|
Outstanding |
|
Granted |
|
Price($) |
|
Date of expiration |
Azim H. Premji (1) |
|
|
1,935,110,430 |
|
|
|
78.91 |
|
|
|
|
|
|
|
|
|
|
|
|
B. C. Prabhakar (2) |
|
|
5,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Jagdish Sheth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Ashok S Ganguly |
|
|
1,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N. Vaghul |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P. M. Sinha (3) |
|
|
33,333 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
Suresh C. Senapaty |
|
|
176,083 |
|
|
|
* |
|
|
|
4,667 |
|
|
|
0.05 |
|
|
July 2012 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
May 2014 |
Pratik Kumar |
|
|
83,667 |
|
|
|
* |
|
|
|
4,667 |
|
|
|
0.05 |
|
|
July 2012 |
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
0.05 |
|
|
May 2014 |
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
0.05 |
|
|
July 2016 |
Vineet Agrawal |
|
|
229,699 |
|
|
|
* |
|
|
|
4,667 |
|
|
|
0.05 |
|
|
July 2012 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
0.05 |
|
|
May 2014 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
0.05 |
|
|
July 2016 |
Suresh Vaswani |
|
|
170,612 |
|
|
|
* |
|
|
|
4,667 |
|
|
|
0.05 |
|
|
July 2012 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
May 2014 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
10.87 |
|
|
May 2014 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
July 2016 |
S. Deb |
|
|
63,333 |
|
|
|
* |
|
|
|
4,000 |
|
|
|
0.05 |
|
|
July 2012 |
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
|
|
0.05 |
|
|
May 2014 |
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
|
|
0.05 |
|
|
July 2016 |
Girish S. Paranjpe |
|
|
140,000
|
|
|
|
* |
|
|
|
4,667 |
|
|
|
0.05 |
|
|
July 2012 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
May 2014 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
10.87 |
|
|
May 2014 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
July 2016 |
T. K. Kurien |
|
|
141,012 |
|
|
|
* |
|
|
|
4,000 |
|
|
|
0.05 |
|
|
July 2012 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
May 2014 |
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
0.05 |
|
|
July 2016 |
Martha Bejar |
|
|
|
|
|
|
* |
|
|
|
50,000 |
|
|
|
0.05 |
|
|
October 2015 |
|
|
|
|
|
|
|
|
|
|
|
16,600 |
|
|
|
0.05 |
|
|
July 2016 |
Anurag Behar |
|
|
26,766 |
|
|
|
* |
|
|
|
3,333 |
|
|
|
0.05 |
|
|
July 2012 |
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
0.05 |
|
|
May 2014 |
Dr. Henning Kagermann |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Arthur Owens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shyam Saran |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
|
|
|
* |
|
Represents less than 1% of the total equity shares
outstanding as of September 30, 2010. |
|
(1) |
|
Includes 543,765,000 shares held by Hasham Traders (a partnership), of which
Mr. Premji is a partner, 541,695,000 shares held by Prazim Traders (a partnership), of
which Mr. Premji is a partner, 540,408,000 shares held by Zash Traders (a partnership),
of which Mr. Premji is a partner, 63,771,666 shares held by Napean Trading Investment
Co. Pvt. Ltd., of which Mr. Premji is a director, 85,023,666 shares held by Regal
Investments Trading Co. Pvt. Ltd., of which Mr. Premji is a
director, 64,767,666 shares
held by Vidya Investment Trading Co. Pvt. Ltd., of which Mr. Premji is a director,
95,679,432 shares held jointly by Mr. Premji and members of his immediately family. In
addition 10,843,333 shares are held by Azim Premji Foundation (I) Pvt. Ltd. Mr. Premji
disclaims beneficial ownership of 10,843,333 shares held by Azim Premji Foundation (I)
Pvt. Ltd. |
|
(2) |
|
The shares are jointly held with an immediate family member of Mr. Prabhakar. |
|
(3) |
|
The shares are jointly held with an immediate family member
of Mr. P.M. Sinha. |
EMPLOYEE STOCK OPTION PLANS
We have various employee stock options and restricted stock unit option plans (collectively
referred to as stock option plans). Our stock option plans provide for grants of options to
eligible employees and directors. Our stock option plans are administered by our Compensation
Committee (the Committee) appointed by our Board of Directors. The committee has the sole power
to determine the terms of the units granted, including the exercise price, selection of eligible
employees and directors, the number of equity shares to be covered by each option, the vesting and
exercise periods, and the form of consideration payable upon such exercise. In addition, the
committee has the authority to amend, suspend or terminate the stock plan with the approval of the
shareholders, provided that no such action may adversely affect the rights of any participant under
the plan.
Our stock option plan generally does not allow for the transfer of options and only the
optionee may exercise an option during his or her lifetime. The vesting period for the options
under the plan(s) range from 12 months to not more than 84 months. An optionee generally must
exercise any vested options within a prescribed period as per the respective stock option plans
generally before termination date of the stock option plan. A participant must exercise any vested
options prior to termination of the services with us and within a specified post-separation period
generally within three months from the date of the separation. If an optionees termination is due
to death, disability or retirement, his or her option will fully vest and become exercisable.
The salient features of our stock plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of |
|
|
|
|
|
|
|
|
Authorized |
|
exercise |
|
|
|
Termination |
|
|
Name of Plan |
|
Shares (1) |
|
prices |
|
Effective date |
|
date |
|
Other remarks |
1999 Employee Stock
option Plan
|
|
|
30,000,000 |
|
|
Rs. 171 490
|
|
July 29, 1999
|
|
July 28, 2009
|
|
There are no stock
options outstanding
under this plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wipro Employee
Stock Option Plan
2000 (2000 Plan)
|
|
|
150,000,000 |
|
|
Rs. 171 490
|
|
September 15, 2000
|
|
September 15, 2020
|
|
In the event of our
merger with or into
another corporation
or a sale of
substantially all
of our assets, each
option under this
plan, shall be
proportionately
adjusted to give
effect to the
merger or asset
sale.
There are no stock
options outstanding
under this plan. |
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of |
|
|
|
|
|
|
|
|
Authorized |
|
exercise |
|
|
|
Termination |
|
|
Name of Plan |
|
Shares (1) |
|
prices |
|
Effective date |
|
date |
|
Other remarks |
Stock Option Plan
(2000 ADS Plan)
|
|
|
9,000,000 |
|
|
$ |
3 7 |
|
|
September, 2000
|
|
September, 2010
|
|
In event of merger
of the Company with
other corporation
or sale of
substantially of
all our assets, the
successor
corporation shall
either assume the
outstanding units
or grant equivalent
units to the
holders. If the
successor
corporation neither
assumes the
outstanding units
nor grants
equivalent units,
such outstanding
units shall vest
immediately, and
become exercisable
in full. |
|
Wipro Restricted
Stock Unit Plan
(WRSUP 2004 plan)
|
|
|
12,000,000 |
|
|
Rs. 2
|
|
June 11, 2004
|
|
June 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wipro ADS
Restricted Stock
Unit Plan (WARSUP
2004 plan)
|
|
|
12,000,000 |
|
|
$ |
0.04 |
|
|
June 11, 2004
|
|
June 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wipro employee
Restricted Stock
Unit Plan 2005
(WSRUP 2005 plan)
|
|
|
12,000,000 |
|
|
Rs. 2
|
|
July 21, 2005
|
|
July 20, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wipro employee
Restricted Stock
Unit Pl 2007 (WSRUP
2007 plan)
|
|
|
10,000,000 |
|
|
Rs. 2
|
|
July 18, 2007
|
|
July 17, 2017 |
|
|
|
|
(1) |
|
Subject to adjustment for corporate action from time to time. |
Wipro Equity Reward Trust
We established the Wipro Equity Reward Trust, or WERT, in 1984 to allow our employees to
acquire a greater proprietary stake in our success and growth, and to encourage our employees to
continue their association with us. The WERT, which is administered by a Board of Trustees is
designed to give eligible employees the right to receive restricted shares and other compensation
benefits at the times and on the conditions that we specify. Such compensation benefits include
voluntary contributions, loans, interest and dividends on investments in the WERT and other similar
benefits.
Shares from the WERT are issued in the joint names of the WERT and the employee until such
restrictions and obligations are fulfilled by the employee. After the four-year period, complete
ownership of the shares is transferred to the employee.
If employment is terminated by death, disability or retirement, his or her restricted shares
are transferred to the employees legal heirs or continue to be held by the employee, as the case
may be, and such individuals may exercise any rights to those shares for up to ninety days after
employment has ceased. The Trustees of the WERT have the authority to amend or terminate the WERT
at any time and for any reason.
Item 7. Major Shareholders and Related Party Transactions
Major Shareholders
The following table sets forth certain information regarding the beneficial ownership of our
equity shares as of September 30, 2010, of each person or group known by us to own beneficially 5% or
more of our outstanding equity shares.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting
and investment power with respect to such shares. Shares subject to vested options that are
currently exercisable are deemed to be outstanding or to be beneficially owned by the person
holding such options for the purpose of computing the percentage ownership of such person, but are
not deemed to be outstanding or to be beneficially owned for the purpose of computing the
percentage ownership of any other person. All information with respect to the beneficial ownership
of any principal shareholder has been furnished by such shareholder and, unless otherwise indicated
below, we believe that persons named in the table have sole voting and sole investment power with
respect to all the shares shown as beneficially owned, subject to community property laws, where
applicable. The number of shares and percentage ownership are based
on 2,451,995,801 equity shares
outstanding as of September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares beneficially |
|
|
Name of Beneficial Owner |
|
Class of Security |
|
held as of September 30, 2010 |
|
%
of Class |
Azim H. Premji (1) |
|
Equity |
|
|
1,935,110,430 |
|
|
|
78.91 |
|
Hasham Traders |
|
Equity |
|
|
543,765,000 |
|
|
|
22.17 |
|
Prazim
Traders |
|
Equity |
|
|
541,695,000 |
|
|
|
22.09 |
|
Zash
Traders |
|
Equity |
|
|
540,408,000 |
|
|
|
22.03 |
|
|
|
|
(1) |
|
Includes 543,765,000 shares held by Hasham Traders (a partnership), of which
Mr. Premji is a partner, 541,695,000 shares held by Prazim Traders (a partnership), of
which Mr. Premji is a partner, 540,408,000 shares held by Zash Traders (a partnership),
of which Mr. Premji is a partner, 63,771,666 shares held by |
66
|
|
|
|
|
Napean Trading Investment
Co. Pvt. Ltd., of which Mr. Premji is a director, 85,023,666 shares held by Regal
Investments Trading Co. Pvt. Ltd., of which Mr. Premji is a director, 64,767,666 shares
held by Vidya Investment Trading Co. Pvt. Ltd., of which Mr. Premji is a director,
95,679,432 shares held jointly by Mr. Premji and members of his immediately family. In
addition 10,843,333 shares are held by Azim Premji Foundation (I) Pvt. Ltd. Mr. Premji
disclaims beneficial ownership of 10,843,333 shares held by Azim Premji Foundation (I)
Pvt. Ltd. |
Our American Depositary Shares are listed on the New York Stock Exchange. Each ADS represents
one equity share of par value Rs. 2 per share. Our ADSs are registered pursuant to Section 12(b) of
the Securities Exchange Act of 1934 and, as of September 30, 2010, are held by approximately 14,023
holders of record in the United States.
Our equity shares can be held by Foreign Institutional Investors, or FIIs, and Non-resident
Indians, or NRIs, who are registered with the Securities and Exchange Board of India, or SEBI, and
the Reserve Bank of India, or RBI. About 7.04% of the Companys
equity shares were held
by these FIIs, and NRIs as of September 30, 2010, some of which may be residents or corporate entities registered in the
United States and elsewhere. We are unaware of whether FIIs, and/or NRIs hold our equity shares as
residents or as corporate entities registered in the United States.
Our major shareholders do not have a differential voting right with respect to their equity
shares. To the best of our knowledge, we are not owned or controlled directly or indirectly by any
Government or by any other corporation. We are not aware of any arrangement, the operation of which
may at a subsequent date result in a change in control, of our Company.
Related Party Transactions
Terms of Employment Arrangements and Indemnification Agreements. We are a party to various
employment and indemnification agreements with our directors and executive officers. See Terms of
Employment Arrangements and Indemnification Agreements under Item 6 of this Annual Report for a
description of the agreements that we have entered into with our directors and executive officers.
Item 8. Financial Information
Consolidated Statements and Other Financial Information
Please refer the following financial statements and the Auditors Report under item 18 in this
Annual Report for the fiscal year ended March 31, 2010:
|
|
|
Report of the independent registered public accounting firm; |
|
|
|
|
Consolidated Statements of Financial Position as of April 1,2008, March 31, 2009 and
2010; |
|
|
|
|
Consolidated Statements of Income for the years ended March 31, 2009 and 2010; |
|
|
|
|
Consolidated Statements of Comprehensive Income for the years ended March 31, 2009
and 2010; |
|
|
|
|
Consolidated Statements of Changes in Equity for the years ended March 31, 2009 and
2010; |
|
|
|
|
Consolidated Statements of Cash Flows for the years ended March 31, 2009 and 2010;
and |
|
|
|
|
Notes to the Consolidated Financial Statements including Reconciliation Statements
and Exemptions to which the Company has availed itself in accordance with IFRS 1. |
The financial statements of the Company included in this Annual Report on Form 20-F have
been prepared in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
Legal Proceedings
Please see the section titled Legal Proceedings under Item 4 of this Annual Report for this
information.
Dividends
The public companies in India typically pay cash dividends even though the amount of such
dividends varies from company to company. Under Indian law, a corporation can pay dividends upon a
recommendation by the Board of
67
Directors and approval by a majority of the shareholders, who have
the right to decrease but not increase the amount of the dividend recommended by the Board of
Directors. Under the Indian Companies Act, 1956, dividends may be paid out of profits of a company
in the year in which the dividend is declared or out of the undistributed profits of previous
fiscal years.
During fiscal 2009, we paid a final cash dividend of Rs. 4 per share. During the
fiscal 2010, we paid a final cash dividend of Rs. 4 per share.
On
April 23, 2010, our Board proposed a cash dividend of Rs. 6 ($0.13) per
equity share and ADR. This proposal was approved by our shareholders
at the Annual General Meeting held on July 22, 2010 and a dividend of
approximately Rs. 10,070 (including dividend tax) has subsequently been paid.
Our
Board of Directors has approved a stock dividend, commonly known in
India as an issue of Bonus
Shares, which was approved by the shareholders through
Postal Ballot on June 4, 2010. The stock dividend consisted of two equity shares for every three equity shares outstanding and two ADSs for
every three ADSs outstanding on June 16, 2010 and a stock dividend was alloted
accordingly. The
stock dividend did not affect
the ratio of ADSs to equity shares, such that each ADS after the stock dividend continues to
represent one equity share of par value of Rs. 2 per share.
Although we have no current intention to discontinue dividend payments, we cannot assure you
that any future dividends will be declared or paid or that the amount thereof will not be
decreased. Holders of ADSs will be entitled to receive dividends payable on equity shares
represented by such ADSs. Cash dividends on equity shares represented by ADSs are paid to the
Depositary in rupees and are generally converted by the Depositary into U.S. dollars and
distributed, net of depositary fees, taxes, if any, and expenses, to the holders of such ADSs.
Significant Changes
None.
Item 9. The Offer and Listing
Price History
Our equity shares are traded on The Stock Exchange, Mumbai or BSE and The National Stock
Exchange of India Limited, or NSE. During the year we have obtained approval for de-listing our
equity shares from the Kolkata Stock Exchange Association Limited. Our American Depositary Shares,
as evidenced by American Depositary Receipts, or ADRs, are traded in the U.S. on the New York Stock
Exchange, or NYSE, under the ticker symbol WIT. Each ADS represents one equity share. Our ADSs
began trading on the NYSE on October 19, 2000.
As of September 30, 2010, we had 2,451,995,801 issued and outstanding equity shares. As of September 30, 2010, there were approximately 14,023 record holders of ADRs evidencing 41,083,220 ADSs
equivalent to equity shares). As of September 30, 2010, there were approximately 222,470 record
holders of our equity shares listed and traded on the Indian Stock Exchanges.
The following tables set forth for the periods indicated the price history of our equity
shares and ADSs on the BSE, NSE and the NYSE. The stock prices for the prior periods are restated
to reflect stock dividend issued by the Company from time to time.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BSE |
|
NSE |
|
NYSE |
|
|
Price per equity share |
|
Price per equity share |
|
Price per ADS |
|
|
High (Rs.) |
|
Low (Rs.) |
|
High ($) |
|
Low ($) |
|
High (Rs.) |
|
Low (Rs.) |
|
High ($) |
|
Low ($) |
|
High ($) |
|
Low ($) |
Fiscal Year
ended March 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
753.00 |
|
|
|
240.00 |
|
|
|
16.75 |
|
|
|
5.34 |
|
|
|
755.85 |
|
|
|
240.15 |
|
|
|
16.82 |
|
|
|
5.34 |
|
|
|
24.29 |
|
|
|
6.90 |
|
2009 |
|
|
537.90 |
|
|
|
181.70 |
|
|
|
10.57 |
|
|
|
3.57 |
|
|
|
535.00 |
|
|
|
180.40 |
|
|
|
10.52 |
|
|
|
3.55 |
|
|
|
14.53 |
|
|
|
5.04 |
|
2008 |
|
|
600.00 |
|
|
|
325.00 |
|
|
|
14.99 |
|
|
|
8.12 |
|
|
|
635.00 |
|
|
|
324.00 |
|
|
|
15.87 |
|
|
|
8.10 |
|
|
|
17.24 |
|
|
|
9.85 |
|
2007 |
|
|
690.00 |
|
|
|
383.00 |
|
|
|
16.01 |
|
|
|
8.89 |
|
|
|
691.00 |
|
|
|
381.25 |
|
|
|
16.03 |
|
|
|
8.80 |
|
|
|
18.44 |
|
|
|
10.18 |
|
2006 |
|
|
573.00 |
|
|
|
285.55 |
|
|
|
12.88 |
|
|
|
6.41 |
|
|
|
585.90 |
|
|
|
272.00 |
|
|
|
13.17 |
|
|
|
8.65 |
|
|
|
22.38 |
|
|
|
9.62 |
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BSE |
|
NSE |
|
NYSE |
|
|
Price per equity share |
|
Price per equity share |
|
Price per ADS |
|
|
High (Rs.) |
|
Low (Rs.) |
|
High ($) |
|
Low ($) |
|
High (Rs.) |
|
Low (Rs.) |
|
High ($) |
|
Low ($) |
|
High ($) |
|
Low ($) |
Quarter Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
452.00 |
|
|
|
327.85 |
|
|
|
10.06 |
|
|
|
7.29 |
|
|
|
454.40 |
|
|
|
372.10 |
|
|
|
10.11 |
|
|
|
8.28 |
|
|
|
14.89 |
|
|
|
11.75 |
|
June 30, 2010 |
|
|
419.22 |
|
|
|
228.69 |
|
|
|
9.33 |
|
|
|
5.09 |
|
|
|
405.54 |
|
|
|
380 |
|
|
|
9.02 |
|
|
|
8.45 |
|
|
|
13.8 |
|
|
|
7.15 |
|
March 31, 2010 |
|
|
753.00 |
|
|
|
535.00 |
|
|
|
16.75 |
|
|
|
11.90 |
|
|
|
755.85 |
|
|
|
630.15 |
|
|
|
16.82 |
|
|
|
14.02 |
|
|
|
24.29 |
|
|
|
19.10 |
|
December 31, 2009 |
|
|
699.00 |
|
|
|
548.50 |
|
|
|
15.55 |
|
|
|
12.20 |
|
|
|
699.9 |
|
|
|
548 |
|
|
|
15.57 |
|
|
|
12.19 |
|
|
|
23.00 |
|
|
|
17.00 |
|
September 30, 2009 |
|
|
605.00 |
|
|
|
362.30 |
|
|
|
13.46 |
|
|
|
8.06 |
|
|
|
605.9 |
|
|
|
365.5 |
|
|
|
13.48 |
|
|
|
8.13 |
|
|
|
17.99 |
|
|
|
10.62 |
|
June 30, 2009 |
|
|
454.00 |
|
|
|
240.00 |
|
|
|
10.10 |
|
|
|
5.34 |
|
|
|
459.95 |
|
|
|
240.15 |
|
|
|
10.23 |
|
|
|
5.34 |
|
|
|
13.00 |
|
|
|
6.90 |
|
March 31, 2009 |
|
|
261.40 |
|
|
|
195.00 |
|
|
|
5.14 |
|
|
|
3.83 |
|
|
|
263.8 |
|
|
|
196.50 |
|
|
|
5.19 |
|
|
|
3.86 |
|
|
|
8.75 |
|
|
|
5.04 |
|
December 31, 2008 |
|
|
351.70 |
|
|
|
181.70 |
|
|
|
6.91 |
|
|
|
3.57 |
|
|
|
364.40 |
|
|
|
180.40 |
|
|
|
7.16 |
|
|
|
3.55 |
|
|
|
9.98 |
|
|
|
5.66 |
|
September 30, 2008 |
|
|
460.90 |
|
|
|
317.00 |
|
|
|
9.06 |
|
|
|
6.23 |
|
|
|
465.00 |
|
|
|
320.10 |
|
|
|
9.14 |
|
|
|
6.29 |
|
|
|
12.18 |
|
|
|
8.88 |
|
June 30, 2008 |
|
|
537.90 |
|
|
|
402.00 |
|
|
|
10.57 |
|
|
|
7.90 |
|
|
|
535.00 |
|
|
|
401.10 |
|
|
|
10.52 |
|
|
|
7.88 |
|
|
|
14.53 |
|
|
|
10.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2010 |
|
|
499.90 |
|
|
|
424.00 |
|
|
|
11.12 |
|
|
|
9.43 |
|
|
|
500.00 |
|
|
|
421.50 |
|
|
|
11.12 |
|
|
|
9.38 |
|
|
|
16.81 |
|
|
|
14.64 |
|
September 30, 2010 |
|
|
452.00 |
|
|
|
398.65 |
|
|
|
10.06 |
|
|
|
8.87 |
|
|
|
454.40 |
|
|
|
398.25 |
|
|
|
10.11 |
|
|
|
8.86 |
|
|
|
14.89 |
|
|
|
12.97 |
|
August 31, 2010 |
|
|
439.70 |
|
|
|
393.10 |
|
|
|
9.78 |
|
|
|
8.75 |
|
|
|
439.60 |
|
|
|
393.05 |
|
|
|
9.78 |
|
|
|
8.74 |
|
|
|
14.21 |
|
|
|
12.48 |
|
July 31, 2010 |
|
|
433.00 |
|
|
|
327.85 |
|
|
|
9.63 |
|
|
|
7.29 |
|
|
|
430.45 |
|
|
|
372.10 |
|
|
|
9.58 |
|
|
|
8.28 |
|
|
|
13.66 |
|
|
|
11.75 |
|
June 30, 2010 |
|
|
439.20 |
|
|
|
228.69 |
|
|
|
9.77 |
|
|
|
5.09 |
|
|
|
440.64 |
|
|
|
380 |
|
|
|
9.80 |
|
|
|
8.45 |
|
|
|
14.80 |
|
|
|
7.15 |
|
May 31,
2010 |
|
|
686.70 |
|
|
|
627.40 |
|
|
|
15.28 |
|
|
|
13.96 |
|
|
|
692.70 |
|
|
|
626.40 |
|
|
|
15.41 |
|
|
|
13.94 |
|
|
|
22.79 |
|
|
|
19.61 |
|
|
|
|
The $ figure under BSE and NSE columns denote the share price in rupees converted to US
$ at the rate of exchange of 1 US$ = Rs. 44.95 |
|
(1) |
|
Source: BSE data was obtained from www.bseindia.com and NSE data was
obtained from www.nseindia.com. NYSE data was obtained from
www.finance.yahoo.com. |
Plan of Distribution
Not applicable.
Markets
Trading Practices and Procedures on the Indian Stock Exchanges
BSE and NSE (Exchanges) together account for more than 90% of the total trading volume on the
Indian Stock Exchanges. Trading on both of these exchanges is accomplished on electronic trading
platforms. Trading is done on a two-day fixed settlement basis on all of the exchanges. Any
outstanding amount at the end of the settlement period is settled by delivery and payment. However,
institutional investors are not permitted to net out their transactions and must trade on a
delivery basis.
Orders can be entered with a specified term of validity that may last until the end of the
session, day or settlement period. Dealers must specify whether orders are for a proprietary
account or for a client. Exchanges specify certain margin requirements for trades executed on the
exchange, including margins based on the volume or quantity of exposure that the broker has on the
market, as well as market-to-market margins payable on a daily basis for all outstanding trades.
Trading on Exchanges normally takes place from 09:00 a.m. to 3:30 p.m. on all weekdays, except
holidays. Exchanges do not permit carry forward trades. They have separate margin requirements
based on the net exposure of the broker on the exchange. Exchanges also have separate online
trading systems and separate clearing houses.
BSE and NSE were closed on a few occasions, in the interest of protection of investor
interests, due to fluctuation in prices caused by various events from time to time. On January 22,
2008, the market tumbled in opening trade due to panic selling triggering the market wide circuit
filter after the intra-day 10% fall. On November 27, 2008, due to terrorist attack in the city of
Mumbai, the BSE and NSE were closed. On May 18, 2009, circuit filters were breached twice during
the day and market closed for the day upon reaching 20% trigger point. When the markets hit the
upper circuit limit on May 18, 2009, there was just a marginal fall in the index the following day.
The stock exchanges in India now operate on a trading day plus two, or T+2 rolling settlement
systems. At the end of the T+2 period, obligations are settled with buyers of securities paying for
and receiving securities, while sellers transfer and receive payment for securities. The SEBI has
moved to a T+2 settlement system, and is subsequently planning to move to a T+1 settlement system.
In order to contain the risk arising out of the transactions entered into by the members in
various securities either on their own account or on behalf of their clients, the largest exchanges
have designed risk management procedures, which include compulsory prescribed margins on the
individual broker members, based on their outstanding exposure in the
69
market, as well as stock
specific margins from the members. There are generally no restrictions on price movements of any
security on any given day. In order to restrict abnormal price volatility, SEBI has instructed the
stock exchanges to apply the following price bands, calculated at the previous days closing price
as follows:
Market-wide circuit breakers are applied to the market for movements by 10%, 15% and 20% for
two prescribed market indices; the SENSEX for the BSE and the Nifty for the NSE. If any of these
circuit breaker thresholds are reached, trading on all equity and equity derivates markets
nationwide is halted. This circuit breaker brings about a coordinated trading halt in all equity
and equity derivative markets nationwide. The market wide circuit breakers would be triggered by
movement of either SENSEX or the NSE S&P CNX Nifty whichever is breached earlier. In case of a 10%
movement of either of these indices, there would be a 1-hour market halt if the movement takes
place before 1 p.m. In case the movement takes place at or after 1 p.m. but before 2.30 p.m. there
will be a trading halt for half an hour. In case the movement takes place at or after 2.30 p.m.
there will be no trading halt at the 10% level and the market will continue trading. If there is a
15% movement of either index, there will be a 2-hour market halt if the movement takes place before
1 p.m. If the 15% trigger is reached on or after 1 p.m. but before 2 p.m., there will be a 1 hour
halt. If the 15% trigger is reached on or after 2 p.m. the trading will halt for the remainder of
the day. In case of a 20% movement of the index, the trading will be halted for the remainder of
the day. The percentages are calculated on the closing index value of the quarter. These
percentages are translated into absolute points of index variations (rounded off to the nearest 25
points in case of SENSEX). At the end of each quarter, these absolute points of index variations
are revised and made applicable for the next quarter.
Index based market wide circuit breaker
The Exchange implements on a quarterly basis, the index based market wide circuit breaker
system. The system is applicable at three stages of the index movement either way at 10%, 15% and
20%.
Listing
The SEBI has promulgated regulations for listing and is governed through circulars issued from
time to time by amending the Listing Agreement entered into by listed companies with stock
exchanges. The Stock Exchanges monitor the listed companies under the supervision of SEBI.
The National Stock Exchange of India Limited
The market capitalization of the capital markets (equities) segment of the NSE as of March 31,
2010 was approximately Rs. 33.10 trillion or approximately $736 billion. The clearing and
settlement operations of the NSE are managed by its wholly-owned subsidiary, the National
Securities Clearing Corporation Limited. Funds settlement takes place through designated clearing
banks. The National Securities Clearing Corporation Limited interfaces with the depositaries on the
one hand and the clearing banks on the other to provide delivery versus payment settlement for
depositary-enabled trades.
As of March 31, 2010, the NSE had about 1,300 members.
Bombay Stock Exchange Limited
The estimated aggregate market capitalization of stocks trading on the BSE as of March 31,
2010 was approximately Rs. 26.24 trillion or approximately $584 billion. The BSE began allowing
online trading in May 1995. As of March 31, 2010, the BSE had 1,017 members, comprised of 173
individual members, 821 Indian companies and 23 Foreign Institutional Investors. Only a member of
the stock exchange has the right to trade in the stocks listed on the stock exchange.
Derivatives
Trading in derivatives in India takes place either on separate and independent derivatives
exchanges or on a separate segment of an existing stock exchange. The derivative exchange or
derivative segment of a stock exchange functions as a self-regulatory organization under the
supervision of the SEBI.
Depositories
The National Securities Depository Limited and Central Depositary Services (India) Limited are
the two depositories that provide electronic depositary facilities for trading in equity and debt
securities in India. The SEBI
mandates that a company making a public or rights issue or an offer for sale to enter into an
agreement with a depository for dematerialization of securities already issued or proposed to be
issued to the public or existing shareholders. The SEBI
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has also provided that the issue and
allotment of shares in initial public offerings and/or the trading of shares shall only be in
electronic form.
Securities Transaction Tax
A brief description of the securities transaction tax and capital gains treatment under India
law is provided under the section Taxation.
Item 10. Additional Information
Share Capital
Our authorized share capital was Rs. 3,300,000,000 divided into
1,650,000,000 equity shares of Rs. 2/- each and 25,000,000 preference shares of Rs. 10/-
each. As of March 31, 2010, 1,468,211,189 equity shares, par value Rs. 2 per share were
issued, outstanding and fully paid.
As of September 30, 2010, 2,451,995,801 equity shares, par value Rs. 2 per share were issued, outstanding and fully paid.
We currently have no convertible debentures or
warrants outstanding, except options outstanding under our employee stock option plans.
On
June 4, 2010, the Company obtained shareholders approval to increase its authorized share
capital from the existing limit of Rs. 3,550,000,000 to Rs.
5,550,000,000 to facilitate the issue of bonus equity shares.
Memorandum and Articles Of Association
Set forth below is a brief summary of the material provisions of our Articles of Association
and the Indian Companies Act, 1956 all as currently in effect. Wipro Limited is registered under
the Companies Act, with the Registrar of Companies, Karnataka, Bangalore, India, with Company No.
20800. The following description of our Articles of Association does not purport to be complete and
is qualified in its entirety by the Memorandum and Articles of Association of
Wipro Limited included as an exhibit to our Form 6-K filed with
the Securities and Exchange Commission on July 6, 2010.
Our Articles of Association provide that the minimum number of directors shall be four and the
maximum number of directors shall be fifteen As of September 30, 2010, we have 12 directors. Our
Articles of Association provide that at least two-thirds of our directors shall be subject to
retirement by rotation. One third of these directors must retire from office at each Annual General
meeting of the shareholders. A retiring director is eligible for re-election. Up to one-third of
our directors can be appointed as permanent directors. Currently, Azim H. Premji is a non-retiring
director. The term of the office of our non-retiring director expires on July 30, 2011. Our
Articles of Association do not mandate the retirement of our directors under an age limit
requirement. Our Articles of Association do not require our Board members to be shareholders in our
company.
Our Articles of Association provide that any director who has a personal interest in a
transaction must disclose such interest, must abstain from voting on such transaction and may not
be counted for purposes of determining whether a quorum is present at the meeting.
The remuneration payable to our directors may be fixed by our Board of Directors in accordance
with provisions of the Indian Companies Act, 1956, and the rules and regulations prescribed by the
Government of India.
Objects and Purposes of Our Memorandum of Association
The following is a summary of our existing Objects as set forth in Section 3 of our Memorandum
of Association:
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To undertake and carry on the business of providing all kinds of information
technology based and enabled services in India and internationally, electronic remote
processing services, eServices, including all types of Internet-based/ Web enabled
services, transaction processing, fulfillment services, business support services
including but not limited to providing financial and related services of all kinds and
description including billing services, processing services, database services, data
entry business-marketing services, business information and management services,
training and consultancy services to businesses, organizations, concerns, firms,
corporations, trusts, local bodies, states, governments and other entities; to
establish and operate service processing centers for providing services for back office
and processing requirements, marketing, sales, credit collection services for companies
engaged in the business of remote processing and IT enabled services from a place of
business in India or elsewhere, contacting and communicating to and on
behalf of overseas customers by voice, data image, letters using dedicated international
private lines to handle business process management, remote help desk management; remote
management. |
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To carry on business in India and elsewhere as manufacturer, assembler, designer,
builder, seller, buyer, exporter, importer, factors, agents, hirers and dealers of
computer hardware and software and any related aspects thereof. |
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To carry on all or any of the business of soap and candle makers, tallow merchants,
chemists, druggists, dry salters, oil-merchants, manufacturers of dyes, paints,
chemicals and explosives and manufacturers of and dealers in pharmaceutical, chemical,
medicinal and other preparations or compounds, perfumery and proprietary articles and
photographic materials and derivatives and other similar articles of every description. |
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To carry on business as manufacturers, sellers, buyers, exporters, importers, and
dealers of fluid power products. |
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To carry on the business of extracting manufacturing and dealing in hydrogenated
vegetable oil. |
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To carry on any other trade or business whatsoever as can in the opinion of us be
advantageously or conveniently carried on by us. |
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To carry on the business of solutions for water treatment including but not limited
to ultra pure water, waste water treatment, water reuse, desalination and related
activities. |
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To carry on the business of renewable energy systems and food and agricultural
product processing and related industries, |
Borrowings Power Exercisable by the Directors
The Board of Directors has the authority to borrow funds up to a limit of one time the
Companys paid-up capital and free reserves. Borrowings beyond this limit will require the approval
of the shareholders of the Company.
Number of Shares Required for Directors Qualification
Directors are not required to hold shares in the Company as a pre-requisite to serving on the
Board of Directors.
Description of Equity Shares
Dividends
Under the Indian Companies Act, 1956, unless our Board of Directors recommends the payment of
a dividend, we may not declare a dividend. Similarly, under our Articles of Association, although
the shareholders may, at the Annual General meeting, approve a dividend in an amount less than that
recommended by the Board of Directors, they cannot increase the amount of the dividend. In India,
dividends are declared as a fixed sum per share on the companys equity shares. The dividend
recommended by the Board, if any, and subject to the limitations described above, is distributed
and paid to shareholders in proportion to the paid up value of their shares within 30 days of the
approval by the shareholders at the Annual General meeting. Pursuant to our Articles of
Association, our Board of Directors has discretion to declare and pay interim dividends without
shareholder approval. Under the Indian Companies Act, 1956, read with the listing agreements
entered into with Indian stock exchanges, dividends can only be paid in cash to the registered
shareholder at a record date fixed on or prior to the Annual General meeting or to his order or his
bankers order.
The Companies Act provides that any dividends that remain unpaid or unclaimed are to be
transferred to the Investor Education and Protection Fund created by the Indian Government after
the stipulated time. Under the Companies Act, dividends may be paid out of profits of a company in
the year in which the dividend is declared or out of the undistributed profits of previous fiscal
years subject to transfer of a portion. Before declaring a dividend greater than 10% of the par
value of its equity shares, a company is required under the Companies Act to transfer to its
reserves a minimum percentage of its profits for that year, ranging from 2.5% to 10%, depending
upon the dividend percentage to be declared in such year.
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The Companies Act further provides that, in the event of an inadequacy or absence of
profits in any year, a dividend may be declared for such year out of the companys
accumulated profits, subject to the fulfillment of certain conditions. |
We are subject to taxation for each dividend declared, distributed or paid for a relevant
period by our company.
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Bonus Shares
In addition to permitting dividends to be paid out of current or retained earnings as
described above, the Companies Act permits a company to distribute an amount transferred from the
general reserve or other permitted reserves, including share premium account and surplus in the
companys profit and loss account, to its shareholders in the form of bonus shares (similar to a
stock dividend). Bonus shares are distributed to shareholders in the proportion recommended by the
Board of Directors to such shareholders on a fixed record date when they are entitled to receive
such bonus shares.
Audit and Annual Report
At least 21 days before the Annual General Meeting of shareholders (excluding the days of
mailing and date of the meeting,), we must distribute to our shareholders a our audited Indian GAAP
balance sheet and profit and loss account and the related reports of our Board of Directors and the
Auditors, together with a notice convening the general meeting. SEBI has permitted dispatch of
abridged financial statements to shareholders in India in lieu of detailed version of financial
statements. Under the Companies Act, a company must file the balance sheet and annual profit and
loss account presented to the shareholders within 30 days of the conclusion of the Annual General
Meeting with the Registrar of Companies.
A company must also file an annual return containing a list of the companys shareholders and
other company information within 60 days of the conclusion of the meeting.
Consolidation and Subdivision of Shares
The Indian Companies Act permits a company to split or combine the par value of its shares,
provided such split or combination is not made in fractions. Shareholders of record on a fixed
record date are entitled to receive the split or combination.
Preemptive Rights, Issue of Additional Shares and Distribution of Rights
The Companies Act gives shareholders the right to subscribe for new shares in proportion to
their respective existing shareholdings (unless otherwise determined by a special resolution passed
by a General Meeting of the shareholders) and the right, to renounce such subscription right in
favor of any other person; Holders of ADSs may not be permitted to participate in any such offer.
If we ever plan to distribute additional rights to purchase our equity shares, we will give
prior written notice to the depositary bank and we will assist the depositary bank in determining
whether it is lawful and reasonably practicable to distribute rights to purchase additional ADSs to
holders.
The depositary bank will establish procedures to distribute rights to purchase additional ADSs
to holders and to enable such holders to exercise such rights if it is lawful and reasonably
practicable to make the rights available to holders of ADSs, subject to all of the documentation
contemplated in the deposit agreement (such as opinions to address the lawfulness of the
transaction). You may have to pay fees, expenses, taxes and other governmental charges to subscribe
for the new ADSs upon the exercise of your rights. The depositary bank is not obligated to
establish procedures to facilitate the distribution and exercise by holders of rights to purchase
new equity shares directly, rather than new ADSs.
The depositary bank will not distribute the rights to you if:
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we do not timely request that the rights be distributed to you or we request that
the rights not be distributed to you; |
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we fail to deliver satisfactory documents to the depositary bank; or |
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it is not reasonably practicable to distribute the rights. |
The depositary bank will sell the rights that are not exercised or not distributed if such
sale is lawful and reasonably practicable. The proceeds of such sale will be distributed to holders
as in the case of a cash distribution. If the depositary bank is unable to sell the rights, it will
allow the rights to lapse.
Voting Rights
At any General Meeting, voting is by show of hands unless a poll is demanded by a shareholder
or shareholders present in person or by proxy holding at least 10% of the total shares entitled to
vote on the resolution or by those holding shares with an aggregate paid up capital of at least Rs.
50,000. Upon a show of hands, every shareholder entitled to vote and present in person has one vote
and, on a poll, every shareholder entitled to vote and present in person or by proxy has
voting rights in proportion to the paid up capital held by such shareholders. The Chairman of
the Board has a deciding vote in the case of any tie. Any shareholder of the company may appoint a
proxy. The instrument appointing a proxy must be
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delivered to the company at least 48 hours prior
to the meeting. A proxy may not vote except on a poll. A corporate shareholder may appoint an
authorized representative who can vote on behalf of the shareholder, both upon a show of hands and
upon a poll.
Ordinary resolutions may be passed by simple majority of those present and voting at any
General Meeting for which the required period of notice has been given. However, certain
resolutions called special resolutions in many instances for example amendments to the Articles of
Association and changes to certain clauses in the Memorandum of Association, the commencement of a
new line of business, etc require that votes cast in favor of the resolution (whether by show of
hands or poll) are not less than three times the number of votes, if any, cast against the
resolution.
Liquidation Rights
Subject to the rights of creditors, employees and the holders of any shares entitled by their
terms to preferential repayment over the equity shares, if any, in the event of our winding-up, the
holders of the equity shares are entitled to be repaid the amounts of paid up capital or credited
as paid up on those equity shares. All surplus assets after payments to the holders of any
preference shares at the commencement of the winding-up shall be paid to holders of equity shares
in proportion to their shareholdings.
Preference Shares
Preference shares have preferential dividend and liquidation rights. Preference shares may be
redeemed if they are fully paid, and only out of our profits, or out of the proceeds of the sale of
shares issued for purposes of such redemption. Holders of preference shares do not have the right
to vote at shareholder meetings, except on resolutions which directly affect the rights of their
preference shares. However, holders of cumulative preference shares have the right to vote on every
resolution at any meeting of the shareholders if the dividends due on the preference shares have
not been paid, in whole or in part, for a period of at least two years prior to the date of the
meeting. Currently, we have no preference shares issued and outstanding.
Redemption of Equity Shares
Under the Companies Act, unlike preference shares, equity shares are not redeemable.
Liability on Calls
Not applicable.
Discriminatory Provisions in Articles
There are no provisions in our Articles of Association discriminating against any existing or
prospective holder of such securities as a result of such shareholder owning a substantial number
of shares.
Alteration of Shareholder Rights
Under the Companies Act, the rights of any class of shareholders can be altered or varied with
the consent in writing of the holder of not less than three-fourths of the issued shares of that
class or with the sanction of a special resolution passed at a separate meeting of the holders of
the issued shares of that class if the provisions with respect to such variation are contained in
the Memorandum of Association or Articles of Association of the Company, or in the absence of any
such provision in the Memorandum of Association or Articles of Association, if such variation is
not prohibited by the terms of issue of the shares of that class.
Under the Companies Act, the Articles of Association may be altered only by way of a special
resolution.
Meetings of Shareholders
We must convene an Annual General meeting of shareholders within six months after the end of
each fiscal year and may convene an extraordinary general meeting of shareholders when necessary or
at the request of a shareholder or shareholders holding at least 10% of our paid up capital
carrying voting rights. The Annual General meeting of the shareholders is generally convened by our
Secretary pursuant to a resolution of our Board of Directors. Written notice setting out the agenda
of the meeting must be given at least 21 days, excluding the days of mailing and date of the
meeting, prior to the date of the general meeting to the shareholders of record. Shareholders who
are registered as shareholders on a pre-determined date are entitled to such notice or their
proxies and have a right to attend or vote at such meeting. The
Annual General meeting of shareholders must be held at our registered office or at such other
place within the city in which the registered office is located. Meetings other than the Annual
General meeting may be held at any other place if so
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determined by our Board of Directors. Our
Articles of Association provide that a quorum for a general meeting is the presence of at least
five shareholders in person.
Additionally, shareholder consent for certain items or special business is required to be
obtained by a postal ballot. In order to obtain the shareholders consent, our Board of Directors
appoints a scrutinizer, who is not in our employment, who, in the opinion of the Board, can conduct
the postal ballot voting process in a fair and transparent manner in accordance with the provisions
of Companies (Passing of the Resolution by Postal Ballot) Rules, 2001.
Limitations on the Rights to Own Securities
The limitations on the rights to own securities imposed by Indian law, including the rights
of non-resident or foreign shareholders to hold the securities, are discussed in Item 10 of this
Annual Report, under the section titled Currency Exchange Controls and is incorporated herein by
reference.
Voting Rights of Deposited Equity Shares Represented by ADSs
As soon as practicable after receipt of notice of any meetings or solicitation of consents or
proxies of holders of shares or other deposited securities, our Depositary shall fix a record date
for determining the holders entitled to give instructions for the exercise of voting rights. The
Depositary shall then mail to the holders of ADSs a notice stating (a) such information as is
contained in such notice of meeting and any solicitation materials, (b) that each holder on the
record date set by the Depositary therefore will be entitled to instruct the Depositary as to the
exercise of the voting rights, if any, pertaining to the deposited securities represented by the
ADSs evidenced by such holders of ADRs, and (c) the manner in which such instruction may be given,
including instructions to give discretionary proxy to a person designated by us.
On receipt of the aforesaid notice from the Depositary, our ADS holders may instruct the
Depositary on how to exercise the voting rights for the shares that underlie their ADSs. For such
instructions to be valid, the Depositary must receive them on or before a specified date.
The Depositary will try, as far as is practicable, and subject to the provisions of Indian law
and our Memorandum of Association and our Articles of Association, to vote or to have its agents
vote the shares or other deposited securities as per our ADS holders instructions. The Depositary
will only vote or attempt to vote as per an ADS holders instructions. The Depositary will not
itself exercise any voting discretion.
Neither the Depositary nor its agents are responsible for any failure to carry out any voting
instructions, for the manner in which any vote is cast, or for the effect of any vote. There is no
guarantee that our shareholders will receive voting materials in time to instruct the Depositary to
vote and it is possible that ADS holders, or persons who hold their ADSs through brokers, dealers
or other third parties, will not have the opportunity to exercise a right to vote.
Register of Shareholders; Record Dates; Transfer of Shares
We maintain a register of our shareholders in electronic form through the National Securities
Depository Limited and the Central Depository Services (India) Ltd. For the purpose of determining
the shares entitled to annual dividends, the register is closed for a specified period prior to the
Annual General meeting. The date on which this period begins is the record date. To determine which
shareholders are entitled to specified shareholder rights, we may close the register of
shareholders. The Companies Act requires us to give at least seven days prior notice to the public
before such closure. We may not close the register of shareholders for more than thirty consecutive
days, and in no event for more than forty-five days in a year. Trading of our equity shares,
however, may continue while the register of shareholders is closed.
Shares held through depositaries are transferred in the form of book entries or in electronic
form in accordance with the regulations laid down by SEBI. The requirement to hold the equity
shares in book-entry form will apply to the ADS holders when the equity shares are withdrawn from
the depository facility upon surrender of the ADSs. In order to trade the equity shares in the
Indian market, the withdrawing ADS holder will be required to comply with the procedures described
above.
Following the introduction of the Depositories Act, 1996, and the repeal of Section 22A of the
Securities Contracts (Regulation) Act, 1956, which enabled companies to refuse to register
transfers of shares in some circumstances, the equity shares of a public company are freely
transferable, subject only to the provisions of Section 111A of the Companies Act. Since we are a
public company, the provisions of Section 111A will apply to us. Our Articles of Association
currently contain provisions which give our directors discretion to refuse to register a transfer
of shares in some circumstances. Furthermore, in accordance with the provisions of Section 111A(2)
of the Companies Act, our directors may refuse to register a transfer of shares if they have
sufficient cause to do so. If our directors refuse to register a
transfer of shares, the shareholder wishing to transfer his, her or its shares may file a
civil suit or an appeal with the Company Law Board or National Company Law Tribunal.
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Pursuant to Section 111A(3), if a transfer of shares contravenes any of the provisions of the
Indian Securities and Exchange Board of India Act, 1992, or the regulations issued thereunder, or
the Indian Sick Industrial Companies (Special Provisions) Act, 1985, or any other Indian laws, the
Company Law Board or National Company Law Tribunal may, on application made by the Company, a
depositary incorporated in India, an investor, the Securities and Exchange Board of India or other
parties, direct the rectification of the register of records. Under the Companies Act, unless the
shares of a company are held in a dematerialized form, a transfer of shares is effected by an
instrument of transfer in the form prescribed by the Companies Act and the rules thereunder
together with delivery of the share certificates. Our transfer agent for our equity shares is Karvy
Computershare Pvt. Limited located in Hyderabad, India.
Company Acquisition of Equity Shares
Under the Companies Act, the Company can reduce its Companys share capital subject to
fulfillment of conditions. A company is not permitted to acquire its own shares for treasury
operations.
Disclosure of Ownership Interest
Section 187C of the Indian Companies Act requires beneficial owners of shares of Indian
companies who are not holders of record to declare to the company details of the beneficial owner.
Provisions on Changes in Capital
Our authorized capital can be altered by an ordinary resolution of the shareholders in a
General Meeting. The additional issue of shares is subject to the preemptive rights of the
shareholders and provisions governing the issue of additional shares are discussed in Item 10 of
this Annual Report. In addition, a company may increase its share capital, consolidate its share
capital into shares of larger face value than its existing shares or sub-divide its shares by
reducing their par value, subject to an ordinary resolution of the shareholders in a General
Meeting.
Takeover Code and Listing Agreements
Under the Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, or Takeover Code, upon the acquisition of more than 5%, 10%, 14%, 54%
or 74% of the outstanding shares or voting rights of a publicly-listed Indian company, a purchaser
is required to notify the company and the company and the purchaser is required to notify all the
stock exchanges on which the shares of such company are listed. An ADS holder would be subject to
these notification requirements.
Upon the acquisition of 15% or more of such shares or voting rights, or a change in control of
the company, the purchaser is required to make an open offer to the other shareholders, offering to
purchase 20% of all the outstanding shares of the company or such number of shares that will result
in the public shareholding not falling below the minimum public holding requirement, whichever is
lower. SEBI has recently amended the Takeover Code to relax any of the provisions of the Takeover
Code if the Directors of the Company have been removed by the Government or statutory authority and
new Directors appointed by the Government or statutory authority provided the new Directors have
devised a plan providing for transparent, open and competitive process of bidding for continued
operations of the Company and for smooth takeover by an acquirer, Since we are a listed company in
India, the provisions of the Takeover Code will apply to us. However, the Takeover Code provides
for a specific exemption from this provision to an ADS holder and states that this provision will
apply to an ADS holder only once he or she converts the ADSs into the underlying equity shares.
However, the acquisition of ADSs (irrespective of conversion into underlying equity shares) is
subject to disclosure and reporting requirements under the Takeover Code.
A listed company can be delisted under the provisions of the SEBI (Delisting of Securities)
Guidelines, 2003, which govern voluntary and compulsory delisting of shares of Indian companies
from the stock exchanges.
Material Contracts
We are a party to various employment arrangements and indemnification agreements with our
directors and executive officers. See Terms of Employment Arrangements and Indemnification
Agreements under Item 6 of this Annual Report for a further description of the employment
arrangements and indemnification agreements that we have entered into with our directors and
executive officers.
Currency Exchange Controls
Foreign Investments in India are governed by the provisions the Foreign Exchange Management
Act (FEMA) 1999 and are subject to the Regulations issued by the Reserve Bank of India from time to
time. The Foreign Direct Investment Scheme under the Reserve Banks Automatic Route enables Indian
Companies (other than those specifically excluded in the scheme) to issue shares to persons
resident outside India without prior permission from the RBI, subject to
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certain conditions.
General permission has been granted for the transfer of shares and convertible debentures by a
person resident outside India as follows: (i) for transfers of shares or convertible debentures
held by a person resident outside India other than NRI, to any person resident outside India and
(ii) NRIs are permitted to transfer shares or convertible debentures of Indian company to other
NRIs. General permission has also been given for transfers between a person resident in India and a
person resident outside India subject to stipulated conditions.
In cases where such conditions are not met, approval of the Central Government and the Reserve
Bank of India may be also required.
Banks in India may now allow remittance from India by a person resident in India up to USD
200,000, per financial year, for any permitted current or capital account transaction or a
combination of both.
General
Shares of Indian companies represented by ADSs may be approved for issuance to foreign
investors by the Government of India under the Issue of Foreign Currency Convertible Bonds and
Equity Shares (through Depositary Receipt Mechanism) Scheme, 1993, or the 1993 Regulation, as
modified from time to time, promulgated by the Government of India. The 1993 Regulation is distinct
from other policies or facilities, as described below, relating to investments in Indian companies
by foreign investors. The issuance of ADSs pursuant to the 1993 Regulation also affords to holders
of the ADSs the benefits of Section 115AC of the Indian Income Tax Act, 1961 for purposes of the
application of Indian tax law.
A registered broker is permitted to purchase shares of an Indian company on behalf of a person
resident outside of India for the purpose of converting those shares into ADSs/GDSs. However, such
conversion is subject to compliance with the provisions of the Issue of Foreign Currency
Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme 1993 and the
periodic guidelines issued by the Central Government. This would mean that ADSs converted into
Indian shares may be converted back into ADSs, subject to the limits of sectoral caps.
The Operative Guidelines for the limited two-way fungibility under the Issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme 1993
has also been approved by the Government of India.
These guidelines provide that a re-issuance of ADSs/GDSs is permitted to the extent that
ADSs/GDSs, have been redeemed for underlying shares and sold in the domestic market. The
re-issuance must be within the specified limits. The conditions to be satisfied in this regard are:
(i) the shares are purchased on a recognized stock exchange; (ii) the Indian company has issued
ADS/GDS, (iii) the shares are purchased with the permission of the custodian of the ADSs/GDSs of
the Indian company and are deposited with the custodian; (iv) the number of shares so purchased
shall not exceed the number of ADSs/GDSs converted into underlying shares pursuant to conversion of
ADS into equity shares under the Depositary Agreement and (v) investor and other intermediaries
comply with the provisions of 1993 Scheme and related guidelines issued from time to time.
Transfer of ADSs and Surrender of ADSs
A person resident outside India may transfer the ADSs held in Indian companies to another
person resident outside India without any permission. An ADS holder is permitted to surrender the
ADSs held by him in an Indian company and to receive the underlying equity shares under the terms
of the Deposit Agreement. Under Indian regulations, the re-deposit of these equity shares with the
depositary to ADSs may not be permitted.
Sponsored ADS
The amendment to the FEMA regulations permit an issuer in India to sponsor the issue of ADSs
through an overseas depositary against underlying equity shares accepted from holders of its equity
shares in India for offering outside of India. The sponsored issue of ADSs was possible only if the
following conditions are satisfied:
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There have been amendments to the Issue of Foreign Currency Convertible Bonds and
Ordinary Shares (through Depositary Receipt Mechanism), Scheme 1993 and primarily the
amendments were on the Eligibility of Issuer, Eligibility of Subscriber, Pricing of the
offerings, and Voting Rights, |
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the ADS offering is approved by the FIPB; |
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the ADS offering is approved by a special resolution of the shareholders of the
issuer in a general meeting; |
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the facility is made available to all the equity shareholders of the issuer; |
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the proceeds of the offering are repatriated into India within one month of the
closing of the offering; |
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the sales of the existing equity shares are made in compliance with the Foreign
Direct Investment Policy in India; |
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the number of shares offered by selling shareholders are subject to limits in
proportion to the existing holdings of the selling shareholders when the offer is
oversubscribed; and |
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the offering expenses do not exceed 7% of the offering proceeds and are paid by
shareholders on a pro-rata basis. |
The issuer is also required to furnish a report to the RBI specifying the details of the
offering, including the amount raised through the offering, the number of ADSs issued, the
underlying shares offered and the percentage of equity in the issuer represented by the ADSs.
Conditions for issuance of ADS/GDS outside India by Indian Companies
Eligibility of issuer: An Indian Company, which is not eligible to raise funds from the Indian
Capital Market including a company which has been restrained from accessing the securities market
by the Securities and Exchange Board of India (SEBI) will not be eligible to issue ADS/GDS apart
from Foreign Currency Convertible Bonds.
Eligibility of subscriber: Erstwhile Overseas Corporate Bodies (OCBs) who are not eligible to
invest in India through the portfolio route and entities prohibited to buy, sell or deal in
securities by SEBI will not be eligible to subscribe to (i) Foreign Currency Convertible Bonds and
(ii) ADS/GDS
Pricing: The pricing of ADS/GDS and Foreign Currency Convertible Bonds should not be less than the
average of the weekly high and low of the closing prices of the related shares quoted on the stock
exchange during the two weeks preceding the relevant date.
The relevant date means date of the meeting in which the Board of the company or the Committee of
Directors duly authorized by the Board of the company decides to open the proposed issue.
Foreign Direct Investment
Over a period of time, and particularly since 1991, the Government of India has relaxed the
restrictions on foreign investment and most industry sectors do not require prior approval of the
FIPB or RBI if the percentage of equity holding by all foreign investors do not exceed specified
industry specific thresholds. Moreover, the Government of India recently relaxed the thresholds for
approval of FIPB for total foreign equity inflow and such approval will be required only for such
inflow of Rs. 12,000 million and above. Purchases by foreign investors of ADSs are treated as
direct foreign investment in the equity issued by Indian companies for such offerings. Foreign
investment up to 100% of companys share capital is currently permitted in the IT industry.
Government of India has recently clarified about the calculation of foreign investment in an Indian
Company through direct or indirect routes for such investment.
Investment by Non-Resident Indians
A variety of facilities for making investments in shares of Indian companies is available to
individuals of Indian nationality or origin residing outside India, or NRIs. These facilities
permit NRIs to make portfolio investments in shares and other securities of Indian companies on a
basis that is not generally available to other foreign investors. A Non-Resident Indian (NRI) or a
Person of Indian Origin (PIO) resident outside India may invest by way of contribution to the
capital of a firm or a proprietary concern in India on a non-repatriation basis. These facilities
are different and distinct from investments by Foreign Direct Investors described above. Indian
companies are now allowed, without prior Government of India approval, to invest in joint ventures
or wholly-owned subsidiaries outside India. The amount invested may not exceed four times the net
worth of the company or its equivalent in a financial year. RBI no longer recognizes Overseas
Corporate Bodies, or OCBs as an eligible class of investment vehicle under various routes and
schemes under the foreign exchange regulations.
NRIs are permitted to make investments through a stock exchange, or Portfolio Investments on
favorable tax and other terms under Indias Portfolio Investment Scheme. Under the scheme, an NRI
can purchase up to 5% of the paid up value of the shares issued by a company, subject to the
condition that the aggregate paid up value of shares purchased by
all NRIs does not exceed 10% of the paid up capital of the company. The 10% ceiling may be
exceeded if a special resolution is passed in a general meeting of the shareholders of a company,
subject to the overall ceiling of Foreign Direct Investment limit.
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In terms of Schedule 1 of the Notification No. FEMA 20/2000-RB dated May 3, 2000, a person
resident outside India can purchase equity shares / compulsorily convertible preference shares and
compulsorily convertible debentures (equity instruments) issued by an Indian company under the FDI
policy and the Indian company is allowed to receive the amount of consideration in advance towards
issue of such equity instruments, subject to the terms and conditions laid down therein. Further,
general permission is available to Indian companies to refund the amounts received towards purchase
of shares under Regulation 5 (1) of Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended
from time to time. Reserve Bank of India vide circular No.20 dated December 14, 2007 decided that
with effect from November 29, 2007, the equity instruments should be issued within 180 days of the
receipt of the inward remittance. In case, the equity instruments are not issued within 180 days
from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the
amount of consideration so received should be refunded immediately to the non-resident investor by
outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the
case may be or approach Reserve Bank of India with an action plan for allotment of equity shares.
It is also clarified that the advances against equity instruments may be received only where
the FDI is allowed under the automatic route.
Investment by Foreign Institutional Investors
In September 1992, the Government of India issued guidelines which enable foreign
institutional investors or FIIs, including institutions such as pension funds, investment trusts,
asset management companies, nominee companies and incorporated/institutional portfolio managers, to
invest in all the securities traded on the primary and secondary markets in India. Under the
guidelines, FIIs are required to obtain an initial registration from the SEBI and a general
permission from the RBI to engage in transactions regulated under FEMA. FIIs must also comply with
the provisions of the SEBI Foreign Institutional Investors Regulations, 1995.
Ownership Restrictions
The limit of FII investment in a company has been linked to sectoral caps/statutory ceiling as
applicable to the concerned industry subject to obtaining the approval of the shareholders by a
special resolution. NRIs in aggregate may hold no more than 24% of a companys equity shares,
(subject to obtaining the approval of the shareholders by a special resolution) excluding the
equity shares underlying the ADSs. Furthermore, SEBI regulations provide that no single FII may
hold more than 10% of a companys total equity shares and no single NRI may hold more than 5% of a
companys total equity shares. There is uncertainty under Indian law about the tax regime
applicable to FIIs which hold and trade ADSs. FIIs are urged to consult with their Indian legal and
tax advisers about the relationship between the FII guidelines and the ADSs and any equity shares
withdrawn upon surrender of ADSs.
Overseas investment Liberalization
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Regulation 6 of the Notification No.FEMA.120/RB-2004 dated July 7, 2004 to read with
Circular No. 42 dated May 12, 2005 and dated Sep 26, 2007 of Reserve Bank of India in
terms of which an Indian entity was permitted to invest up to 400 per cent of their net
worth in overseas Joint Ventures and/or Wholly Owned Subsidiaries (JV/WOS) in any
bonafide business activity under automatic route. |
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It was further clarified by the Reserve Bank of India that the ceiling is not
applicable to the investments made out of balances held in EEFC accounts and out of the
proceeds of ADR / GDR issue, as hitherto. This enables Authorized Dealers to allow
remittances under automatic route up to 400 per cent of the net worth as on the date of
the last audited balance sheet of the investing companies, after considering the
proposals received from such companies. |
Taxation
The following summary is based on the law and practice of the Indian Income-tax Act, 1961, or
Income-Tax Act, including the special tax regime contained in Sections 115AC and 115ACA of the
Income-tax Act read with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares
(through Depositary Receipt Mechanism) Scheme, 1993, as amended on, January 19, 2000, or the Issue
of Foreign Currency Convertible bonds and Ordinary Shares Scheme. The Income-tax Act is amended
every year by the Finance Act of the relevant year. Some or all of the tax consequences of
Sections 115AC and 115ACA may be amended or changed by future amendments to the Income-tax Act.
We believe this information is materially complete as of the date hereof, however, this
summary is not intended to constitute a complete analysis of the individual tax consequences to
non-resident holders or employees under Indian law for the acquisition, ownership and sale of ADSs
and equity shares.
Residence. For purposes of the Income-tax Act, an individual is considered to be a resident
of India during any fiscal year if he or she is in India in that year for:
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a period or periods amounting to 182 days or more; or |
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60 days or more and, within the four preceding years has been in India for a period
or periods amounting to 365 days or more. |
The period of 60 days referred to above shall be read as 182 days (i) in case of a citizen of
India who leaves India in a fiscal year for the purposes of employment outside of India or (ii) in
case of a citizen of India or a person of Indian origin living abroad who visits India and within
the four preceding years has been in India for a period or periods amounting to 365 days or more.
A company is a resident of India if it is incorporated in India or the control and the
management of its affairs is situated wholly in India. Companies that are not residents of India
would be treated as non-residents for purposes of the Income-tax Act.
Taxation of Distributions. As per Section 10(34) of the Income Tax Act, dividends paid by
Indian Companies on or after April 1, 2003 to their shareholders (whether resident in India or not)
are not subject to tax. However, the Company paying the dividend is currently subject to a dividend
distribution tax of 15% on the total amount it distributes, declares or pays as a dividend, in
addition to the normal corporate tax. Additionally, the Finance Act, 2006 levies a surcharge of 10%
on such tax and an additional surcharge called an education cess of 3% on such tax and surcharge,
after which the dividend distribution tax payable would be 17%. Finance Act 2010 has reduced the
rate of surcharge to 7.5% from the present rate of 10%.
Any distributions of additional ADSs or equity shares to resident or non- resident holders
will not be subject to Indian tax.
Taxation of Capital Gains. The following is a brief summary of capital gains taxation of
non-resident holders and resident employees in respect of the sale of ADSs and equity shares
received upon redemption of ADSs. The relevant provisions are contained mainly in sections 45,
47(vii)(a), 115AC and 115ACA, of the Income Tax Act, in conjunction with the Issue of Foreign
Currency Convertible Bonds and Ordinary Shares Scheme.
Gains realized upon the sale of ADSs and shares that have been held for a period of more than
thirty-six months and twelve months, respectively, are considered long-term capital gains. Gains
realized upon the sale of ADSs and shares that have been held for a period of thirty six months or
less and twelve months or less, respectively, are considered short term capital gains. Capital
gains are taxed as follows:
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Gains from a sale of ADSs outside India, by a non-resident to another non-resident
are not taxable in India. |
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Long-term capital gains realized by a resident employee from the transfer of the
ADSs will be subject to tax at the rate of 10%. Short-term capital gains on such a
transfer will be taxed at graduated rates with a maximum of 30%. |
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Long-term capital gains realized by a non-resident upon the sale of equity shares
obtained through the redemption of ADSs, or settlement of such sale being made off a
recognized stock exchange, are subject to tax at a rate of 10%. Short-term capital
gains on such transfer will be taxed at graduated rates with a maximum of 30%. |
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Long-term capital gains realized by a non-resident upon the sale of equity shares
obtained through the redemption of ADSs, or settlement of such sale being made on a
recognized stock exchange, is exempt from tax and the Short-term capital gains on such
sale will be taxed at 15%. An additional tax called Securities Transaction Tax, or
STT (described in detail below) will be levied at the time of settlement. |
Finance Act (No.2) 2009 has abolished surcharge for individual tax payers effective as of
April 1, 2009. In the case of resident corporations whose turnover exceeds Rs. 10,000,000 during
the relevant financial year, in addition to the above rates, a surcharge of 10% will be levied on
the above taxes (Finance Act 2010 reduced this surcharge to 7.5%, effective as of April 1, 2010).
An additional surcharge called education cess of 3% on the above tax and surcharge is payable in
the case of all the assesses.
The above rates may be reduced by the applicable tax treaty in case of non-residents. The
capital gains tax is computed by applying the appropriate tax rates to the difference between the
sale price and the purchase price of the equity shares or ADSs. In the case of employees who
receive shares allotted as part of a companys stock option plan, the purchase price shall be the
fair market value which has been taken into account for the purpose of computing the perquisite on
salaries. In 1992, the Government allowed established Indian Companies to issue foreign currency
convertible bonds (FCCB). Effective April 2008, the conversion of FCCBs into shares or debentures
of any company shall not be treated as a
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transfer and consequently will not be subject to capital
gains tax upon conversion. Further, the cost of acquisition of the shares received upon conversion
of the bond shall be the price at which the corresponding bond was acquired. Prior to this
amendment, the price of the shares received on conversion was arrived by using the stepped up
basis.
With the enactment of Finance Act (No.2) 2009, the value of shares/security allotted under any
Employees Stock Option Plan is treated as a perquisite in the hands of employees and will be taxed
accordingly effective 1st April, 2009. The tax rate will vary from employee to employee
with a maximum of 30.90% (subject to the prevailing tax slab) on the perquisite value. The
perquisite value is calculated as the difference between the fair market value (FMV) of the share /
security on the date of exercise minus the exercise price.
According to the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme, a
non-resident holders holding period for the purposes of determining the applicable Indian capital
gains tax rate in respect of equity shares received in exchange for ADSs commences on the date of
notice of the redemption by the depositary to the custodian. However, the Issue of Foreign Currency
Convertible Bonds and Ordinary Shares Scheme does not address this issue in the case of resident
employees, and it is therefore unclear as to when the holding period for the purposes of
determining capital gains tax commences for such a resident employee.
The Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme provides that if
the equity shares are sold on a recognized stock exchange in India against payment in Indian
rupees, they will no longer be eligible for the preferential tax treatment.
It is unclear as to whether section 115AC and the Issue of Foreign Currency Convertible Bonds
and Ordinary Shares Scheme are applicable to a non-resident who acquires equity shares outside
India from a non-resident holder of equity shares after receipt of the equity shares upon
redemption of the ADSs.
It is unclear as to whether capital gains derived from the sale of subscription rights or
other rights by a non-resident holder not entitled to an exemption under a tax treaty will be
subject to Indian capital gains tax. If such subscription rights or other rights are deemed by the
Indian tax authorities to be situated within India, the gains realized on the sale of such
subscription rights or other rights will be subject to Indian taxation. The capital gains realized
on the sale of such subscription rights or other rights, which will generally be in the nature of
short term capital gains, will be subject to tax at variable rates with a maximum rate of 40% in
the case of a foreign companies and at graduated rate with a maximum of 30%, in the case of
resident employees and non-resident individuals. In addition to this, there will be a surcharge of
2.5% in the case of foreign companies and an additional surcharge called education cess of 3% on
the above tax and surcharge in the case of foreign companies and only an additional surcharge
called education cess of 3% on the above tax in the case of individuals.
As per Section 55(2) of the Income Tax Act, the cost of any share (commonly called a bonus
share) allotted to any shareholder without any payment and on the basis of such shareholders
share holdings, shall be nil. The holding period of bonus shares for the purpose of determining the
nature of capital gains shall commence on the date of allotment of such shares by the company.
Securities Transaction Tax: The Finance Act, 2004 has introduced certain new provisions with
regard to taxes on the sale and purchase of securities, including equity shares. On and after
October 1, 2004, in respect of a sale and purchase of equity shares entered into on a recognized
stock exchange, (i) both the buyer and seller are required to pay each a Securities Transaction
Tax, or STT at the rate of 0.125% of the transaction value of the securities, if a transaction is a
delivery based transaction (i.e. the transaction involves actual delivery or transfer of shares);
and (ii) the seller of the shares is required to pay a STT at the rate of 0.025% of the transaction
value of the securities, if the transaction is a non-delivery based transaction, i.e. a transaction
settled without taking delivery of the shares.
Withholding Tax on Capital Gains. Any gain realized by a non-resident or resident employee on
the sale of equity shares is subject to Indian capital gains tax, which, in the case of a
non-resident is to be withheld at the source by the buyer. However, as per the provisions of
Section 196D(2) of the Income Tax Act, no withholding tax is required to be deducted by way of
capital gains arising to Foreign Institutional Investors as defined in Section 115AD of the Income
Tax Act on the transfer of securities defined in Section 115AD of the Income Tax Act.
Buy-back of Securities. Indian companies are not subject to any tax on the buy-back of their
shares. However, the shareholders will be taxed on any resulting gains. Our company would be
required to deduct tax at source according to the capital gains tax liability of a non-resident
shareholder.
Stamp Duty and Transfer Tax. Upon issuance of the equity shares underlying our ADSs, companies
will be required to pay a stamp duty of 0.1% per share of the issue price of the underlying equity
shares. A transfer of ADSs is not subject to Indian stamp duty. However, upon the acquisition of
equity shares from the depositary in exchange for ADSs, the non-resident holder will be liable for
Indian stamp duty at the rate of 0.25% of the market value of the ADSs or equity shares exchanged.
A sale of equity shares by a non-resident holder will also be subject to Indian stamp duty at the
rate of
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0.25% of the market value of the equity shares on the trade date, although customarily such
tax is borne by the transferee. Shares must be traded in dematerialized form. The transfer of
shares in dematerialized form is currently not subject to stamp duty.
Wealth Tax. The holding of the ADSs and the holding of underlying equity shares by resident
and non-resident holders will be exempt from Indian wealth tax. Non-resident holders are advised to
consult their own tax advisors regarding this issue.
Gift Tax and Estate Duty. Indian gift tax was abolished as of October 1998. Indian Estate
Duty was abolished as of March 1985. On and after September 1, 2004, a sum of money exceeding Rs.
25,000 (approx $570), received by an individual without consideration will be subject to tax at
graduated rates with a maximum of 30% (excluding applicable surcharge and education cess), unless
the same was received from a relative as defined in Explanation under Section 56(v), or on the
occasion of the marriage of the Individual or under a will or by way of inheritance or in
contemplation of death of the payer. The Taxation Laws Amendment Bill, 2005 introduced in the
Parliament on May 12, 2005 proposes to levy the above tax in case the sum of money exceeds in
aggregate Rs. 50,000 in a fiscal year. We cannot assure that these provisions will not be amended
further in future. Non-resident holders are advised to consult their own tax advisors regarding
this issue.
Service Tax. Brokerage or commission paid to stock brokers in connection with the sale or
purchase of shares is subject to a service tax of 10% excluding surcharges and education cess. The
stock broker is responsible for collecting the service tax from the shareholder and paying it to
the relevant authority.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE INDIAN AND
THEIR LOCAL TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING OF EQUITY SHARES OR ADSs.
Material United States Federal Income Tax Consequences
The following is a summary of the material U.S. federal income tax consequences that may be
relevant with respect to the acquisition, ownership and disposition of equity shares or ADSs and is
for general information only. This summary addresses the U.S. federal income tax considerations of
holders that are U.S. persons. U.S. persons are citizens or residents of the United States, or
corporations (or other entities treated as corporations for United States federal income tax
purposes) created in or under the laws of the United States or any political subdivision thereof or
therein, estates, the income of which is subject to U.S. federal income taxation regardless of its
source and trusts having a valid election to be treated as U.S. persons in effect under U.S.
Treasury Regulations or for which a U.S. court exercises primary supervision and a U.S. person has
the authority to control all substantial decisions. This summary is limited to U.S. persons who
will hold equity shares or ADSs as capital assets.
This summary is limited to U.S. persons who will hold equity shares or ADSs as capital assets.
In addition, this summary is limited to U.S. persons who are not residents in India for purposes of
the Convention between the Government of the United States of America and the Government of the
Republic of India for the avoidance of Double Taxation and the prevention of Fiscal Evasion with
respect to taxes on income. If a partnership holds the equity shares or ADSs, the tax treatment of
a partner will generally depend upon the status of the partner and upon the activities of the
partnership. A partner in a partnership holding equity shares or ADSs should consult his/her/its
own tax advisor.
This summary does not address tax considerations applicable to holders that may be subject to
special tax rules, such as banks, insurance companies, regulated Investment companies, real estate
investment trusts, financial institutions, dealers in securities or currencies, tax-exempt
entities, persons liable for alternative minimum tax, persons that will hold equity shares or ADSs
as a position in a straddle or as part of a hedging or conversion transaction for tax
purposes, persons holding ADSs or equity shares through partnerships or other pass-through
entities, persons that have a functional currency other than the U.S. dollar or holders of 10% or
more, by voting power or value, of the shares of our company. This summary is based on the tax laws
of the United States as in effect on the date of this document and on United States Treasury
Regulations in effect or, in some cases, proposed, as of the date of this document, as well as
judicial and administrative interpretations thereof available on or before such date and is based
in part on the assumption that each obligation in the deposit agreement and any related agreement
will be performed in accordance with its terms. All of the foregoing is subject to change, which
change could apply retroactively and could affect the tax consequences described below.
Each prospective investor should consult his, her or its own tax advisor with respect to the
U.S. federal, state, local and foreign tax consequences of acquiring, owning or disposing of equity
shares or ADSs.
Ownership of ADSs. For U.S. federal income tax purposes, holders of ADSs generally will be
treated as the owners of equity shares represented by such ADSs. Accordingly, the conversion of
ADSs into equity shares generally will not be subject to United States federal income tax.
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Dividends. Except for equity shares, if any, distributed pro rata to all shareholders of our
company, including holders of ADSs, the gross amount of any distributions of cash or property with
respect to equity shares or ADSs will generally be included in income by a U.S. holder as foreign
source dividend income at the time of receipt, which in the case of a U.S. holder of ADSs generally
should be the date of receipt by the depositary, to the extent such distributions are made from the
current or accumulated earnings and profits (as determined under U.S. federal income tax
principles) of our company. Such dividends will not be eligible for the dividends received
deduction generally allowed to corporate U.S. holders. To the extent, if any, that the amount of
any distribution by our company exceeds our companys current and accumulated earnings and profits
as determined under U.S. federal income tax principles, such excess will be treated first as a
tax-free return of the U.S. holders tax basis in the equity shares or ADSs and thereafter as
capital gain.
Subject to certain conditions and limitations, including the passive foreign investment
company rules described below, dividends paid to non-corporate U.S. holders, including individuals,
may be eligible for a reduced rate of taxation if we are deemed to be a qualified foreign
corporation for United States federal income tax purposes. Under current tax, this reduced rate of
taxation will not apply to dividends received in taxable years beginning after December 31, 2010
and such dividends will be taxed at ordinary income rates.
EACH U.S. HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TREATMENT OF DIVIDENDS AND
SUCH HOLDERS ELIGIBILITY FOR REDUCED RATE OF TAXATION.
A qualified foreign corporation includes a foreign corporation if (1) its shares (or,
according to legislative history, its ADSs) are readily tradable on an established securities
market in the United States, or (2) it is eligible for the benefits under a comprehensive income
tax treaty with the United States. In addition, a corporation is not a qualified foreign
corporation if it is a passive foreign investment company (as discussed below). The ADSs are traded
on the New York Stock Exchange. Due to the absence of specific statutory provisions addressing
ADSs, however, there can be no assurance that we are qualified foreign corporation solely as a
result of our listing on New York Stock Exchange. Nonetheless, we may be eligible for benefits
under the comprehensive income tax treaty between India and the United States. Each U.S. holder
should consult its own tax advisor regarding the treatment of dividends and such holders
eligibility for reduced rate of taxation.
Subject to certain conditions and limitations, any Indian dividend withholding tax imposed
upon distributions paid to a U.S. holder should be eligible for credit against the U.S. holders
federal income tax liability. Alternatively, a U.S. holder may claim a deduction for such amount,
but only for a year in which a U.S. holder does not claim a credit with respect to any foreign
income taxes. The overall limitation on foreign taxes eligible for credit is calculated separately
with respect to specific classes of income. For this purpose, distributions on equity shares or
ADSs will be income from sources outside the United States, and, for tax years beginning before
January 1, 2007, will generally be passive income, or financial services income, and for tax
years beginning after December 31, 2006, will generally be passive category income or general
category income for purposes of computing the United States foreign tax credit allowable to a U.S.
holder.
If dividends are paid in Indian rupees, the amount of the dividend distribution included in
the income of a U.S. holder will be in the U.S. dollar value of the payments made in Indian rupees,
determined at a spot exchange rate between Indian rupees and U.S. dollars applicable to the date
such dividend is included in the income of the U.S. holder, regardless of whether the payment is in
fact converted into U.S. dollars. Generally, gain or loss, if any, resulting from currency exchange
fluctuations during the period from the date the dividend is paid to the date such payment is
converted into U.S. dollars will be treated as U.S. source ordinary income or loss.
Sale or Exchange of Equity Shares or ADSs. A U.S. holder generally will recognize gain or loss
on the sale or exchange of equity shares or ADSs equal to the difference between the amount
realized on such sale or exchange and the U.S. holders adjusted tax basis in the equity shares or
ADSs, as the case may be. Such gain or loss will be capital gain or loss, and will be long-term
capital gain or loss if the equity shares or ADSs, as the case may be, were held for more than one
year. Gain or loss, if any, recognized by a U.S. holder generally will be treated as U.S. source
passive category income or loss for U.S. foreign tax credit purposes. Capital gains realized by a
U.S. holder upon sale of equity shares (but not ADSs) may be subject to certain tax in India. See
taxation Taxation of Distributions Taxation of Capital Gains. Due to limitations on foreign
tax credits, however, a U.S. holder may not be able to utilize any such taxes as a credit against
the U.S. holders federal income tax liability.
Backup Withholding Tax and Information Reporting. Any dividends paid, or proceeds on a sale
of, equity shares or ADSs to or by a U.S. holder may be subject to U.S. information reporting, and
backup withholding (currently at a rate of 28%, which will increase to 31% under current law if
paid after December 31, 2010) may apply unless the holder is an exempt recipient or provides a U.S.
taxpayer identification number, certifies that such holder is not subject to backup withholding and
otherwise complies with any applicable backup withholding requirements. Any amount withheld under
the backup withholding rules will be allowed as a refund or credit against the holders U.S.
federal income tax, provided that the required information is furnished to the Internal Revenue
Service.
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Passive Foreign Investment Company. A non-U.S. corporation will be classified as a passive
foreign investment company for U.S. Federal income tax purposes if either:
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75% or more of its gross income for the taxable year is passive income; or |
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on average for the taxable year by value, or, if it is not a publicly traded
corporation and so elects, by adjusted basis, if 50% or more of its assets produce or
are held for the production of passive income. |
We do not believe that we satisfy either of the tests for passive foreign investment company
status for the year ended March 31, 2010. However, since this determination is made on
an annual basis and depends on the value of our ADS, no assurance can be given that we will not be
considered a passive foreign investment company in 2010 and/or future taxable years. If we were to
be a passive foreign investment company for any taxable year, U.S. holders would be required to
either:
|
|
|
pay an interest charge together with tax calculated at an ordinary income rates on
excess distributions, as the term is defined in relevant provisions of U.S. tax laws,
and on any gain on a sale or other disposition of equity shares; |
|
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|
if an election is made to be a qualified electing fund (as the term is defined in
relevant provisions of the U.S. tax laws), include in their taxable income their pro
rata share of undistributed amounts of our income; or |
|
|
|
if the equity shares are marketable and a mark-to-market election is made,
mark-to-market the equity shares each taxable year and recognize ordinary gain and, to
the extent of prior ordinary gain, ordinary loss for the increase or decrease in market
value for such taxable year. |
If we are treated as a passive foreign investment company, we do not plan to provide
information necessary for the qualified electing fund election.
In addition, certain information reporting obligations may apply to U.S. holders if we are
determined to be a PFIC.
THE ABOVE SUMMARY IS NOT INTENDED TO BE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING
TO OWNERSHIP OF EQUITY SHARES OR ADSs. YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISORS REGARDING THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR CIRCUMSTANCES, AS WELL
AS ANY ADDITIONAL TAX CONSEQUENCES RESULTING FROM AN INVESTMENT IN THE ADSs OR EQUITY SHARES,
INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR NON-U.S.
JURISDICTION, INCLUDING ESTATE, GIFT AND INHERITANCE LAWS.
Documents on Display
This report and other information filed or to be filed by Wipro Limited can be inspected and
copied at the public reference facilities maintained by the SEC at:
|
|
|
100 F Street, NE
Washington D.C., 20549 |
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Northwestern Atrium Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511 |
Copies of these materials can also be obtained from the Public Reference Section of the SEC,
100 F Street, NE., Washington, D.C. 20549, at prescribed rates.
The SEC maintains a website at www.sec.gov that contains reports, proxy and
information statements, and other information regarding registrants that make electronic filings
with the SEC using its EDGAR system.
Additionally, documents referred to in this Form 20-F may be inspected at our corporate
offices which are located at Doddakannelli, Sarjapur Road, Bangalore, Karnataka, 560035, India.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
(in millions, except share data and where otherwise stated)
84
General
Market risk is the risk of loss of future earnings, to fair values or to future cash flows
that may result from a change in the price of a financial instrument. The value of a financial
instrument may change as a result of changes in the interest rates, foreign currency exchange
rates, equity prices and other market changes that affect market risk sensitive instruments. Market
risk is attributable to all market risk sensitive financial instruments including investments,
foreign currency receivables, payables and loans and borrowings.
Our exposure to market risk is a function of investment and borrowing activities and
revenue generating activities in foreign currency. The objective of market risk management is to
avoid excessive exposure of our earnings and equity to losses.
Risk Management Procedures
We manage market risk through a corporate treasury department, which evaluates and
exercises independent control over the entire process of market risk management. Our corporate
treasury department recommends risk management objectives and policies, which are approved by
senior management and Audit Committee. The activities of this department include management of cash
resources, implementing hedging strategies for foreign currency exposures, borrowing strategies,
and ensuring compliance with market risk limits and policies.
Components of Market Risk
Foreign currency risk
We operate internationally and a major portion of our business is transacted in
several currencies and consequently the Company is exposed to foreign exchange risk through
sales and services in the United States and elsewhere, and purchases from overseas suppliers in
various foreign currencies. The exchange rate risk primarily arises from foreign exchange revenue,
receivables, cash balances, forecasted cash flows, payables and foreign currency loans and
borrowings. A significant portion of revenue is in U.S. dollars, euro and pound sterling, while a
significant portion of costs are in Indian rupees. The exchange rate between the rupee and U.S.
dollar, euro and pound sterling has fluctuated significantly in recent years and may continue to
fluctuate in the future. Appreciation of the rupee against these currencies can adversely affect
our results of operations.
We evaluate our exchange rate exposure arising from these transactions and enter into
foreign currency derivative instruments to mitigate such exposure. We follow established
risk management policies, including the use of derivatives like foreign exchange forward / option
contracts to hedge forecasted cash flows denominated in foreign currency.
We have designated certain derivative instruments as cash flow hedge to mitigate the
foreign exchange exposure of forecasted highly probable cash flows. We have also designated
a combination of foreign currency borrowings and related cross-currency swaps and other foreign
currency derivative instruments as hedge of its net investment in foreign operations.
As at March 31, 2010, Rs.1 increase / decrease in the spot exchange rate of Indian Rupee with
U.S. dollar would result in approximately Rs. 1,071 decrease / increase in the fair value of our foreign currency dollar denominated derivative instruments.
As at March 31, 2010, 1% change in the exchange rate between U.S. Dollar and Yen would result
in approximately Rs. 160 increase/decrease in the fair value of cross-currency interest rate swaps.
Interest rate risk
Interest rate risk primarily arises from floating rate borrowing, including various revolving
and other lines of credit. Our investments are primarily in short-term investments, which
do not expose us to significant interest rate risk. We manage our net exposure to
interest rate risk relating to borrowings, by balancing the proportion of fixed rate borrowing and
floating rate borrowing in its total borrowing portfolio. To manage this portfolio mix, we
may enter into interest rate swap agreements, which allows us to exchange periodic
payments based on a notional amount and agreed upon fixed and floating interest rates. As of March
31, 2010, substantially all of our borrowings was subject to floating interest rates, which
reset at short intervals. If interest rates were to increase by 100 bps from March 31, 2010,
additional annual interest expense on our floating rate borrowing would amount to
approximately Rs. 584.
85
Credit risk
Credit risk arises from the possibility that customers may not be able to settle their
obligations as agreed. To manage this, we periodically assess the financial reliability
of customers, taking into account the financial condition, current economic trends, analysis of
historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
No single customer accounted for more than 10% of the accounts receivable as at April 1, 2008,
March 31, 2009 and 2010, respectively and revenues for the year ended March 31, 2009 and 2010,
respectively. There is no significant concentration of credit risk.
Counterparty risk
Counterparty risk encompasses issuer risk on marketable securities, settlement risk on
derivative and money market contracts and credit risk on cash and time deposits. Issuer risk is
minimized by only buying securities which are at least AA rated. Settlement and credit risk is
reduced by the policy of entering into transactions with counterparties that are usually banks or
financial institutions with acceptable credit ratings. Exposure to these risks are closely
monitored and maintained within predetermined parameters. There are limits on credit exposure to
any financial institution. The limits are regularly assessed and determined based upon credit
analysis including financial statements and capital adequacy ratio reviews. In addition, net
settlement agreements are contracted with significant counterparties.
Liquidity risk
Liquidity
risk is defined as the risk that we will not be able to settle or
meet our
obligations on time or at a reasonable price. Our corporate treasury department is
responsible for liquidity, funding as well as settlement management. In addition, processes and
policies related to such risks are overseen by senior management. Management monitors the Companys
net liquidity position through rolling forecasts on the basis of expected cash flows. As of March
31, 2010, our cash and cash equivalents are held with major banks and financial institutions.
Item 12. Description of Securities Other Than Equity Securities
Item 12 A. Debt Securities
Not applicable
Item 12 B. Warrants and Rights
Not applicable
Item 12 C. Other securities
Not applicable
Item 12 D. American Depository Shares
Item 12.D.3. Fees and Charges for Holders of American Depository Receipts
J P Morgan Chase Bank, N.A., as depositary for the ADSs (the depositary) collects fees as
provided in the Deposit Agreement, as mentioned below:
The Depositary may charge each person to whom ADRs are issued against deposits of Shares,
including deposits in respect of Share Distributions, Rights and Other Distributions (as such terms
are defined in paragraph (10)), and each person surrendering ADRs for withdrawal of Deposited
Securities, U.S. $5.00 for each 100 ADSs (or portion thereof) evidenced by the ADRs delivered or
surrendered. The Depositary may sell (by public or private sale) sufficient securities
and property received in respect of Share Distributions, Rights and Other Distributions prior to
such deposit to pay such charge. The Company will pay all other charges and expenses of the
Depositary and any agent of the Depositary (except the Custodian) pursuant to agreements from time
to time between the Company and the Depositary, except (i) stock transfer or other taxes and other
governmental charges (which are payable by Holders or persons depositing Shares), (ii) cable, telex
and facsimile transmission and delivery charges incurred at the request of persons depositing, or
Holders delivering Shares, ADRs or Deposited Securities (which are payable by such persons or
Holders), (iii) transfer or registration fees for the registration of transfer of Deposited
Securities on any applicable register in connection with the deposit or withdrawal of Deposited
Securities (which are payable by persons depositing Shares or Holders withdrawing Deposited
Securities; there are no such fees in respect of the Shares as of the date of the Deposit
Agreement) and (iv) expenses of the Depositary in connection with the conversion of foreign
currency into U.S. dollars (which are paid out of such foreign currency).
The depositary may generally refuse to provide fee-attracting services until its fees for those
services are paid.
86
Item 12.D.4. Fees Paid by Depository to the Company
a. Direct Payments
J. P. Morgan, as depositary, has agreed to reimburse certain reasonable expenses related to
the Companys ADR Program and incurred by the Company in connection with the Program. In the year
ended March 31, 2010, the depositary reimbursed USD 9519.97.
The amounts the depositary reimbursed are not perforce related to the fees collected by the
depositary from ADR holders. Under certain circumstances, including termination of the Program
prior to the contract term, Company is required to repay to J.P. Morgan amounts reimbursed
in prior periods. The table below sets forth the types of expenses that J.P. Morgan has agreed to
reimburse and the amounts reimbursed during the fiscal year ended March 31, 2010.
|
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Category of Expenses |
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Amount reimbursed for fiscal ended March 31, 2010 |
Legal and accounting fees
incurred in connection with
preparation of Form 20F and
ongoing SEC compliance and
listing requirements |
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Listing fees
|
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(Details provided under Indirect Payments) |
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Investor relations (1)
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USD 9519.97 |
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Advertising and public relations
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Nil |
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Broker reimbursements (2)
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(Details provided under Indirect Payments) |
|
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1) |
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Includes ADR training expenses. |
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2) |
|
Broker reimbursements are fees payable to Broadridge and other service providers for the
distribution of hard copy material to beneficial ADR holders in the Depository Trust Company.
Corporate material includes information related to shareholders meetings and related voting
instruction cards. These fees are SEC approved. |
b. Indirect Payments
As part of its service to the Company, J.P. Morgan has agreed to waive fees for the
standard costs associated with the administration of the ADR Program, associated operating
expenses and investor relations advice estimated to total $240,000. J.P. Morgan has also
paid the following expenses on our behalf: $100,236.07
Under certain circumstances, including termination of the Program prior to contract term,
the Company is required to repay to J. P. Morgan amounts waived and/or expenses paid in prior
periods. The table below sets forth the fees that J.P. Morgan has agreed to waive and/or expenses
that J.P. Morgan has agreed to pay during the fiscal year ended March 31, 2010.
|
|
|
Category of Expenses |
|
Amount reimbursed for fiscal ended March 31, 2010 |
Third party expenses paid directly (Listing fees)
|
|
USD 76,000 (NYSE listing fees for 2009 and 2010) |
|
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USD 19,648.09 (Broker reimbursements, postage,
printing and DTC report fees) |
|
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USD 4,587.98 (Training expenses) |
|
|
|
Service Fees waived
|
|
Up to USD 240,000 per year |
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not Applicable
Item 15. Controls and Procedures
Disclosure controls and procedures.
87
Item 15. Controls and Procedures
Disclosure controls and procedures.
In connection with the audit of our consolidated financial statements for the year ended March
31, 2010, and as disclosed in our Form 6-K dated March 1, 2010, we discovered acts of embezzlement
by one of our junior level employees during the period from November 2006 to December 2009. In
response to the discovery of such acts of embezzlement, our Audit
Committee conducted investigations to determine, among other things, the materiality of the amounts embezzled, the
design and implementation of internal control processes to detect and prevent similar
misappropriations in the future and certain other issues including appropriateness of certain
accounting entries. Based on our review of the facts discovered during the investigation, we
believe that the amounts embezzled were not material. See also Item 5 Managements Discussion and Analysis of Financial Condition and Results of
Operations for additional information pertaining to our Audit Committee investigations and the
findings and the impact of financial statement misstatements and other adjustments identified
during the investigations.
We and our independent registered public accounting firm also identified the lack of internal
controls that gave rise to this embezzlement and the financial
statement misstatements as material weaknesses in our internal control over
financial reporting as of March 31, 2009. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of a companys annual or interim financial statements will
not be prevented or detected on a timely basis. The material weaknesses were related to the:
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|
sharing of online banking access passwords and our internal accounting system
passwords by certain employees within the finance and accounting departments,
including personnel responsible for external financial reporting; |
|
|
|
lack of effective controls over recording of journal entries, including
inadequate documentation and maker-checker controls, which also resulted in
ineffective controls over bank reconciliation statements, exchange rate
fluctuation accounts and outstanding liabilities accounts; |
|
|
|
lack of timely and adequate reconciliation and review of period-end
reinstatement of foreign currency inter-company and unit balances, including the
recording of appropriate adjustments; and |
|
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|
insufficient segregation of duties in relation to recording and initiating
certain banking payments. |
As a result of identifying these material weaknesses, our management and Audit Committee have
concluded that our previously issued report on Internal Control Over Financial Reporting (ICOFR),
as of March 31, 2009, should no longer be relied upon. Further, KPMG India, our independent
registered public accounting firm, has concluded that its audit opinion on ICOFR as of March 31,
2009 should also no longer be relied upon due to these material weaknesses.
We have taken steps to address the underlying causes of these material weaknesses described
above primarily through the development and implementation of policies and controls, improved
processes and documented procedures, the retention of third-party experts, and the hiring of
additional accounting and finance personnel. The actions that we have taken were reviewed by our
senior management with oversight by our Audit Committee.
As of the end of the period covered by this Annual Report on Form 20-F, we carried out an
evaluation, under the supervision and with the participation of our management, including our chief
executive officer and chief financial officer, of the effectiveness of the design and operation of
our
disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended, or the Exchange Act.
Based on their evaluation as of March 31, 2010 and the actions described above, our principal
executive officer and principal financial officer have concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by us in reports that
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules and forms and that material
information related to us and our consolidated subsidiaries is accumulated and communicated to our
management, including the Chief Executive Officer and Chief Financial
Officer, as appropriate, to
allow timely decisions about required disclosure.
MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and
15(d)-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with the International Financial Reporting Standards
and their interpretations (IFRS), as issued by the International Accounting Standard Board
(IASB).
The
Companys internal control over financial reporting includes those policies and procedures
that:
|
(i) |
|
pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of our assets; |
|
(ii) |
|
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with IFRS, as issued by the
IASB and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and |
|
(iii) |
|
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that could have
a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management,
with the participation of our Chief Executive Officer and Chief
Financial Officer, assessed the effectiveness of internal control over financial reporting as of
March 31, 2010. In conducting this assessment of internal control over financial reporting,
management based its evaluation on the framework in Internal ControlIntegrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Our independent registered public accounting firm, KPMG India, has audited the consolidated
financial statements in this Form 20-F, and as part of their audit, has issued its report, which is
included in this Form 20-F, on the effectiveness of our internal control over financial reporting
as of March 31, 2010.
In connection with the audit of our consolidated financial statements for the year ended March
31, 2010, we and our independent registered public accounting firm also identified the lack of
internal controls that gave rise to the embezzlement and financial
statement misstatements as material weaknesses in our internal control
over financial reporting as of March 31, 2009.
We have taken steps to address the underlying causes of these material weaknesses, primarily through the development and implementation of policies and controls, improved
processes and documented procedures, the retention of third-party experts, and the hiring of
additional accounting and finance personnel. The actions that we have taken were reviewed by our
senior management with oversight by our Audit Committee.
88
Report of Independent Registered Public Accounting Firm
The Board of Directors and Equity holders
Wipro Limited:
We have audited Wipro Limited and its subsidiaries (the Company) internal control over financial
reporting as of March 31, 2010, based on criteria established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Companys management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Managements Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Companys internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2010, based on criteria established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated statements of financial position of the Company as of April 1, 2008
and March 31, 2009 and 2010, and the related consolidated statements of income, comprehensive income,
changes in equity, and cash flows for each of the years in the two-year period ended March 31, 2010, and
our report dated November 12, 2010 expressed an unqualified opinion on those consolidated financial statements.
KPMG
Bangalore, India
November 12, 2010
89
Change in internal controls over financial reporting.
During the period covered by this Annual Report, there were changes in our internal control
over financial reporting that have materially affected or are reasonably likely to materially
affect our internal control over financial reporting.
As we disclosed in our Form 6-K dated March 1, 2010, we discovered acts of embezzlement by one
of our junior level employees during the period from November 2006 to December 2009. In response
to the discovery of such acts of embezzlement, our Audit Committee
conducted an investigation through an internal investigation team to
determine, among other things, the materiality of the amounts embezzled, the design and
implementation of internal control processes to detect and prevent similar misappropriations in the
future and certain other issues including appropriateness of certain accounting entries. Based on
our review of the facts discovered during the investigation, we believe that the amounts embezzled were not material. We have since recovered
substantially all of the embezzled amounts.
As part of this internal
investigation, certain financial misstatements were also identified in the area of exchange rate fluctuation and
outstanding liability accounts. Accordingly, our Audit Committee, together with its independent
legal counsel and the forensic accountants they engaged, commenced an external investigation to evaluate
certain issues that arose out of the internal investigation, including the appropriateness of
certain accounting entries. We and our independent registered public accounting firm also
identified the lack of internal controls that gave rise to the embezzlement and other financial statement misstatements as material weaknesses
in our internal control over financial reporting as of March 31, 2009. A material weakness is a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of a companys annual or
interim financial statements will not be prevented or detected on a timely basis. The material
weaknesses were related to the:
|
|
|
sharing of online banking access passwords and our internal accounting
system passwords by certain employees within the finance and accounting departments,
including personnel responsible for external financial reporting; |
|
|
|
lack of effective controls over recording of journal entries, including
inadequate documentation and maker-checker controls, which also resulted in
ineffective controls over bank reconciliation statements, exchange rate fluctuation
accounts and outstanding liabilities accounts; |
|
|
|
lack of timely and adequate reconciliation and review of period end
reinstatement of foreign currency inter-company and unit balances, including recording
of appropriate adjustments; and |
|
|
|
insufficient segregation of duties in relation to recording and
initiating banking payments. |
As of March 31, 2010, these identified material weaknesses were remediated by our management
through the implementation of a series of steps designed to improve the control processes and
controls including making necessary personnel changes. The steps that we have taken are reviewed by
senior management, as well as oversight by our Audit Committee. These steps included the following:
|
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|
re-emphasizing our documented policy on Password Security Compliance
and obtaining quarterly confirmations from employees; |
|
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|
implementation of maker-checker control over recording of journal entries
including additional controls over bank reconciliation statements, exchange rate
fluctuation accounts and outstanding liabilities accounts; |
|
|
|
performing review and reconciliation of period end reinstatement of
foreign currency inter-company unit balances; and |
|
|
|
appropriate segregation of duties in relation to recording and initiating
banking payments. |
As a result of identifying these material weaknesses our management and Audit Committee have
concluded that our previously issued report on Internal Control Over Financial Reporting (ICOFR),
as of March 31, 2009, should no longer be relied upon. Further, KPMG India, our independent
registered public accounting firm, have concluded that its audit opinion on ICOFR as of March 31,
2009 should also no longer be relied upon due to these material weaknesses.
Compliance with the New York Stock Exchange Corporate Governance Rules
The Company presently complies with all the practices as described in the final Corporate
Governance Rules and Listing standards of the New York Stock Exchange as approved by the Securities
and Exchange Commission on November 4, 2003 and codified in Section 303A of the NYSE Listed Company
Manual.
A detailed compliance report with the final Corporate Governance rules of the New York Stock
Exchange will be separately filed with the New York Stock Exchange.
Item 16 A. Audit Committee Financial Expert
The Audit Committee is responsible for reviewing reports of our financial results, audits,
internal controls, and compliance with federal procurement laws and regulations. The committee
selects the independent registered public accounting firm and approves all related fees and
compensation and reviews their selection with the Board of Directors. The committee also reviews
the services proposed to be performed by the independent registered public accounting firm to
ensure their independence with respect to such services.
Members of the committee are non-management directors who, in the opinion of the Companys
Board of Directors, are independent as defined under the applicable rules of the New York Stock
Exchange. The Board has determined that Mr. Narayan Vaghul qualifies as an Audit Committee
Financial Expert as defined by the applicable rules of the SEC.
Item 16 B. Code of Ethics
Our Audit Committee has adopted a written Code of Ethics, as defined in Item 406 of Regulation
S-K, applicable to our principal executive officer, principal financial officer, principal
accounting officer and all officers working in our finance, accounting, treasury, internal audit,
tax, legal, purchase, financial analyst, investor relations functions, disclosure committee
members, and senior management, as well as members of the Audit Committee and the Board of
Directors. Our Code of Ethics is available under the investor relations section on our website at
www.wipro.com. We will post any amendments to, or waivers from, our Code of Ethics at that
location on our website.
Our Audit Committee has also adopted an Ombuds process policy wherein it has established
procedures for receiving, retaining and treating complaints received, and procedures for the
confidential, anonymous submission by employees of complaints regarding questionable accounting or
auditing matters, conduct which results in a violation of law by Wipro or in a substantial
mismanagement of Company resources. Under this policy, our employees are encouraged to report
questionable accounting matters, any reporting of fraudulent financial information to our
shareholders, the government or the financial markets any conduct that results in a violation of
law by Wipro to our management (on an anonymous basis, if employees so desire). Likewise, under
this policy, we have prohibited discrimination, retaliation or harassment of any kind against any
employee who, based on the employees reasonable belief that such conduct or practices have
occurred or are occurring, reports that information or participates in an investigation. Our Ombuds
process policy is available under the investor relations section on our website at
www.wipro.com.
We have also adopted an updated Code of Business Conduct and Ethics, applicable to all
officers, directors and employees. Our updated Code of Business Conduct and Ethics is available
under the investor relations section on our website at www.wipro.com.
Item 16 C. Principal Accountant Fees and Services
Our Audit Committee charter requires us to obtain the prior approval of our audit committee on
every occasion that we engage our principal accountants or their associated entities and on every
occasion that they provide us with any non-audit services. At the beginning of each year, the Audit
Committee reviews the proposed services, including the nature, type and scope of services
contemplated and approves the related fees, to be rendered by these firms during the year. In
addition, Audit Committee pre-approval is also required for those engagements that may arise during
the course of the year that are outside the scope of the initial services and fees pre-approved by
the Audit Committee.
The following table presents fees for professional audit services rendered by KPMG for the
audit of the Companys annual financial statements and fees billed for other services rendered by
KPMG.
90
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
|
2009 |
|
|
2010 |
|
Audit fees |
|
Rs. |
78 |
|
|
Rs. |
82 |
|
Tax fees |
|
|
37 |
|
|
|
36 |
|
All other fees |
|
|
3 |
|
|
|
11 |
|
|
|
|
|
|
|
|
Total |
|
Rs. |
118 |
|
|
Rs. |
129 |
|
|
|
|
|
|
|
|
Audit services comprise fees for professional services in connection with the audit of
Companys annual consolidated financial statements and their attestation and report concerning
internal control over financial reporting and reviews of interim financial statement.
Tax services comprise fees for tax compliance, tax assessment and tax planning services
rendered by the independent registered public accounting firm. These services include corporate tax
services like assistance with foreign income tax, value added tax, transfer pricing study,
government sales tax and equivalent tax matters in local jurisdictions and assistance with local
tax authority reporting requirements for tax compliance purposes.
Our Audit Committee charter requires us to take the prior approval of our Audit Committee on
every occasion we engage our principal accountants or their associated entities to provide us any
audit or non-audit services. We disclose to our Audit Committee the nature of services that are
provided and the fees to be paid for the services. All of the audit or non-audit services provided
by our principal accountants or their associated entities have been pre-approved by our Audit
Committee.
Item 16 D. Exemptions from the Listing Standards for Audit Committees
We have not sought any exemption from the listing standards for Audit Committees applicable to
us as foreign private issuer, pursuant to Rule 10(A)-3(d) of the Securities Exchange Act of 1934.
Item 16 E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16 F. Changes in registrants Certifying Accountant
None.
Item 16 G. Corporate Governance
Because our securities are listed on a national securities exchange, we are required to
provide a concise summary of any significant ways in which our corporate governance practices
differ from those followed by domestic companies under the listing standards of that exchange.
Being a foreign private issuer, we are permitted to follow home country practice in lieu of the
provisions of this Section 303A of the NYSE Listed Company Manual, except that we are required to
comply with the requirements of Sections 303A.06, 303A.11 and 303A.12(b) and (c) thereof. With
regard to Section 303A.11, although the Companys required home country standards on corporate
governance may differ from the NYSE listing standards, the Companys actual corporate governance
policies and practices are generally in compliance with the NYSE listing standards applicable to
domestic companies. Some of the key differences between the requirements in India and those as per
NYSE Listing requirements are as follows:
|
a. |
|
Listing Agreement with Indian stock exchanges require 50% of the Board of
Directors to be independent directors in the case of executive Chairman of the Board
(it is 33.33% in other cases) while NYSE listing requirements specify that a majority
of the Board to consist of independent directors. |
|
|
b. |
|
Listing Agreement with Indian stock exchanges requires that a majority of the
members of the Audit Committee be independent directors while the NYSE Listing
specifies that all the members of the Audit Committee must be independent directors. |
|
|
c. |
|
The requirement for a Nomination Committee and Compensation Committee are not
compulsory as per Listing Agreements with Indian stock exchanges. These are mandatory
requirements as per NYSE Listing requirements. A Shareholders Grievance committee is
mandatory under Listing Agreements with stock exchanges and is not a requirement under
NYSE Listing requirements. |
91
|
d. |
|
Criteria for determining directors to be independent also differ between the
two countries Listing requirements. |
The other key practices followed in the home country as per home country laws are disclosed
elsewhere in this report.
Part III
Item 17. Financial Statements
See Item 18.
92
Item 18. Financial Statements
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
REPORT OF AUDIT COMMITTEE
The Board of Directors and Stockholders of Wipro Limited
In connection with the March 31, 2010 consolidated financial statements prepared under
International Financial Reporting Standards and its interpretations (IFRS), as issued by the
International Accounting Standard Board (IASB), the Audit Committee: (1) reviewed and discussed
the consolidated financial statements with management; (2) discussed with the auditors the matters
required by the Statement on Auditing Standards No. 114, and the Sarbanes-Oxley Act of 2002; and
(3) reviewed and discussed with the auditors the matters required by NYSE Listing Standards. Based
upon these reviews and discussions, the Audit Committee recommended to the board of directors that
the audited consolidated financial statements be included in the Annual Report on Form 20-F to be
filed with the Securities and Exchange Commission of the United States of America.
|
|
|
|
|
|
|
Bangalore, India
|
|
N.Vaghul
|
|
P. M. Sinha
|
|
B. C. Prabhakar |
November
12, 2010
|
|
Chairman
|
|
Member
|
|
Member |
93
REPORT OF MANAGEMENT
Management of Wipro is responsible for the integrity and objectivity of the consolidated
financial statements and related notes. The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards and its interpretations (IFRS), as
issued by the International Accounting Standard Board (IASB) and include amounts based on
judgments and estimates by management. Management is also responsible for the accuracy of the
related data in the annual report and its consistency with the financial statements.
Management maintains internal control systems designed to provide reasonable assurance that
assets are safeguarded, transactions are executed in accordance with managements authorization and
properly recorded, and accounting records are adequate for preparation of financial statements and
other financial information. These are reviewed at regular intervals to ascertain their adequacy
and effectiveness.
In addition to the system of internal controls, the Company has articulated its vision and
core values which permeate all its activities. It also has corporate policies to ensure highest
standards of integrity in all business transactions, eliminate possible conflicts of interest,
ensure compliance with laws, and protect confidentiality of proprietary information. These are
reviewed at periodic intervals.
The consolidated financial statements have been audited by the Companys independent
registered public accounting firm, KPMG. Their responsibility is to audit these statements in
accordance with the standards of the Public Company Accounting Oversight Board (United States) and
express their opinion on the fairness of presentation of the statements.
The Audit Committee of the board comprised entirely of independent directors conducts an
ongoing appraisal of the independence and performance of the Companys internal and external
auditors and monitors the integrity of Companys financial statements. The Audit Committee meets
several times during the year with management, internal auditors and the independent registered
public accounting firm to discuss audit activities, internal controls and financial reporting
matters.
|
|
|
|
|
|
|
|
|
Azim H. Premji |
|
|
|
|
Chairman and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
S.C. Senapaty |
|
|
|
|
Chief Financial Officer and Director |
Bangalore, India
Date:
November 12, 2010
94
Report of Independent Registered Public Accounting Firm
The Board of Directors and Equity holders
Wipro Limited:
We have audited the accompanying consolidated statements of financial position of Wipro Limited and
subsidiaries (the Company) as of April 1, 2008 and March 31, 2009 and 2010 and the related
consolidated statements of income, comprehensive income, changes in equity, and cash flows for each
of the years in the two-year period ended March 31, 2010. These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of April 1, 2008 and March 31, 2009 and
2010, and the results of their operations and their cash flows for each of the years in the
two-year period ended March 31, 2010, in conformity with International Financial Reporting
Standards as issued by International Accounting Standards Board (IFRS).
As discussed in Note 2(ii) to the consolidated financial statements, the Company has changed its
basis of accounting to IFRS during the year ended March 31, 2010. Consequently, the Companys
consolidated financial statements as of April 1, 2008 and for the year ended March 31, 2009
referred to above have been restated to conform with IFRS. Prior to adoption of IFRS, the Company
prepared financial statements in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP) for purposes of its U.S. Securities and Exchange Commission
reporting and accounting principles generally accepted in India (Indian GAAP) for purposes of its
Indian regulatory reporting. Upon adoption of IFRS, Indian GAAP was considered previous GAAP.
Indian GAAP varies in certain significant respects from U.S. GAAP and IFRS. Information relating to
the nature and effect of such differences are presented in Note 31 and Note 3 to the consolidated
financial statements.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Companys internal control over financial reporting as of March 31,
2010, based on criteria established in Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated November 12, 2010 expressed an unqualified opinion on the effectiveness of the Companys internal control
over financial reporting.
KPMG
Bangalore, India
November 12, 2010
95
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Rupees in millions, except share and per share data, unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 1, |
|
|
As of March 31, |
|
|
|
|
|
|
Notes |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
into US $ in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer note 2(iv) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
5 |
|
|
|
42,635 |
|
|
|
56,143 |
|
|
|
53,802 |
|
|
|
1,197 |
|
Intangible assets |
|
|
5 |
|
|
|
1,866 |
|
|
|
3,493 |
|
|
|
4,011 |
|
|
|
89 |
|
Property, plant and equipment |
|
|
4 |
|
|
|
39,478 |
|
|
|
49,794 |
|
|
|
53,458 |
|
|
|
1,189 |
|
Investment in equity accounted investees |
|
|
16 |
|
|
|
1,343 |
|
|
|
1,670 |
|
|
|
2,345 |
|
|
|
52 |
|
Derivative assets |
|
|
15 |
|
|
|
|
|
|
|
543 |
|
|
|
1,201 |
|
|
|
27 |
|
Deferred tax assets |
|
|
18 |
|
|
|
1,508 |
|
|
|
4,369 |
|
|
|
1,686 |
|
|
|
38 |
|
Non-current tax assets |
|
|
|
|
|
|
2,833 |
|
|
|
2,690 |
|
|
|
3,464 |
|
|
|
77 |
|
Other non-current assets |
|
|
11 |
|
|
|
4,050 |
|
|
|
7,378 |
|
|
|
8,784 |
|
|
|
195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets |
|
|
|
|
|
|
93,713 |
|
|
|
126,080 |
|
|
|
128,751 |
|
|
|
2,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
9 |
|
|
|
6,664 |
|
|
|
7,587 |
|
|
|
7,926 |
|
|
|
176 |
|
Trade receivables |
|
|
8 |
|
|
|
40,353 |
|
|
|
50,123 |
|
|
|
50,928 |
|
|
|
1,133 |
|
Other current assets |
|
|
11 |
|
|
|
11,269 |
|
|
|
14,664 |
|
|
|
21,106 |
|
|
|
470 |
|
Unbilled revenues |
|
|
|
|
|
|
8,514 |
|
|
|
14,108 |
|
|
|
16,708 |
|
|
|
372 |
|
Available for sale investments |
|
|
7 |
|
|
|
15,247 |
|
|
|
16,293 |
|
|
|
30,420 |
|
|
|
677 |
|
Current tax assets |
|
|
|
|
|
|
4,157 |
|
|
|
5,664 |
|
|
|
6,596 |
|
|
|
147 |
|
Derivative assets |
|
|
15 |
|
|
|
64 |
|
|
|
619 |
|
|
|
2,615 |
|
|
|
58 |
|
Cash and cash equivalents |
|
|
10 |
|
|
|
39,270 |
|
|
|
49,117 |
|
|
|
64,878 |
|
|
|
1,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
125,538 |
|
|
|
158,175 |
|
|
|
201,177 |
|
|
|
4,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
|
|
|
219,251 |
|
|
|
284,255 |
|
|
|
329,928 |
|
|
|
7,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
|
|
2,923 |
|
|
|
2,930 |
|
|
|
2,936 |
|
|
|
65 |
|
Share premium |
|
|
|
|
|
|
25,373 |
|
|
|
27,280 |
|
|
|
29,188 |
|
|
|
649 |
|
Retained earnings |
|
|
|
|
|
|
94,728 |
|
|
|
126,646 |
|
|
|
165,789 |
|
|
|
3,688 |
|
Share based payment reserve |
|
|
|
|
|
|
3,149 |
|
|
|
3,745 |
|
|
|
3,140 |
|
|
|
70 |
|
Other components of equity |
|
|
|
|
|
|
(704 |
) |
|
|
(12,915 |
) |
|
|
(4,399 |
) |
|
|
(98 |
) |
Shares held by controlled trust |
|
|
|
|
|
|
|
|
|
|
(542 |
) |
|
|
(542 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to the equity holders
of the Company |
|
|
|
|
|
|
125,469 |
|
|
|
147,144 |
|
|
|
196,112 |
|
|
|
4,363 |
|
Minority interest |
|
|
|
|
|
|
116 |
|
|
|
237 |
|
|
|
437 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
125,585 |
|
|
|
147,381 |
|
|
|
196,549 |
|
|
|
4,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings |
|
|
12 |
|
|
|
15,317 |
|
|
|
19,681 |
|
|
|
18,107 |
|
|
|
403 |
|
Derivative liabilities |
|
|
15 |
|
|
|
|
|
|
|
8,767 |
|
|
|
2,882 |
|
|
|
64 |
|
Deferred tax liabilities |
|
|
18 |
|
|
|
|
|
|
|
474 |
|
|
|
380 |
|
|
|
8 |
|
Non-current tax liabilities |
|
|
|
|
|
|
2,227 |
|
|
|
2,321 |
|
|
|
3,065 |
|
|
|
68 |
|
Other non-current liabilities |
|
|
14 |
|
|
|
3,789 |
|
|
|
4,332 |
|
|
|
3,233 |
|
|
|
72 |
|
Provisions |
|
|
14 |
|
|
|
261 |
|
|
|
277 |
|
|
|
100 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities |
|
|
|
|
|
|
21,594 |
|
|
|
35,852 |
|
|
|
27,767 |
|
|
|
617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings and bank overdraft |
|
|
12 |
|
|
|
29,533 |
|
|
|
37,211 |
|
|
|
44,404 |
|
|
|
988 |
|
Trade payables and accrued expenses |
|
|
13 |
|
|
|
27,873 |
|
|
|
40,191 |
|
|
|
38,748 |
|
|
|
862 |
|
Unearned revenues |
|
|
|
|
|
|
4,503 |
|
|
|
8,734 |
|
|
|
7,462 |
|
|
|
166 |
|
Current tax liabilities |
|
|
|
|
|
|
1,786 |
|
|
|
4,170 |
|
|
|
4,850 |
|
|
|
108 |
|
Derivative liabilities |
|
|
15 |
|
|
|
2,571 |
|
|
|
3,255 |
|
|
|
1,375 |
|
|
|
31 |
|
Other current liabilities |
|
|
14 |
|
|
|
4,558 |
|
|
|
5,582 |
|
|
|
6,499 |
|
|
|
145 |
|
Provisions |
|
|
14 |
|
|
|
1,248 |
|
|
|
1,879 |
|
|
|
2,274 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
72,072 |
|
|
|
101,022 |
|
|
|
105,612 |
|
|
|
2,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
|
93,666 |
|
|
|
136,874 |
|
|
|
133,379 |
|
|
|
2,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY AND LIABILITIES |
|
|
|
|
|
|
219,251 |
|
|
|
284,255 |
|
|
|
329,928 |
|
|
|
7,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these consolidated financial statements.
96
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Rupees in millions, except share and per share data, unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
Notes |
|
2009 |
|
2010 |
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
into US $ in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer note 2(iv) |
|
|
|
|
|
|
|
|
|
Revenues |
|
|
21 |
|
|
|
256,891 |
|
|
|
271,957 |
|
|
|
6,050 |
|
Cost of revenues |
|
|
22 |
|
|
|
(180,215 |
) |
|
|
(186,299 |
) |
|
|
(4,145 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
76,676 |
|
|
|
85,658 |
|
|
|
1,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
22 |
|
|
|
(17,313 |
) |
|
|
(18,608 |
) |
|
|
(414 |
) |
General and administrative expenses |
|
|
22 |
|
|
|
(14,510 |
) |
|
|
(14,823 |
) |
|
|
(330 |
) |
Foreign exchange losses |
|
|
|
|
|
|
(1,553 |
) |
|
|
(716 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results from operating activities |
|
|
|
|
|
|
43,300 |
|
|
|
51,511 |
|
|
|
1,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense |
|
|
23 |
|
|
|
(3,824 |
) |
|
|
(991 |
) |
|
|
(22 |
) |
Finance and other income |
|
|
24 |
|
|
|
5,057 |
|
|
|
4,360 |
|
|
|
97 |
|
Share of profits of equity accounted investees |
|
|
16 |
|
|
|
362 |
|
|
|
530 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax |
|
|
|
|
|
|
44,895 |
|
|
|
55,410 |
|
|
|
1,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
18 |
|
|
|
(6,035 |
) |
|
|
(9,294 |
) |
|
|
(207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
38,860 |
|
|
|
46,116 |
|
|
|
1,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company |
|
|
|
|
|
|
38,761 |
|
|
|
45,931 |
|
|
|
1,022 |
|
Minority interest |
|
|
|
|
|
|
99 |
|
|
|
185 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
38,860 |
|
|
|
46,116 |
|
|
|
1,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per equity share: |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
15.99 |
|
|
|
18.91 |
|
|
|
0.42 |
|
Diluted |
|
|
|
|
|
|
15.90 |
|
|
|
18.75 |
|
|
|
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of equity shares used in computing earnings
per equity share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
2,423,558,482 |
|
|
|
2,429,025,243 |
|
|
|
2,429,025,243 |
|
Diluted |
|
|
|
|
|
|
2,437,464,403 |
|
|
|
2,449,658,532 |
|
|
|
2,449,658,532 |
|
The accompanying notes form an integral part of these consolidated financial statements.
97
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Rupees in millions, except share and per share data, unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
Notes |
|
2009 |
|
2010 |
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
into US $ in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer note 2(iv) |
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
38,860 |
|
|
|
46,116 |
|
|
|
1,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation difference relating to foreign operations |
|
|
17 |
|
|
|
8,992 |
|
|
|
(5,522 |
) |
|
|
(123 |
) |
Net change in fair value of hedges of net investment in
foreign operations |
|
|
17 |
|
|
|
(7,427 |
) |
|
|
4,202 |
|
|
|
93 |
|
Net change in fair value of cash flow hedges |
|
|
15,18 |
|
|
|
(13,436 |
) |
|
|
9,841 |
|
|
|
219 |
|
Net change in fair value of available for sale investments |
|
|
7,18 |
|
|
|
(320 |
) |
|
|
(50 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income, net of taxes |
|
|
|
|
|
|
(12,191 |
) |
|
|
8,471 |
|
|
|
188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
|
|
|
|
26,669 |
|
|
|
54,587 |
|
|
|
1,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company |
|
|
|
|
|
|
26,548 |
|
|
|
54,447 |
|
|
|
1,211 |
|
Minority interest |
|
|
|
|
|
|
121 |
|
|
|
140 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,669 |
|
|
|
54,587 |
|
|
|
1,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these consolidated financial statements.
98
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDTAED STATEMENTS OF CHANGES IN EQUITY
(Rupees in millions, except share and per share date, unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other components of equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
Foreign |
|
Cash |
|
|
|
|
|
Shares |
|
Equity attributable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
based |
|
currency |
|
flow |
|
|
|
|
|
held by |
|
to the equity |
|
|
|
|
|
|
|
|
|
|
Share |
|
Share |
|
Retained |
|
payment |
|
translation |
|
hedging |
|
Other |
|
controlled |
|
holders of the |
|
Minority |
|
|
|
|
No. of shares |
|
capital |
|
premium |
|
earnings |
|
reserve |
|
reserve |
|
reserve |
|
reserve |
|
Trust |
|
Company |
|
interest |
|
Total equity |
As at April 1, 2008 |
|
|
1,461,453,320 |
|
|
|
2,923 |
|
|
|
25,373 |
|
|
|
94,728 |
|
|
|
3,149 |
|
|
|
(10 |
) |
|
|
(1,097 |
) |
|
|
404 |
|
|
|
|
|
|
|
125,469 |
|
|
|
116 |
|
|
|
125,585 |
|
Cash dividend paid (including dividend tax
thereon) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,842 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,842 |
) |
|
|
|
|
|
|
(6,842 |
) |
Issue of equity shares on exercise of
options |
|
|
2,558,623 |
|
|
|
5 |
|
|
|
1,367 |
|
|
|
|
|
|
|
(1,272 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
100 |
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,761 |
|
|
|
99 |
|
|
|
38,860 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,543 |
|
|
|
(13,436 |
) |
|
|
(320 |
) |
|
|
|
|
|
|
(12,213 |
) |
|
|
22 |
|
|
|
(12,191 |
) |
Shares issued and held by controlled trust |
|
|
968,803 |
|
|
|
2 |
|
|
|
540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(542 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation cost related to employee share
based payment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,868 |
|
|
|
|
|
|
|
1,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2009 |
|
|
1,464,980,746 |
|
|
|
2,930 |
|
|
|
27,280 |
|
|
|
126,646 |
|
|
|
3,745 |
|
|
|
1,533 |
|
|
|
(14,533 |
) |
|
|
85 |
|
|
|
(542 |
) |
|
|
147,144 |
|
|
|
237 |
|
|
|
147,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at April 1, 2009 |
|
|
1,464,980,746 |
|
|
|
2,930 |
|
|
|
27,280 |
|
|
|
126,646 |
|
|
|
3,745 |
|
|
|
1,533 |
|
|
|
(14,533 |
) |
|
|
85 |
|
|
|
(542 |
) |
|
|
147,144 |
|
|
|
237 |
|
|
|
147,381 |
|
Cash dividend paid (including dividend tax
thereon) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,788 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,788 |
) |
|
|
|
|
|
|
(6,788 |
) |
Issue of equity shares on exercise of options |
|
|
3,230,443 |
|
|
|
6 |
|
|
|
1,908 |
|
|
|
|
|
|
|
(1,908 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,931 |
|
|
|
185 |
|
|
|
46,116 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,275 |
) |
|
|
9,841 |
|
|
|
(50 |
) |
|
|
|
|
|
|
8,516 |
|
|
|
(45 |
) |
|
|
8,471 |
|
Infusion of capital, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
60 |
|
Compensation cost related to employee share
based payment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,302 |
|
|
|
|
|
|
|
1,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2010 |
|
|
1,468,211,189 |
|
|
|
2,936 |
|
|
|
29,188 |
|
|
|
165,789 |
|
|
|
3,140 |
|
|
|
258 |
|
|
|
(4,692 |
) |
|
|
35 |
|
|
|
(542 |
) |
|
|
196,112 |
|
|
|
437 |
|
|
|
196,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience translation into US $ in millions
(Unaudited) Refer note 2(iv) |
|
|
|
|
|
|
65 |
|
|
|
649 |
|
|
|
3,688 |
|
|
|
70 |
|
|
|
6 |
|
|
|
(104 |
) |
|
|
1 |
|
|
|
(12 |
) |
|
|
4,363 |
|
|
|
10 |
|
|
|
4,373 |
|
The accompanying notes form an integral part of these consolidated financial statements
99
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Rupees in millions, except share and per share date, unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
2009 |
|
2010 |
|
2010 |
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
|
Translation into |
|
|
|
|
|
|
|
|
|
|
US $ in millions |
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Refer note 2(iv) |
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
38,860 |
|
|
|
46,116 |
|
|
|
1,026 |
|
Adjustments to reconcile profit for the year to net cash generated
from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of property, plant and equipment |
|
|
(28 |
) |
|
|
(43 |
) |
|
|
(1 |
) |
Depreciation and amortization |
|
|
6,948 |
|
|
|
7,831 |
|
|
|
174 |
|
Unrealized exchange (gain) / loss |
|
|
3,728 |
|
|
|
(1,462 |
) |
|
|
(33 |
) |
Impact of cash flow/net investment hedging activities |
|
|
(12,196 |
) |
|
|
6,017 |
|
|
|
134 |
|
Gain on sale of investments |
|
|
(681 |
) |
|
|
(308 |
) |
|
|
(7 |
) |
Share based compensation |
|
|
1,868 |
|
|
|
1,302 |
|
|
|
29 |
|
Income tax expense |
|
|
6,035 |
|
|
|
9,294 |
|
|
|
207 |
|
Share of profits of equity accounted investees |
|
|
(362 |
) |
|
|
(530 |
) |
|
|
(12 |
) |
Dividend and interest (income)/expenses, net |
|
|
(1,331 |
) |
|
|
(2,820 |
) |
|
|
(63 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
(8,024 |
) |
|
|
(2,150 |
) |
|
|
(48 |
) |
Unbilled revenues |
|
|
(5,594 |
) |
|
|
(2,600 |
) |
|
|
(58 |
) |
Inventories |
|
|
(922 |
) |
|
|
(218 |
) |
|
|
(5 |
) |
Other assets |
|
|
(1,663 |
) |
|
|
(2,203 |
) |
|
|
(49 |
) |
Trade payables and accrued expenses |
|
|
12,260 |
|
|
|
(66 |
) |
|
|
(1 |
) |
Unearned revenues |
|
|
2,465 |
|
|
|
(1,272 |
) |
|
|
(28 |
) |
Other liabilities |
|
|
1,986 |
|
|
|
2,024 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash generated from operating activities before taxes |
|
|
43,349 |
|
|
|
58,912 |
|
|
|
1,311 |
|
Income taxes paid, net |
|
|
(7,250 |
) |
|
|
(7,914 |
) |
|
|
(176 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash generated from operating activities |
|
|
36,099 |
|
|
|
50,998 |
|
|
|
1,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure on property, plant and equipment and intangible assets |
|
|
(16,746 |
) |
|
|
(12,631 |
) |
|
|
(281 |
) |
Proceeds from sale of property, plant and equipment |
|
|
358 |
|
|
|
397 |
|
|
|
9 |
|
Purchase of available for sale investments |
|
|
(342,717 |
) |
|
|
(340,891 |
) |
|
|
(7,584 |
) |
Proceeds from sale of available for sale investments |
|
|
341,687 |
|
|
|
325,770 |
|
|
|
7,247 |
|
Investment in inter-corporate deposits |
|
|
(3,750 |
) |
|
|
(10,750 |
) |
|
|
(239 |
) |
Refund of inter-corporate deposits |
|
|
|
|
|
|
4,950 |
|
|
|
110 |
|
|