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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þ |
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Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended March 31, 2009
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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 |
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 contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of each class
American Depositary Shares, each represented by one Equity
Share, par value Rs. 2 per share.
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Name of each exchange on which registered
New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
(Title of Class)
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: 1,464,980,746 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,
a non-accelerated filer, or a smaller reporting company.
See the definitions of large
accelerated filer, accelerated filer and smaller reporting company 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
(Do not check if a smaller reporting company) |
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Smaller reporting company o |
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
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þ
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International
Financial Reporting Standards as issued by the International
Accounting Standards Board
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Other
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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 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
United States Generally Accepted Accounting Principles (U.S. GAAP). References to Indian GAAP
are to Indian 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, 2009, which was Rs. 50.87 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, including our intention to establish new development
facilities in Southeast Asia and Europe; |
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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 acquisition; |
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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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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 a dividend payout; |
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projections that our cash and cash equivalent along with cash generated from operations
will be sufficient to meet 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.
2
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable
4
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 five years ended March 31, 2009 and selected consolidated balance sheet data as of March
31, 2005, 2006, 2007, 2008 and 2009 in Indian rupees have been prepared and presented in
accordance with U.S. GAAP and have been derived from our audited consolidated financial
statements and related notes.
(In millions, except per equity share data)
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2005 |
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2006 |
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2007 |
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2008 |
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2009 |
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2009 |
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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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Services |
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65,398 |
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86,610 |
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117,819 |
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146,170 |
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193,924 |
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3,812 |
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Products |
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15,955 |
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19,287 |
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31,612 |
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51,258 |
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60,640 |
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1,192 |
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Total |
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81,353 |
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106,107 |
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149,431 |
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197,428 |
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254,564 |
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5,004 |
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Cost of revenues: |
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Services |
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(41,473 |
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(56,546 |
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(76,488 |
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(98,606 |
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129,769 |
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2,551 |
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Products |
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(12,655 |
) |
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(15,303 |
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(25,980 |
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(40,630 |
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48,407 |
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952 |
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Total |
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(54,128 |
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(71,849 |
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(102,468 |
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(139,236 |
) |
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(178,176 |
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3,503 |
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Gross profit |
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27,225 |
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34,258 |
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46,963 |
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58,192 |
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76,388 |
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1,502 |
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Operating expenses: |
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Selling and marketing expenses |
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(5,466 |
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(6,764 |
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(9,173 |
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(13,807 |
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(17,762 |
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(349 |
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General and administrative
expenses |
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(3,744 |
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(5,239 |
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(7,639 |
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(10,820 |
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(14,696 |
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(289 |
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Amortization of intangible assets |
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(140 |
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(64 |
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(269 |
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(616 |
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(1,488 |
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(29 |
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Other operating income/ (expenses) |
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(18 |
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(138 |
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24 |
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765 |
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(1,052 |
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(21 |
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Operating income |
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17,857 |
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22,053 |
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29,906 |
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33,714 |
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41,390 |
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814 |
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Gain/ (loss) on sale of stock by
affiliates, including direct issue
of stock by affiliate |
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(207 |
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Other income/ (expense), (net) |
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800 |
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1,196 |
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2,628 |
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2,167 |
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(1,816 |
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(36 |
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Equity in earnings / (losses) of
affiliates |
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158 |
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288 |
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318 |
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257 |
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362 |
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7 |
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Income before income taxes,
minority interest and cumulative
effect of changes in accounting
policy |
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18,608 |
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23,537 |
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32,852 |
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36,138 |
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39,936 |
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785 |
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Income taxes |
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(2,694 |
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(3,265 |
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(3,723 |
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(3,873 |
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(5,422 |
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(107 |
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Minority interest |
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(81 |
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(1 |
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(24 |
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(99 |
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(2 |
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Income before cumulative effect of
change in accounting principle |
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15,833 |
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20,271 |
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29,129 |
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32,241 |
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34,415 |
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677 |
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Cumulative effect of change in
accounting principle |
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39 |
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Net income |
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Rs. |
15,833 |
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Rs. |
20,271 |
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Rs. |
29,168 |
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Rs. |
32,241 |
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Rs. |
34,415 |
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$ |
677 |
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Earnings per share: |
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Basic |
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Income before cumulative effect
of change in accounting
principle |
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11.38 |
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14.41 |
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20.42 |
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22.23 |
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23.67 |
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0.47 |
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Cumulative effect of change in
accounting principle |
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0.03 |
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Net income |
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11.38 |
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14.41 |
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20.45 |
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22.23 |
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23.67 |
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0.47 |
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Diluted |
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Income before cumulative effect
of change in accounting
principle |
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11.29 |
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14.24 |
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20.17 |
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22.16 |
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23.63 |
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0.46 |
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Cumulative effect of change in
accounting principle |
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0.03 |
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Net income |
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11.29 |
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14.24 |
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20.20 |
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22.16 |
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23.63 |
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0.46 |
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Cash dividend per equity share |
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4.84 |
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2.50 |
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10.00 |
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3.00 |
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4.00 |
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5
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2005 |
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2006 |
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2007 |
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2008 |
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2009 |
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2009 |
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Convenience |
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translation into |
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|
|
|
|
|
US$ |
|
Additional data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Services |
|
Rs. |
65,398 |
|
|
Rs. |
86,610 |
|
|
Rs. |
117,640 |
|
|
Rs. |
146,260 |
|
|
Rs. |
191,193 |
|
|
$ |
3,758 |
|
IT Products |
|
|
8,686 |
|
|
|
10,378 |
|
|
|
16,965 |
|
|
|
24,619 |
|
|
|
33,424 |
|
|
|
657 |
|
Consumer Care and Lighting |
|
|
4,555 |
|
|
|
5,625 |
|
|
|
7,563 |
|
|
|
14,619 |
|
|
|
19,243 |
|
|
|
378 |
|
Others |
|
|
2,674 |
|
|
|
3,285 |
|
|
|
7,066 |
|
|
|
12,055 |
|
|
|
8,958 |
|
|
|
176 |
|
Reconciling items |
|
|
40 |
|
|
|
209 |
|
|
|
197 |
|
|
|
(125 |
) |
|
|
1,746 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Rs. |
81,353 |
|
|
Rs. |
106,107 |
|
|
Rs. |
149,431 |
|
|
Rs. |
197,428 |
|
|
Rs. |
254,564 |
|
|
$ |
5,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Services |
|
Rs. |
16,363 |
|
|
Rs. |
20,238 |
|
|
Rs. |
27,927 |
|
|
Rs. |
30,488 |
|
|
Rs. |
38,810 |
|
|
$ |
763 |
|
IT Products |
|
|
432 |
|
|
|
575 |
|
|
|
639 |
|
|
|
869 |
|
|
|
1,218 |
|
|
|
24 |
|
Consumer Care and Lighting |
|
|
671 |
|
|
|
799 |
|
|
|
1,067 |
|
|
|
1,842 |
|
|
|
2,294 |
|
|
|
45 |
|
Others |
|
|
466 |
|
|
|
487 |
|
|
|
384 |
|
|
|
878 |
|
|
|
(326 |
) |
|
|
(6 |
) |
Reconciling items |
|
|
(75 |
) |
|
|
(46 |
) |
|
|
(111 |
) |
|
|
(363 |
) |
|
|
(606 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Rs. |
17,857 |
|
|
Rs. |
22,053 |
|
|
Rs. |
29,906 |
|
|
Rs. |
33,714 |
|
|
Rs. |
41,390 |
|
|
$ |
814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
Rs. |
5,671 |
|
|
Rs. |
8,858 |
|
|
Rs. |
12,412 |
|
|
Rs. |
39,270 |
|
|
Rs. |
49,117 |
|
|
$ |
966 |
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
7,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Investments |
|
|
22,958 |
|
|
|
30,315 |
|
|
|
32,410 |
|
|
|
14,808 |
|
|
|
16,180 |
|
|
|
318 |
|
Working capital (1) |
|
|
36,449 |
|
|
|
50,691 |
|
|
|
57,444 |
|
|
|
53,643 |
|
|
|
52,154 |
|
|
|
1,025 |
|
Total assets |
|
|
72,075 |
|
|
|
102,827 |
|
|
|
146,084 |
|
|
|
224,502 |
|
|
|
291,087 |
|
|
|
5,722 |
|
Total debt (excluding capital lease
obligation) |
|
|
564 |
|
|
|
705 |
|
|
|
3,757 |
|
|
|
43,732 |
|
|
|
55,388 |
|
|
|
1,089 |
|
Total stockholders equity |
|
|
56,729 |
|
|
|
78,764 |
|
|
|
101,468 |
|
|
|
129,354 |
|
|
|
150,182 |
|
|
|
2,952 |
|
|
|
|
|
Notes: |
|
|
|
1. |
|
Working capital equals current assets minus current liabilities. |
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31, |
|
Period End |
|
Average |
|
High |
|
Low |
2009 |
|
Rs. 50.87 |
|
|
Rs. 46.32 |
|
|
Rs. 51.96 |
|
|
Rs. 39.73 |
|
2008 |
|
|
40.02 |
|
|
|
40.13 |
|
|
|
43.05 |
|
|
|
38.48 |
|
2007 |
|
|
43.10 |
|
|
|
45.06 |
|
|
|
46.83 |
|
|
|
42.78 |
|
2006 |
|
|
44.48 |
|
|
|
44.21 |
|
|
|
46.26 |
|
|
|
43.05 |
|
2005 |
|
|
43.62 |
|
|
|
44.87 |
|
|
|
46.45 |
|
|
|
43.27 |
|
On May 8, 2009, the certified foreign exchange rates published by Federal Reserve Board of New
York was Rs. 49.13
The following table sets forth the high and low exchange rates for the previous six months and
are based on the certified foreign exchange rates published by Federal Reserve Board of New York on
each business day during the period:
|
|
|
|
|
|
|
|
|
Month |
|
High |
|
Low |
April 2009 |
|
|
50.48 |
|
|
|
49.55 |
|
March 2009 |
|
|
51.96 |
|
|
|
50.21 |
|
February 2009 |
|
|
50.88 |
|
|
|
48.37 |
|
January 2009 |
|
|
49.07 |
|
|
|
48.25 |
|
December 2008 |
|
|
50.05 |
|
|
|
46.74 |
|
November 2008 |
|
|
50.12 |
|
|
|
47.25 |
|
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 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:
|
|
|
the size, complexity, timing, pricing terms and profitability of significant
projects or product orders; |
|
|
|
|
changes in our pricing policies or those of our competitors; |
|
|
|
|
the proportion of services we perform at our clients sites rather than at our
offshore facilities; |
|
|
|
|
seasonal changes that affect the mix of services we provide to our clients or the
relative proportion of services and product revenue; |
|
|
|
|
seasonal changes that affect purchasing patterns among our consumers of desktops,
notebooks, servers, communication devices, consumer care and other products; |
|
|
|
|
unanticipated cancellations, contract terminations or deferral of projects or those
occurring as a result of our clients reorganizing their operations; |
|
|
|
|
the duration of tax holidays or exemptions and the availability of other Government
of India incentives; |
|
|
|
|
the effect of seasonal hiring patterns and the time we require to train and
productively utilize our new employees; |
|
|
|
|
unanticipated variations in the duration, size and scope of our projects, as well as
changes in the corporate decision-making process of our clients; |
|
|
|
|
currency exchange fluctuations; and |
|
|
|
|
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 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 net income increased by 7% in the year ended March 31, 2009, as compared to the year ended
March 31, 2008. We continue to face increasing competition, pricing pressures for our products and
services and reduced demand for IT Services. 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 impact our
operating margins. As a result, there can be no assurance that we will be able to sustain our
historic levels of profitability.
8
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 2009, we had experienced significant growth in all our
businesses. In fiscal 2009, we experienced lower growth rates.
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:
|
|
|
recruiting and retaining sufficiently skilled technical, marketing and management
personnel; |
|
|
|
|
adhering to our high quality standards; |
|
|
|
|
maintaining high levels of client satisfaction; |
|
|
|
|
developing and improving our internal administrative infrastructure, particularly
our financial, operational, communications and other internal systems; and |
|
|
|
|
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 China and the Philippines. 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 added 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 by 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 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.
9
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.
We are highly dependent on the senior members of our management team, including the continued
efforts of our Chairman and Managing Director. Our ability to execute project engagements and to
obtain new clients depends 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, in customer interaction service offering in our BPO services business.
Continued employee attrition rates in this business may adversely affect our revenues and
profitability.
Changes in government policies affect our ability to hire, attract and retain personnel. For
instance, the Finance Act, 2007 has imposed a fringe benefit tax (FBT) on companies in respect of
specified securities or equity shares allotted or transferred, directly or indirectly, by the
company free of cost or at a concessional rate to its employees reducing our ability to use stock
option grants to attract, hire and retain qualified personnel.
Currency 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 revenues. Our revenues from this business
are derived in major currencies of the world while a significant portion of its costs are in Indian
rupees. The exchange rate between the rupee and major currencies of the world has fluctuated
significantly in recent years and may continue to fluctuate in the future. Appreciation of the
rupee against the major currencies of the world can adversely affect our revenues and competitive
positioning, and can adversely impact our gross margins. We derive 26%
of our IT services revenue from Europe. Exchange rate fluctuations
between Euro and Pound sterling against the U.S. dollars can effect
our revenues and growth expressed in USD terms. We enter into forward exchange 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 60% 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. Over the past few
months there has been a significant reduction in consumer spending in the United States.
According to World Economic Outlook Update published by International Monetary Fund in
April 2009, GDP of United States is projected to contract by 2.8% in calendar 2009 and during the
same period GDP of Euro area is projected to contract by 4.2%. 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. Forrester Global IT 2009 Market Outlook, predicts that U.S. IT purchases will
slowdown from 4.05% growth in 2008 to 1.6% growth in 2009.
Further, 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. For instance we derive about 26% of our revenues
in IT Services from clients in financial services sector. The recent crisis in the mortgage-backed
securities markets has impacted companies in the financial services sector, which could result in
reduction or postponement of their IT spending and thus may adversely affect our business.
10
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, 2007, March 31, 2008 and March 31,
2009, accounted for 3% of our IT Services revenue. For the same periods, our ten largest clients
accounted for 25%, 21% and 20 % of our IT Services revenue. The volume of work we perform for
specific clients may vary from year to year, particularly since we typically are not the sole
outside service provider for our clients. Thus, any major client of 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 challenging economic environment and consequently have reduced the volume of
business with us. If we were to lose one of our major clients or have 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.
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. 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.
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. The U.S.
Citizenship and Immigration Services have limited the number of H-1B visas that may be granted from
2005 fiscal year to 65,000 per year, from 195,000 in each of the three years prior to 2004.
Although the U.S. government has approved the grant of approximately 20,000 additional H-1B visas,
these visas are only available to skilled workers who possess a Masters or higher degree from
educational institutions in the United States.
The L-1 and H-1B Visa Reform Act of 2004 further proposes to preclude 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. The L1
Reforms Act provisions became effective in June 2005.
Immigration laws in the United States may also require us to meet certain 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
11
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 13,000 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 violation of labour law or other alleged conduct. Our
failure to comply with 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. 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. This may adversely impact our ability to do business in these jurisdictions
and could adversely affect our revenues and operating profitability.
The recent credit crisis in the United States has also resulted in the United States federal
government and governments in Europe acquiring or proposing to acquire equity positions in leading
financial institutions and banks. If either the United States federal government or a government in
Europe acquires equity positions in any of our clients, any resulting changes in management or
reorganizations may result in deferrals or cancellations of projects or delays in purchase
decisions, which may adversely affect our business, results of operations or financial condition.
Moreover, equity holdings by governmental entities in our clients may increase the ability of
the respective governments to influence the decisions of these financial institutions to outsource
or obtain services from outside of United States which may in turn affect our business with these
entities.
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 29% of our IT Services 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-timeframe basis, rather than on a
time-and-materials basis. Although we use specified software engineering processes and 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.
12
A significant element of our business strategy is to continue to leverage and expand our
software development centers at Bangalore, Chennai, Hyderabad and Pune in India, as well as
overseas. 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 the country 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.
Disclosure about our vendor status with World Bank could adversely affect our business and
results of operations
On January 13, 2009, we filed on Form 6-K our press release clarifying our vendor status with
the World Bank. The World Bank had determined Wipro to be ineligible to contest direct contracts
from the World Bank for the period 2007 2011. Even though our revenue from the World Bank is
insignificant and our inability to contract future business from the World Bank will not adversely
affect our business and results of operations, the negative publicity resulting from this
disclosure could cause existing and potential customers to alter their relationship with Wipro in a
manner, which could adversely affect our business and results of operations.
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 on construction or expansion of new software development
facilities and physical infrastructure during fiscal 2009 in anticipation of growth in our
business. The total amount of investment made to purchase property, plant and equipment in fiscal
2009 was Rs. 16,592 million ($ 326 million). Additionally, as of March 31, 2009, we had contractual
commitments of approximately Rs. 5,371 million ($ 106 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. We intend to establish new
development facilities in Southeast Asia and Europe. We have not yet made substantial contractual
commitments to establish any new facilities and we cannot assure you that we will not significantly
alter our proposed expansion plans. Because of our limited experience with facilities outside of
India, 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.
13
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-timeframe 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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a change in strategic priorities, resulting in a reduced level of IT spending; |
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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 January 2009, we acquired 100% of equity of
the Citi Technology Services Limited, an India based company engaged in providing Technology
Infrastructure Services (TIS), application development and maintenance services for cards, capital
markets and corporate banking. 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 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 under the balance 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 the loss caused by alleged
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
intellectual property of the customer could cause significant damage to our reputation and
adversely affect our results of operations.
14
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, NYSE 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, 2009, our management has performed an assessment of
the effectiveness of the internal control over financial reporting. We have determined that the
internal controls are effective.
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 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. Macroeconomic conditions, such as the
continued credit crisis and related turmoil in the global financial system, could also result in
financial difficulties, including limited access to the credit markets, insolvency or bankruptcy,
for our clients, and as a result could cause clients to delay payments to us, request modifications
to their payment arrangements that could increase our receivables balance, or default on their
payment obligations to us. 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, on 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 outsourcing 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.
15
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
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our ability to forecast demand for our services and thereby maintain an appropriate
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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
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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. Continued deterioration of the
credit 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.
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,
as well as changes in exchange rates and interest rates.
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, increase in
proportion of employees with lower experience, or source talent from other low cost locations, like
Eastern Europe, China or South-East Asia; wage increases in the long term may reduce our profit
margins.
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 percent of profits or
gains derived from the export of services for the first five years from commencement of provision
of services and 50 percent 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 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 net income would decrease if the Government of India imposes additional taxes or withdraws
or reduces tax benefits or other incentives
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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 in India, or STPs, such that it 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.
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 rate of MAT, effective April 1,
2007, would be 11.33% (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 seven 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 the recent years, the Government of India has introduced tax on various services provided
within India including the maintenance and repair of software. The Government of India has in the
Finance Act, 2008, included services provided in relation to information technology software under
the ambit of service tax, if it is in the course or 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 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 a 15% Branch Profit Tax, or BPT, in the United States to the extent that the
after-tax net profits of our United States branch during a fiscal year exceeds the increase in the
United States branch net assets, the net profits and net assets being calculated in accordance with
the Internal Revenue Code. Based on the net profits of our United States branch for fiscal 2009 and
the net assets held as of March 31, 2009 and March 31, 2008, 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 have a direct impact on 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 revenues are 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
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.
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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 are 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.
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 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 like us. 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.
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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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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 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.
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.
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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 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
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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.
Item 4. Information on the Company
History and Development of the Company
Wipro Limited was incorporated in 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.
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
and Consumer Care and Lighting Products. We are headquartered in Bangalore, India and have
operations in North America, Europe and Asia. For the fiscal year ended March 31, 2009, 94% of our
operating income was generated from our IT Services. For the same period, IT Products represented
3% of our operating income and Consumer Care and Lighting and Others represented 3% of our
operating income.
We incurred capital expenditure of Rs. 11,392 million, Rs. 14,674 million and Rs. 16,592
million during the fiscal years ended March 31, 2007, 2008 and 2009, 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, 2009, we had contractual commitments of
Rs. 5,371 million ($106 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, 2009.
Industry Overview
IT Services
According
to the NASSCOM Strategic Review Report 2009, IDC estimates total spending of $ 557
billion on IT services in 2008, a increase of 5.5% over last year. Within the IT services market,
outsourcing was the fastest growing segment in 2008, estimated to have grown by 21%.
IDC forecasts worldwide IT services
spending of approximately $672 billion by 2012, reflecting a compound annual growth rate, or CAGR,
of 4.8%. However, Forrester Global IT 2009 Market Outlook, predicts that U.S. IT purchases will
slowdown from 4.05% growth in 2008 to 1.6% growth in 2009.
Increasing Trend Towards Offshore Technology Services. 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.
According to NASSCOM Strategic Review Report 2009, IDC forecasts a cumulative annual growth
rate (CAGR) of over 6.21% in worldwide IT services and IT enabled services (IT-ITeS) spending and a
CAGR of over 18.79% in offshore IT spending, for the period 2007-12. The combined market for Indian
IT-ITeS exports in fiscal 2009 was nearly $ 60 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.
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
2009, 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. |
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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 2009, India based centers
(both Indian firms as well as MNC owned captives) have earned more quality
certifications than any other country, over 498 India based
centers (both Indian firms as well as MNC owned captives) had acquired quality
certifications with 85 companies certified SEI CMM Level 5. |
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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 2009, the
Indian IT industry employed nearly 2,230,000 software professionals as of 2008-09,
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 accounting for
over 28% of the suitable pool available across all offshore destinations. |
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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. |
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 2009, the worldwide BPO market is expected to touch $
181 billion by 2012, representing a compounded annual growth rate, or CAGR, of 11.9%.
According to IDCs report India domestic IT/ITeS market top 10 predictions for 2009, the
India domestic IT/ITeS market growth rate will come down from an average of 24.3% recorded during
2003-08 to 16.4% over the next five years.
In India, the IT services market is estimated to account for 34% of the domestic IT industry.
The growth in the IT services market is estimated to be around 14% in US$ terms. The key verticals
driving the growth of the IT services market are Retail, BFSI, Telecom and Manufacturing.
IT Products
According to NASSCOM Strategic Review Report 2009, IDC forecasts that worldwide hardware
spending will increase from $570 billion in 2007 to $683 billion in 2012, representing a compounded
annual growth rate, or CAGR, of 3.68%
According to NASSCOM Strategic Review Report 2009, the hardware market in India is estimated
to account for 49% of the domestic IT industry, growing at about 3% in 2009. 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. Our Santoor brand is the third
biggest soap brand in India. The market for soaps in India is dominated by established players like
Hindustan Unilever (a subsidiary of Unilever). 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.
AC Nielsen estimates that India is amongst the fastest growing geographies for FMCG, with a
2008 growth rate of 15.8% for the non-food segment, largely led by price increases. This market is
estimated to grow at a CAGR of 10.0% 12% for the period 2009-2012. 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 6% for the period 2009-2013.
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The Indian domestic market for institutional lighting and office modular furniture is
estimated at U.S. $ 675 million and is expected to grow at the rate of 10% for the period
2009-2010. 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 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.
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 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 IT companies
An active acquisition program is an important element 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) and Unza Holding Limited (Unza). In January 2009, we
acquired Citi Technology Services Limited, an India based provider of information technology
services and solutions to CITI Group worldwide. 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 offshore to India to leverage our
low cost offshore 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.
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Innovate
new service models
We
have developed a new service model PACE to facilitate performance optimization and
improve efficiency of IT assets. We offer new service delivery models that minimize risks and
improves efficiency of processes and productivity of IT infrastructure. We deliver these benefits
through process / application optimization and infrastructure consolidation.
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 79%, 74% and 75% of our total revenues for the years
ended March 31, 2007, 2008 and 2009, respectively. Our IT Services segment accounted for 94%, 90%
and 94% of our total operating income for the years ended March 31, 2007, 2008 and 2009,
respectively.
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. |
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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 increased to 17 as of March 31,
2009.
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
61,190 professionals excluding associates in BPO Services, Indian IT
Services and Infocrossing. This business segment accounted for 75% of our revenue and 94% of our
operating income for the year ended March 31, 2009. Our service offerings include
Enterprise Solutions Offerings
We provide a comprehensive range of enterprise solutions primarily to Fortune 1000 and Global
500 companies to meet their business needs. Our services range from Enterprise Application Services
(CRM, ERP, e-Procurement and SCM), to e-Business solutions. Our enterprise solutions 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 enterprise solutions division accounted for 65%, 67% and 71% of our IT services revenues
for the fiscal years ended March 31, 2007, 2008 and 2009, respectively.
Our services include:
Customised 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.
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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.
For example, we were engaged by a gaming company to develop one of the worlds first
physics processing solutions targeted at PC-based games market. We were involved in
physics ASIC designing, deployment and functional validation of the hardware,
prototype. We facilitate manufacture, test and delivery in compliance with global
certification standards. This enabled our client to focus on developing user market
while we focused on delivering the solution in accordance with the overall business
strategy. |
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Re-engineering and maintenance. We study a clients business processes and existing
systems and convert or redevelop them to improve efficiency and reduce costs. For
example, we were engaged by a utility company in U.K. for streamlining and reducing
manual components in the business process of providing gas connections to customers. We
reviewed the entire process of planning, scheduling and the final execution of the
requests of customers. Through our BPA/I expertise and our standard methodologies (six
sigma / lean analysis, process modeling simulation), we were able to achieve
significant reduction in delivery costs, reduce handoffs and provide visibility on
bottlenecks and resource utilization. |
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To meet the needs of a changing business environment with limited internal resource
utilization, we maintain legacy software applications that require frequent upgrades. Our
maintenance services also support a distributed delivery environment wherein work
responsibilities can be effectively divided between the various organizations depending
on the criticality of the requests. |
Enterprise business integration (EBI) services. We implement EBI solutions for the worlds
leading fortune 500 companies across various domains addressing complex integration needs spanning
geographies. Our service offerings in EBI help to maximize benefits from investments in existing
systems, enable business change through flexible underlying information technology systems, provide
global enterprise visibility of information and business processes, extend supply chain visibility
and reduce systems/IT total cost of ownership.
For example, a leading cleaning and hygiene products and solutions company had expanded its
operations across the world through acquisitions and organic growth. Diverse business applications,
duplicative IT infrastructure and dissimilar processes across geographies presented significant
challenge resulting in lack of consistency, higher costs and stifled collaboration. We rationalized
the IT applications and infrastructure with more efficient applications that were
aligned to business needs. This resulted in significant reduction in overall IT expenditures,
improved productivity of the business teams which relied on these applications and reduced
maintenance costs.
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Business technology services. We perform application management services through innovative
factory model and unified security solutions for the complete lifecycle of audit, legal compliance,
security management services and managed services for technology domain, business intelligence
portals and content management. For example, we are engaged by a leading energy and utility company
to configure, integrate and monitor business critical database servers with an existing SIM
solution to comply with Sarbanes Oxley (SOX) requirements, enable auditing / logging functions
monitor security events, and provide database security and operational reports.
Business intelligence and data warehousing. We develop strategies and implement solutions for
our clients to manage multiple sources of data for use in their decision-making processes.
Package implementation. We use our expertise in package software to design, implement and
maintain client specific solutions.
Consulting. We leverage our domain expertise and knowledge base in specific areas to provide
consulting services. For example, for a large semiconductor manufacturer, we improved the global
supply chain and related governance processes and rationalized information flow leading to
significant reduction in lead times and improved customer loyalty.
For a HiTech manufacturer, we standardized the business process for global logistics. This
has significantly reduced the carton handling cost and reduced the number of track and trace cases
due to improved shipment visibility.
Testing Services. We are one of the largest Offshore Testing Services providers in the world
with annual revenues aggregating to approximately $ 490 million. We have 8,100 dedicated employees
and over 250 customers across the globe, including engagements with many Fortune 500 companies. We
have been operating our Independent Testing Services division since 1997. Our service portfolio in
testing covers many user needs from product concept to deployment, and across the stages of the
product/ application life cycle.
Research and Development Services
We have been in the Product Engineering space for more than 25 years now. We are one of the
worlds largest third party research and development services
provider. This group works with the Engineering and Research departments of
many Fortune 500 companies to help them design and develop innovative, high quality, cost effective
and safe products.
We have the technical capability and domain knowledge to quickly turn around a product design
from requirements to proof of concept or prototypes. The group has dedicated product development
teams for Telecom (Equipment makers, device makers, service providers), Computing (Hardware,
software, storage vendors), Embedded (Consumer Electronics, Automotive Electronics, Medical
Devices, Aerospace, Industrial Automation etc.) and Semiconductors.
We have the unique strength amongst service providers to be able to provide not only
supplement services for the high-tech clients and ISVs but can help them reduce the total cost of
ownership of their products and get them faster to the end-consumers.
Our research and development services division accounted for 35%, 33% and 29% of our IT services revenue for the
fiscal years ended March 31, 2007, 2008 and 2009, respectively. Our services include:
Engineering Design Services. Our experience in complex project management coupled with
technological expertise enables us to provide engineering design solutions that help in reducing
time to market and cost while complying with quality standards. For example, for a leading software
product vendor, we reduced development lead time from 12 months to 4 months resulting in faster
release of new products. We undertook complete ownership of security and systems utilities product
suite and lowered development lead time.
Hardware design and development. We design and develop various types of integrated electronic
circuits, or ICs, including application specific integrated circuits, or ASICs and field
programmable gate arrays, or FPGAs. We offer our services over a broad spectrum of technology
areas, and are able to provide our clients complete subsystems or entire products.
Product Strategy & Architecture (PSA). Our PSA practice has wide experience in researching,
analyzing, and documenting the business value of technology solutions and helps technology vendors
and enterprises develop innovative and effective product and IT strategies that have had proven
value in achieving business success. Integrating market-specific knowledge and experience in
emerging technologies and standards, the PSA practice provides a unique combination that can meet
the complex demands of the industry.
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Multimedia. Our multimedia team works actively on multimedia product realization and provides
re-usable Audio, Video and Speech codecs optimized on different platforms suitable for different
application areas and end-to-end HW development of video codec solutions.
Telecommunications and service providers. We provide software application integration, network
integration and maintenance services to telecommunications service providers, Internet service
providers, application service providers and Internet data centers.
Semiconductor IP. We offer an industry leading portfolio of semiconductor Intellectual
Property (IP) cores for complex wireless and wireline applications including Wireless LAN,
Bluetooth, Ultra wideband, Wireless USB and Firewire. Our portfolio of IP cores also contains
software, silicon proven Wireless LAN, multiband radio module and analog / mixed-signal / digital
blocks such as AFEs, synthesizers, PLLs and LVDS driver / receiver.
Technology Infrastructure Support Services
Our service offerings include help desk management, systems management and migration, network
management and messaging services. We are able to provide our IT Services and Products clients with
high quality, 24-hour, seven-day-a-week support services by leveraging our expertise in managing IT
infrastructures for our clients in India. Our offerings are powered by over 7,300 technical
specialists and one of the worlds first BS 15000 and ISO 20000 certified infrastructures for
operations support.
This is service line which serves customer across Enterprise Solution Offerings
and Research and Development Services.
For example, we were engaged by a utility company in the U.K. to overhaul its legacy
applications without impacting its day-to-day operations. We created resilient and scalable
network structures, created single interface for all network services and defined a clear
technology roadmap for wide area acceleration, IP etc. This network transformation was carried out
without any impact on the service levels to end users and led to a significant reduction in
operational expenses.
We formed the Technology Infrastructure Support Services division at the end of 1998, and it
accounted for 14%, 17% and 20% of our IT Services revenues for the year ended March 31, 2007, 2008
and 2009, respectively.
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 a leading online mortgage lender, we transitioned the loan approval process
and re-engineered the process applying six sigma methodologies to reduce cycle time for processing
and ensure the highest level of accuracy. We segregated the entire processing into three phases to
ensure smoother workflow, improved efficiency and minimal processing lead time.
Our service offerings include:
|
|
|
customer interaction services, such as IT-enabled customer services, marketing
services, technical support services and IT helpdesks; |
|
|
|
|
finance and accounting services, such as accounts payable and accounts receivable
processing; |
|
|
|
|
process improvement services that provide benefits of scale for repetitive
processes like claims processing, mortgage processing and document management; and |
|
|
|
|
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 BPO Services, we primarily compete against the in-house business process outsourcing units
of international companies, other Indian IT service providers, global competitors and competitors
from other offshore locations like the Philippines and Ireland. 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. We had over 22,800 employees in our BPO
Services as of March 31, 2009.
27
Our BPO services business accounted for 8% of our IT Services revenues for the years ended
March 31, 2007, 2008 and 2009, respectively. This is a service line which serves customer across Enterprise Solution Offerings and Research and Development services.
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
our projects, we endeavor to increase the proportion of work performed at the ODCs in order to be
able 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 Atlanta in USA, Monterry in Mexico, Cairo in
Egypt, Curitiba in Brazil. Reading, in the U.K., Windsor and Ontario in Canada, Kiel in Germany,
Tampere in Finland, Shanghai in China, Cebu in Philippines, Bucharest in Romania, Sydney 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 |
|
Year ended |
|
|
March 31, |
|
March 31, |
|
March 31, |
Per client revenue($) |
|
2007 |
|
2008 |
|
2009 |
1-3 million |
|
|
119 |
|
|
|
169 |
|
|
|
207 |
|
3-5 million |
|
|
36 |
|
|
|
64 |
|
|
|
67 |
|
>5 million |
|
|
100 |
|
|
|
129 |
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total >1 million |
|
|
255 |
|
|
|
362 |
|
|
|
427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2007, 2008 and 2009, 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; |
28
|
|
|
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. Our IT Services 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 425 to 498 personnel from March 31, 2008 to March 31, 2009. 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 focussed on identifying and winning large outsourcing
engagements across verticals.
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 11%, 13%, 13% of our total
revenues for the year ended March 31, 2007, 2008 and 2009, respectively. Our IT Products segment
accounted for 2%, 3% and 3% of our operating income for the year ended March 31, 2007, 2008 and
2009, 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; |
|
|
|
|
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 |
29
|
|
|
New Alliances partner with emerging technology providers to improve market address
and develop new streams of revenue. |
Products
Our range of IT Product comprises the following:
Wipro Manufactured Products. Our manufactured range of products comprises of desktops,
notebooks, NetPower servers and super computers. To cater to a wider range of customer, 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 individuals to high-end corporate users.
Enterprise Platform. Our products under this category comprise design and deployment services
for RISC servers, Application servers, Databases, Unix OS, 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, unified communication systems
Software
Products. Our products in this category comprise enterprise
application, datawarehousing and business intelligence softwares 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, and banking 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 Mega, Enterprise and Mid-market; |
|
|
|
|
by geography region in which our client is located; and |
|
|
|
|
by 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. 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.
30
We are witnessing higher pricing pressures due to:
|
|
|
commoditization of manufactured products business; and |
|
|
|
|
higher focus on Indian markets by all leading IT companies |
We are favorably positioned due to our quality leadership, our ability to create client
loyalty and our expertise in targeted select markets.
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, lighting products including modular switches and
modular furniture for the Indian market. Our Santoor brand is the third largest brand in India in
the soap category. With the acquisition of Unza group, we are increasing our presence in personal
care products sector in South-East Asia. Our Consumer Care and Lighting segment accounted for 5%,
7% and 8% of our total revenue for the years ended March 31, 2007, 2008 and 2009, respectively. Our
Consumer Care and Lighting segment accounted for 3%, 5% and 5% of our operating income for the year
ended March 31, 2007, 2008 and 2009, 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, 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 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 line of infant and child care products, which 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.
Office Modular Furniture. Our product line modular furniture for office use like 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 3,500 distributors and 2.1 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 31 sales offices located throughout
India.
In our other geographies, led by Malaysia, Vietnam, Indonesia and Greater China, we have
direct access to over 60,000 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 to 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.
Competition
We face competition primarily from multinational companies like Unilever, Proctor and Gamble,
Johnson & Johnson, Loreal in the personal care products market. Our competitors in the consumer
care and lighting are located primarily in India, and include multinational and Indian companies
such as Hindustan Unilever for soaps, toiletries and
31
Philips for lighting. 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 second
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 infrastructure engineering business remain intact. Our strategy is to gain
share globally 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, including reconciling items segment accounted for 5%, 6% and 4% of our total
revenues for the year ended March 31 2007, 2008 and 2009, respectively. Our Others, including
reconciling items segment accounted for 1%, 2% and (2)% of our operating income for the year ended
March 31 2007, 2008 and 2009, 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 material 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 sales office in china.
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
32
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.
For example, we identified technology infrastructure outsourcing as an emerging growth area in
1998. We developed service offerings in this area and familiarized customers with the concept of
remote network management. Today this comprises 20% of our revenues from IT Services. We have
recently been ranked by Forrester as the leader in providing IT infrastructure outsourcing
services. We have established centers of excellence in emerging growth areas. These centers focus
on understanding technology and developing customized business solutions for our customers.
33
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 2009,
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. $ 4.9 billion in
revenues in 2009. The recurring nature of revenues from research and development services helps in
mitigating the cyclic 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, 2009, our IT Services segment had 863 active clients and 76% of our revenues
from IT Services segment was derived from Fortune 1000 and Global 500 clients.
We have approximately 153 customers from whom we derived annualized revenues in excess of $5
million in the fiscal year ended March 31, 2009. 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 Dale
Carnegie Global Leadership Award in recognition of our emphasis on development of human resources,
innovation and organizational creativity. As of March 31, 2009,
in our IT Services business excluding BPO business, Indian IT
Services and Infocrossing we had over 61,190 professionals. In our
BPO business we had over 22,800 employees. 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.
34
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 excluding BPO Services, Indian IT Services and Infocrossing, grew from approximately 9,900 employees as of March 31, 2001 to approximately 61,190
employees as of March 31, 2009. During the same period, our revenues from our IT Services segment
have grown from Rs. 17,816 million to Rs. 191,193 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 190 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 2.1 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 three fiscal years by geographic areas are as follows:
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
India |
|
Rs. |
30,650 |
|
|
Rs. |
46,891 |
|
|
Rs. |
52,908 |
|
United States |
|
|
72,846 |
|
|
|
87,552 |
|
|
|
116,281 |
|
Europe |
|
|
36,972 |
|
|
|
48,259 |
|
|
|
57,109 |
|
Rest of the world |
|
|
8,963 |
|
|
|
14,726 |
|
|
|
28,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rs. |
149,431 |
|
|
Rs. |
197,428 |
|
|
Rs. |
254,564 |
|
|
|
|
|
|
|
|
|
|
|
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
35
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, 2009, we hold more than 1100 registered trademarks including registered
community trademarks in India, Japan, 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 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 80
registered patents (including patents granted to our subsidiaries) and have about 15 pending patent
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 2010. 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 March 31, 2009 are provided in the table below.
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Country of |
|
Direct Subsidiaries |
|
Step Subsidiaries |
|
Incorporation |
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Wipro Inc. |
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U.S. |
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Wipro Gallagher Solutions Inc |
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U.S. |
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Enthink Inc. |
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U.S. |
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Infocrossing Inc. |
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U.S. |
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Infocrossing. LLC, |
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U.S. |
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cMango Pte Limited |
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Singapore |
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Wipro Japan KK |
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Japan |
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Wipro Shanghai Limited |
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China |
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Wipro Trademarks Holding Limited |
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India |
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Cygnus Negri Investments |
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India |
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Private Limited |
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Wipro Travel Services Limited |
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India |
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Wipro Consumer Care Limited |
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India |
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Wipro Holdings (Mauritius) Limited |
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Mauritius |
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Wipro Holdings UK Limited |
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U.K. |
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Wipro Technologies UK Limited BVPENTE |
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U.K. Austria |
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36
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Country of |
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Direct Subsidiaries |
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Step Subsidiaries |
|
Incorporation |
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Beteiligungsverwaltung |
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GmbH(A) |
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3D Networks FZ-LLC |
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Dubai |
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3D Networks (UK) Limited |
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U.K. |
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Wipro Cyprus Private Limited |
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Cyprus |
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Wipro Technologies S.A DE C. V |
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Mexico |
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Wipro BPO Philippines LTD Inc |
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Philippines |
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Wipro Holdings Hungary |
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Hungary |
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Korlátolt Felelõsségû |
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Társaság |
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Wipro Technologies Argentina |
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Argentina |
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SA |
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Wipro Information Technology |
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Egypt |
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Egypt SAE |
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Wipro Arabia Limited |
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Dubai |
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Wipro Poland Sp Zoo |
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Poland |
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Wipro Information Technology |
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Netherland |
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Netherlands BV |
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(formerly RetailBox BV) |
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Enabler Informatica SA(A) |
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Portugal |
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Wipro Technologies Limited, Russia |
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Russia |
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Wipro Technologies Oy |
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Finland |
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(formerly Saraware Oy) |
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Wipro Infrastructure |
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Sweden |
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Engineering AB |
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Wipro Infrastructure Engineering Oy |
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Finland |
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Hydrauto Celka San ve Tic |
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Turkey |
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Wipro Technologies SRL |
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Romania |
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Wipro Singapore Pte Limited |
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Singapore |
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Unza Holdings Limited (A) |
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Singapore |
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Wipro Technocentre (Singapore) Pte |
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Singapore |
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Limited |
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Wipro (Thailand) Co Limited |
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Thailand |
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Wipro Australia Pty Limited |
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Australia |
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Wipro Networks Pte Limited |
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Singapore |
(formerly 3D Networks Pte
Limited) |
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Planet PSG Pte Limited |
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Singapore |
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Planet PSG SDN BHD |
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Malaysia |
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Wipro Chengdu Limited |
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China |
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Wipro Chandrika Limited |
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India |
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WMNETSERV Limited |
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Cyprus |
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WMNETSERV (U.K.) Limited. |
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U.K. |
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WMNETSERV INC |
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U.S. |
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Wipro Technology Services Limited |
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India |
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 and 90% of the equity securities of Wipro Chandrika
Limited.
As of March 31, 2009, 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 Unza Holdings Limited, BVPENTE Beteiligungsverwaltung
GmbH and Enabler Informatica SA are as follows : |
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|
|
Country of |
Step Subsidiaries |
|
Step Subsidiaries |
|
Incorporation |
Unza Company Pte
Limited
|
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|
Singapore |
Unza Indochina Pte
Limited
|
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Singapore |
|
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Unza Vietnam Co., Limited
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Vietnam |
Unza Cathay Limited
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Hong Kong |
Unza China Limited
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|
Hong Kong |
37
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|
Country of |
Step Subsidiaries |
|
Step Subsidiaries |
|
Incorporation |
|
|
Dongguan Unza Consumer Products
Limited.
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China |
PT Unza Vitalis
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Indonesia |
Unza Thailand Limited
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Thailand |
Unza Overseas Limited
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British virgin islands |
Unza Africa Limited
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Nigeria |
Unza Middle East Limited
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British virgin islands |
Unza International
Limited
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British virgin islands |
Positive Equity Sdn Bhd
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Malaysia |
Unza Nusantara Sdn Bhd
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Malaysia |
|
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Unza Holdings Sdn Bhd
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Malaysia |
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Unza Malaysia Sdn Bhd
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Malaysia |
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UAA (M) Sdn Bhd
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Malaysia |
|
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Manufacturing Services Sdn Bhd
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Malaysia |
|
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|
|
Shubido Pacific Sdn
Bhd(a)
|
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Malaysia |
|
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Gervas Corporation Sdn Bhd
|
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Malaysia |
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Gervas (B) Sdn Bhd
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Malaysia |
|
|
Formapac Sdn Bhd
|
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|
Malaysia |
BVPENTE
Beteiligungsverwaltung
GmbH
|
|
|
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Austria |
|
|
New Logic Technologies GmbH
|
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Austria |
|
|
New Logic Technologies SARL
|
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France |
Enabler Informatica SA |
|
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|
Enabler France SAS
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France |
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|
Enabler UK Limited
|
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U.K. |
|
|
Wipro do Brasil Technologia Ltda
|
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|
Brazil |
|
|
Wipro Technologies Gmbh
(formerly Enabler & Retail
Consult GmbH
|
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Germany |
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|
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. |
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.
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 three facilities located in Waluj, Haridwar 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.
38
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, 2009, we have capital commitments of Rs. 5,371 million ($106 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, 2009.
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 could have a material impact on our financial position. Please see
the description of our tax proceedings, 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
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.
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 the Middle East region.
We also have a notable presence in the markets for consumer products and lighting and
infrastructure engineering.
Until March 31, 2008, our reportable segments, were Global IT Services and Products
(comprising of IT Services and BPO Services segments), India and AsiaPac IT Services and Products,
Consumer Care and Lighting and Others. The Chairman of the Company has been identified as the
Chief Operating Decision Maker (CODM) as defined by SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information. The Chairman of the Company evaluates the segments based on
their revenue growth, operating income and return on capital employed.
39
In April 2008, we re-organized our IT businesses by combining the Global IT Services and
Products business and the India and AsiaPac IT Services and Products business and appointed joint
Segment Chief Executive Officers for the combined IT businesses. Consequent to the reorganization,
we identified IT Services and IT Products as the new operating and reportable segments within our
IT business. There was no change in the reportable segments for our other businesses.
Our revenue and net income for the years ended March 31, 2007, 2008 and 2009 are provided
below.
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|
|
Wipro Limited and subsidiaries |
|
|
Years ended March 31, |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Year on Year change |
|
|
(in millions except earnings per share data) |
|
|
2009-08 |
|
2008-07 |
Revenue |
|
Rs. |
254,564 |
|
|
Rs. |
197,428 |
|
|
Rs. |
149,431 |
|
|
|
29 |
% |
|
|
32 |
% |
Cost of revenue |
|
|
(178,176 |
) |
|
|
(139,236 |
) |
|
|
(102,468 |
) |
|
|
28 |
% |
|
|
36 |
% |
Gross profit |
|
|
76,388 |
|
|
|
58,192 |
|
|
|
46,963 |
|
|
|
31 |
% |
|
|
24 |
% |
Selling and marketing
expenses |
|
|
(17,762 |
) |
|
|
(13,807 |
) |
|
|
(9,173 |
) |
|
|
29 |
% |
|
|
51 |
% |
General and administrative expenses |
|
|
(14,696 |
) |
|
|
(10,820 |
) |
|
|
(7,639 |
) |
|
|
36 |
% |
|
|
42 |
% |
Operating income |
|
|
41,390 |
|
|
|
33,714 |
|
|
|
29,906 |
|
|
|
23 |
% |
|
|
13 |
% |
Net income |
|
|
34,415 |
|
|
|
32,241 |
|
|
|
29,168 |
|
|
|
7 |
%(1) |
|
|
11 |
%(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
6.98 |
% |
|
|
6.99 |
% |
|
|
6.14 |
% |
|
1 |
bps |
|
(85 |
) bps |
General and administrative expenses |
|
|
5.77 |
% |
|
|
5.48 |
% |
|
|
5.11 |
% |
|
(29 |
) bps |
|
(37 |
) bps |
Gross margins |
|
|
30.01 |
% |
|
|
29.48 |
% |
|
|
31.43 |
% |
|
53 |
bps |
|
(195) bps |
Operating Margin |
|
|
16.26 |
% |
|
|
17.08 |
% |
|
|
20.01 |
% |
|
(82 |
) bps |
|
(293 |
) bps |
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
23.67 |
|
|
|
22.23 |
|
|
|
20.45 |
|
|
|
|
|
|
|
|
|
Diluted |
|
|
23.63 |
|
|
|
22.16 |
|
|
|
20.20 |
|
|
|
|
|
|
|
|
|
(1) |
|
Our adjusted non-GAAP net income for the year ended March 31, 2009, 2008, 2007 is
Rs. 37,656, Rs. 32,322 and Rs. 29,168, respectively, a growth of 17% and 11% over the year
ended March 31, 2008 and 2007, respectively. 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, 2007, 2008 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
2009 |
|
2008 |
|
2007 |
|
|
(In Percentage) |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
IT Services and Products |
|
|
|
|
|
|
|
|
|
|
|
|
IT Services |
|
|
75 |
|
|
|
74 |
|
|
|
79 |
|
IT Products |
|
|
13 |
|
|
|
13 |
|
|
|
11 |
|
Total |
|
|
88 |
|
|
|
87 |
|
|
|
90 |
|
Consumer Care and Lighting |
|
|
8 |
|
|
|
7 |
|
|
|
5 |
|
Others |
|
|
4 |
|
|
|
6 |
|
|
|
5 |
|
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
IT Services and Products |
|
|
|
|
|
|
|
|
|
|
|
|
IT Services |
|
|
94 |
|
|
|
90 |
|
|
|
94 |
|
IT Products |
|
|
3 |
|
|
|
3 |
|
|
|
2 |
|
Total |
|
|
97 |
|
|
|
93 |
|
|
|
96 |
|
Consumer Care and Lighting |
|
|
5 |
|
|
|
5 |
|
|
|
3 |
|
Others |
|
|
(2 |
) |
|
|
2 |
|
|
|
1 |
|
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
The following table provides our adjusted non-GAAP net income, excluding the impact of
translating specific foreign currency borrowings and the impact of periodic fair value measurement
of related cross-currency interest rate swaps, used in combination, to mitigate exchange
fluctuations arising from translation of investments in foreign operations,
40
(which did not qualify as hedging of net investments, under GAAP), and certain stock-related
fringe benefit tax expenses paid in India. This non GAAP net income is a measure defined by the SEC
as a non-GAAP financial measure. 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, financial measures calculated in accordance with GAAP, and may be different from non-GAAP
measures used by other companies. In addition to this non-GAAP measure, the financial statements
prepared in accordance with GAAP and reconciliations of our GAAP financial statements to such
non-GAAP measure should be carefully evaluated.
A reconciliation of net income as reported and adjusted non-GAAP net income, excluding impact
of currency translation on foreign currency loan, related cross-currency interest rate swaps and
certain stock-related fringe benefit tax, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Net income as per GAAP |
|
Rs. |
34,415 |
|
|
Rs. |
32,241 |
|
|
Rs. |
29,168 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Translation loss on a foreign
currency loan and changes in
fair value of cross-currency
interest rate swap |
|
|
3,044 |
|
|
|
|
|
|
|
|
|
Stock-related fringe benefit tax
expense paid in India
(1) |
|
|
197 |
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Non-GAAP net income |
|
Rs. |
37,656 |
|
|
Rs. |
32,322 |
|
|
Rs. |
29,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Relates to stock options granted prior to April 1, 2007, where application of
GAAP results in a permanent mismatch between the fringe benefit tax expense recorded
through the income statement and the related recovery of the fringe benefit tax from
the employees by modifying the grants outstanding as of April 1, 2007, which is
recorded through equity. |
The Company believes that the presentation of this non-GAAP adjusted net income, when shown in
conjunction with the corresponding GAAP measures, provides useful information to investors and
management regarding financial and business trends relating to its net income. The Company believes
that foreign currency borrowing in combination with related cross-currency interest rate swap are
in substance, economic hedges of net investment in foreign operations, though for GAAP reporting
the impact of translation and fair value measurements are recorded in the income statement. In
addition, certain stock-based fringe benefit tax expenses are fully reimbursed by our employees,
but for GAAP reporting the reimbursement is recorded in stockholders equity. Therefore, we believe
that making available an adjusted net income number that excludes the impact of these items from
net income 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 periodic translation of such specific foreign currency borrowings and fair
value re-measurement of related cross-currency interest rate swaps and certain stock-based fringe
benefit tax expenses. The management of the Company also uses non-GAAP adjusted net income, in
addition to the corresponding GAAP measures, in reviewing our financial results.
A material limitation associated with the use of non-GAAP net income as compared to the GAAP
measures of net income is that it does not include costs which are recurring in nature and may not
be comparable with the calculation of net income for other companies in our industry. The Company
compensates for these limitations by providing full disclosure of the effects of non-GAAP measures,
by presenting the corresponding GAAP financial measures and by providing a reconciliation to the
corresponding GAAP measure.
Analysis of years ended March 31, 2009 and 2008
|
§ |
|
Our total revenues increased by 29%. This was driven primarily by a 31%, 36% and 32%
increase in revenue from our IT Services, IT Products and Consumer Care and Lighting
business segments respectively. This increased revenue was partially offset by a
decline of 10% in revenue from our Others, including reconciling items segment. |
|
|
§ |
|
Our gross profit as percentage of our total revenue increased by 53 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 business segment by 333 bps and increase in
gross profit as a percentage of revenue from our IT Services segment by 29 bps. This
increase was partially offset by a decline in gross profit as a percentage of revenue
from our IT Products segment by 77 bps and a decline in gross profit as a percentage of
revenue from our Others segment, including reconciling items, by 51 bps. |
|
|
§ |
|
Our selling and marketing expenses as a percentage of revenue has almost remained
constant for the year ended March 31, 2009 and 2008, respectively. In absolute terms
selling and marketing expenses have increased by 29%, primarily due to an increase in
the IT Services segment. |
41
|
§ |
|
Our general and administrative expenses as a percentage of revenue has increased
from 5.48% for the year ended March 31, 2008 to 5.77% for the year ended March 31,
2009. In absolute terms the general and administrative expenses have increased by 36%,
primarily due to an increase in the IT Services segment. |
|
|
§ |
|
The increase of Rs. 872 in the amortization of intangible assets was primarily due
to an increase in the amortization of intangibles of our IT Services segment by Rs. 620
and an increase in the amortization of intangibles of our Consumer Care and Lighting
segment by Rs. 254. This increase is primarily attributable to the amortization of
determinable life intangibles of Infocrossing and Unza which were acquired in fiscal
2008. |
|
|
§ |
|
As a result of the foregoing factors, our operating income increased by 23% from Rs.
33,714 for the year ended March 31, 2008 to Rs. 41,390 for the year ended March 31,
2009. |
|
|
§ |
|
Our Other income, net, decreased from Rs. 2,167 for the year ended March 31, 2008 to
Rs. (1,816) for the year ended March 31, 2009. This decrease is primarily on account of
an increase in foreign exchange loss attributable to restatement of debt denominated in
foreign currency and change in the fair value of cross-currency interest rate swaps of
Rs. 3,973. Excluding this impact, other income decreased from Rs. 2,167 for the year
ended March 31, 2008 to Rs. 2,157 for the year ended March 31, 2009. |
|
|
§ |
|
Our income taxes increased by Rs. 1,549, from Rs. 3,873 for the year ended March 31,
2008 to Rs. 5,422 for the year ended March 31, 2009. Our effective tax rate increased
from 10.7% for the year ended March 31, 2008 to 13.6% for the year ended March 31,
2009. This increase is primarily due to expiry of tax holiday period in respect of
certain units and increase in the proportion of income subject to taxation in foreign
jurisdictions. The translation loss on foreign currency loan and change in fair value
of cross-currency interest rate swap is not deductable for tax purposes. Adjusted for
the impact of translation loss on a foreign currency loan and changes in fair value of
cross-currency interest rate swap and tax write-backs, our effective
tax rate was 13.5%
for the year ended March 31, 2009 as compared to 12.2% for the year ended March 31,
2008. |
|
|
§ |
|
Our equity in earnings of affiliates for the year ended March 31, 2008 and 2009 was
Rs. 257 and Rs. 362 respectively. Equity in earnings of affiliates primarily relates to
the equity in earnings of Wipro GE. |
|
|
§ |
|
As a result of the foregoing factors, our net income increased by Rs. 2,174 or 7%,
from Rs. 32,241 for the year ended March 31, 2008 to Rs. 34,415 for the year ended
March 31, 2009. |
Analysis of years ended March 31, 2008 and 2007
|
§ |
|
Our total revenues increased by 32%. This increase was driven primarily by an
increase of 24%, 45% and 93% in revenues from our IT Services, IT Products and Consumer
Care and Lighting business segments respectively. |
|
|
§ |
|
Our gross profit as a percentage of our total revenue declined by 195 bps. This was
primarily on account of a decline in gross profit as a percentage of revenue from our
IT Services segment by 226 bps. This was partially offset by an increase in gross
profit as a percentage of revenue from our IT Products segment by 82 bps and an
increase in gross profit as a percentage of revenue from our Consumer Care and Lighting
segment by 548 bps. |
|
|
§ |
|
Our selling and marketing expenses as a percentage of revenue has increased from
6.14% for the year ended March 31, 2007 to 6.99% for the year ended March 31, 2008. In
absolute terms selling and marketing expense have increased by 51%, primarily due to
increase in the IT Services and Consumer Care and Lighting segments. |
|
|
§ |
|
Our general and administrative expenses as a percentage of revenue has increased
from 5.11% for the year ended March 31, 2007 to 5.48% for the year ended March 31,
2008.In absolute terms general and administrative expenses have increased by 42%,
primarily due to increase in the IT Services and Consumer Care and Lighting segments. |
|
|
§ |
|
As a result of the foregoing factors, our operating income increased by 13% from Rs.
29,906 for the year ended March 31, 2007 to Rs. 33,714 for the year ended March 31,
2008. |
|
|
§ |
|
Our other income, net, decreased from Rs. 2,628 for the year ended March 31, 2007 to
Rs. 2,167 for the year ended March 31, 2008. The decrease is primarily on account of an
increase in foreign exchange loss attributable to restatement of debt denominated in
foreign currency of Rs. 457. Further, interest expense increased by Rs. 803 on account
of the increase in average outstanding debt during the year ended March 31,
2008. This was partially offset by an increase in income from investments in liquid and
short-term instruments by Rs. 222. |
42
|
§ |
|
Our income taxes increased by Rs. 150 from Rs. 3,723 for the year ended March 31,
2007 to Rs. 3,873 for the year ended March 31, 2008. Our effective tax rate decreased
from 11.3% for the year ended March 31, 2007 to 10.7% for the year ended March 31,
2008. Adjusted for tax write-backs our effective tax rate declined from 13.5% for the
year ended March 31, 2007 to 12.2% for the year ended March 31, 2008. This decline was
primarily due to decrease in proportion of income subject to taxation in foreign
jurisdictions. |
|
|
§ |
|
Our equity in earnings of affiliates for the year ended March 31, 2007 and 2008 was
Rs. 318 and Rs. 257, respectively. Equity in earnings of affiliates of Rs. 318 for the
year ended March 31, 2007 comprises equity in earnings of Wipro GE of Rs. 302, net gain
on sale of a portion of the interest in WeP Peripherals of Rs. 40 and equity in loss of
WM Net Serv of Rs. 24. Equity in earnings of affiliates of Rs. 257 for the year ended
March 31, 2008 comprises equity in earnings of Wipro GE. |
|
|
§ |
|
As a result of the foregoing factors, our net income increased by Rs. 3,072 or 11%
from Rs. 29,169 for the year ended March 31, 2007 to Rs. 32,241 for the year ended
March 31, 2008. |
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 services, 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.
Our IT Services segment accounted for 79%, 74% and 75% of our total revenue for the years
ended March 31, 2007, 2008 and 2009, respectively. Our IT Services segment accounted for 94%, 90%
and 94% of our total operating income for the years ended March 31, 2007, 2008 and 2009,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
Year on Year change |
|
|
2009 |
|
2008 |
|
2007 |
|
2009-08 |
|
2008-07 |
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
Rs. |
191,193 |
|
|
Rs. |
146,260 |
|
|
Rs. |
117,640 |
|
|
|
31 |
% |
|
|
24 |
% |
Gross profit |
|
|
63,104 |
|
|
|
47,853 |
|
|
|
41,152 |
|
|
|
32 |
% |
|
|
16 |
% |
Selling and marketing expenses |
|
|
(11,270 |
) |
|
|
(9,013 |
) |
|
|
(6,587 |
) |
|
|
25 |
% |
|
|
37 |
% |
General and administrative expenses |
|
|
(12,234 |
) |
|
|
(8,312 |
) |
|
|
(6,487 |
) |
|
|
47 |
% |
|
|
28 |
% |
Amortization of intangibles |
|
|
(1,061 |
) |
|
|
(441 |
) |
|
|
(244 |
) |
|
|
141 |
% |
|
|
81 |
% |
Others, net |
|
|
271 |
|
|
|
401 |
|
|
|
93 |
|
|
no |
|
no |
Operating income |
|
|
38,810 |
|
|
|
30,488 |
|
|
|
27,927 |
|
|
|
27 |
% |
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
5.89 |
% |
|
|
6.16 |
% |
|
|
5.60 |
% |
|
27 |
bps |
|
(56 |
) bps |
General and administrative
expenses |
|
|
6.40 |
% |
|
|
5.68 |
% |
|
|
5.51 |
% |
|
(72 |
) bps | |
(17 |
) bps |
Gross margin |
|
|
33.01 |
% |
|
|
32.72 |
% |
|
|
34.98 |
% |
|
29 |
bps | |
(226 |
) bps |
Operating margin |
|
|
20.30 |
% |
|
|
20.85 |
% |
|
|
23.74 |
% |
|
(55 |
) bps |
|
(289 |
) 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. 117,819, Rs. 146,170 and Rs. 192,635 for the years ended March
31, 2007, 2008 and 2009, respectively.
Analysis of years ended March 31, 2009 and 2008
|
|
|
Our revenue from IT Services segment grew by 31%. In USD terms our revenue grew by
19% from $3,647 to $4,323. Our average USD/INR realization increased from Rs. 40.1 for
the year ended March 31, 2008 to Rs 44.2 for the year ended March 31, 2009. |
|
|
|
|
This growth of 19% was primarily due to a 30% increase in revenue from retail and
transportation services, a 27% increase in revenues from financial services, a 26%
increase in revenues from manufacturing and |
43
|
|
|
healthcare services, a 9% increase in revenue from energy and utility services and a 6%
increase in revenue from technology, media and telecom services. Our price realization
increased by 3.8% and 3.2% on a year on year basis for our offshore and onsite services
respectively. In our IT Services segment, we added 110 new clients during the year ended
March 31, 2009. The total number of clients that individually accounted for over US $1
million run rate in revenue increased from 362 as of March 31, 2008 to 427 as of March
31, 2009. |
|
|
|
Our gross profit as a percentage of our revenue from our IT Services segment
increased by 29 bps. The improvement in gross margin as percentage of revenue is
primarily on account of improvement in utilization rates and better exchange rate
realization. Our average utilization of billable employees improved from 67% for the
year ended March 31, 2008 to 69% for the year ended March 31, 2009. These improvements
were offset by the increase in personnel costs due to increased compensation based on
promotions. |
|
|
|
|
Selling and marketing expenses as a percentage of revenue from our IT Services
segment decreased marginally from 6.16% for the year ended March 31, 2008 to 5.89% for
the year ended March 31, 2009. However in absolute terms, selling and marketing
expenses have increased by 25%. This increase was primarily due to an increase in
personnel costs, certain employees being classified as sales
and marketing personnel during the year, an increase in compensation costs
as part of our compensation review and grant of additional stock options. |
|
|
|
|
General and administrative expenses as a percentage of revenue from our IT Services
segment has increased from 5.68% for the year ended March 31, 2008 to 6.40% for the
year ended March 31, 2009. This increase was primarily due to an increase in personnel
costs by Rs. 1,451 and an increase in the provision for doubtful debts by Rs 658.
Personnel costs have increased from Rs. 3,509 for the year ended March 31, 2008 to Rs.
4,960 for the year ended March 31, 2009, which is attributable to the increase in the
support staff consistent with the increase in volume and operations and increase in
compensation cost as part of our compensation review, grant of additional stock options
and acquisition of Infocrossing. The increase in the provision for doubtful debts was
primarily due to additional reserve recorded upon a major customer opting for
bankruptcy protection. |
|
|
|
|
Increase in amortization of intangibles is primarily attributable to amortization of
customer-related intangible arising on acquisition of Infocrossing. |
|
|
|
|
As a result of the above, operating income from our IT Services segment increased by
27%. |
Analysis of years ended March 31, 2008 and 2007
|
§ |
|
Our revenue from the IT Services segment grew by 24%. In USD terms our revenue grew
by 40% from $ 2,601 to $3,647. Our average USD/INR realization
decreased from Rs. 45.2
for the year ended March 31, 2007 to Rs. 40.1 for the year ended March 31, 2008. |
|
|
|
|
This growth of 40% was primarily due to the acquisition of Infocrossing in September
2007, about 38% increase in revenues from retail and transportation business and about
50% increase in revenues from financial services and manufacturing & healthcare services. Integration of acquisitions during the
year contributed to a 4% increase in the revenues. Our price realization increased by
1.2% and 2.6% on a year on year basis for our offshore and onsite services respectively.
In our IT Services segment, we added 185 new clients during the year ended March 31,
2008. The total number of clients that individually accounted for over US $ 1 million
run rate in revenue increased from 255 as of March 31, 2007 to 362 as of March 31, 2008. |
|
|
§ |
|
Our gross profit as a percentage of our revenue from our IT Services segment
declined by 226 bps. The decline in gross margin as a percentage of revenue is
primarily due to adverse impact of appreciation of the Indian rupee against the US
dollar, an increase in compensation costs for offshore and onsite employees as a part
of our compensation review and lower gross margins in Infocrossing. Based on average
exchange rates in fiscal 2007 and 2008, the Indian rupee has appreciated by over 10.9%
against the U.S. dollar in fiscal 2008. This is partially offset by improvement in the
average utilization rates of billable employees from 64% for the year ended March 31,
2007 to 67% for the year ended March 31, 2008. |
|
|
§ |
|
Selling and marketing expenses as a percentage of revenue from our IT Services
segment increased marginally from 5.60% for the year ended March 31, 2007 to 6.16% for
the year ended March 31, 2008. However in absolute terms selling and marketing expenses
increased by 37% during the same period. This increase was primarily due to an increase
in personnel cost by Rs. 1,757 from Rs. 4,004 for the year ended March 31, 2007 to Rs.
5,761 for the year ended March 31, 2008. This is attributable to the increase in number
of sales and marketing personnel from 340 as of March 31, 2007 to 425 as of March 31,
2008 and an increase in compensation costs as a part of our compensation review. |
44
|
§ |
|
General and administrative expenses as a percentage of revenue from our IT Services
segment has increased marginally from 5.51% for the year ended March 31, 2007 to 5.68%
for the year ended March 31, 2008. This increase was primarily due to an increase in
personnel cost by Rs. 862. Personnel cost increased from Rs. 2,647 for the year ended
March 31, 2007 to Rs. 3,509 for the year ended March 31, 2008, which is attributable to
the increase in our support staff consistent with the increase in
volume and operations, increase in compensation cost as a part of our compensation review, grants of
additional stock options and acquisition of Infocrossing. |
|
|
§ |
|
Increase in amortization of intangibles is primarily attributable to amortization of
customer-related intangible arising on acquisition of Infocrossing. |
|
|
§ |
|
Others, net for the year ended March 31, 2008, include Rs. 269 of insurance
recoveries relating to certain costs incurred by the Company. |
|
|
§ |
|
As a result of the above, operating income from our IT Services segment increased by
9%. |
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 solution and packaged software. Our IT Products
segment accounted for 11%, 13% and 13% of our total revenue for the years ended March 31, 2007,
2008 and 2009, respectively. Our IT Products segment accounted for 2%, 3% and 3% of our operating
income for the years ended March 31, 2007, 2008 and 2009, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
Year on Year change |
|
|
2009 |
|
2008 |
|
2007 |
|
2009-08 |
|
2008-07 |
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
Rs. |
33,424 |
|
|
Rs. |
24,619 |
|
|
Rs. |
16,965 |
|
|
|
36 |
% |
|
|
45 |
% |
Gross profit |
|
|
3,249 |
|
|
|
2,583 |
|
|
|
1,640 |
|
|
|
26 |
% |
|
|
58 |
% |
Selling and marketing expenses |
|
|
(1,335 |
) |
|
|
(852 |
) |
|
|
(581 |
) |
|
|
57 |
% |
|
|
47 |
% |
General and administrative expenses |
|
|
(717 |
) |
|
|
(894 |
) |
|
|
(436 |
) |
|
|
(20 |
)% |
|
|
105 |
% |
Amortization of intangibles |
|
|
(23 |
) |
|
|
(30 |
) |
|
|
(13 |
) |
|
|
(23 |
)% |
|
|
131 |
% |
Others, net |
|
|
44 |
|
|
|
62 |
|
|
|
29 |
|
|
No |
|
no |
Operating income |
|
|
1,218 |
|
|
|
869 |
|
|
|
639 |
|
|
|
40 |
% |
|
|
36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses |
|
|
3.99 |
% |
|
|
3.46 |
% |
|
|
3.42 |
% |
|
(53 |
) bps |
|
(4 |
) bps |
General and administrative
expenses |
|
|
2.15 |
% |
|
|
3.63 |
% |
|
|
2.57 |
% |
|
148 |
bps | |
(106 |
) bps |
Gross margin |
|
|
9.72 |
% |
|
|
10.49 |
% |
|
|
9.67 |
% |
|
(77 |
) bps | |
82 |
bps |
Operating margin |
|
|
3.64 |
% |
|
|
3.53 |
% |
|
|
3.77 |
% |
|
11 |
bps | |
(24 |
) 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. 16,990, Rs. 24,545 and Rs. 33,519 for the years ended March 31,
2007, 2008 and 2009, respectively.
Analysis of years ended March 31, 2009 and 2008
|
|
|
Our revenue from the IT Products segment grew by 36%. This increase is primarily due
to growth in revenues across all product lines. |
|
|
|
|
Our gross profit as a percentage of our revenue from our IT Products segment
decreased by 77 bps. This decline is primarily attributable to increase in the
procurement cost of imported items due to depreciation of the Indian Rupee against U.S.
Dollar during the year ended March 31, 2009. |
|
|
|
|
Selling and marketing expenses as a percentage of revenue from our IT Products
segment has increased marginally from 3.46% for the year ended March 31, 2008 to 3.99%
for the year ended March 31, 2009. In absolute terms selling and
marketing expenses increased by 483. The increase in selling and marketing
expenses in absolute terms was primarily due to focus on our increasing presence in
select geographies. |
45
|
|
|
General and administrative expenses as a percentage of revenue from our IT Products
segment has decreased from 3.63% for the year ended March 31, 2008 to 2.15% for the
year ended March 31, 2009. This decline of Rs. 177 is primarily due to certain cost
containment measures. |
|
|
|
|
As a result of the above, operating income from our IT Products segment increased by
40%. |
Analysis of years ended March 31, 2008 and 2007
|
§ |
|
Our revenue from the IT Products segment grew by 45%. This increase is primarily due
to growth in revenues across all product lines and integration of our acquisition of 3D
Networks. |
|
|
§ |
|
Our gross profits as a percentage of our revenues from our IT Products segment
increased by 82 bps. The improvement is primarily attributable to an increase in
proportion of revenues from traded products, which typically have higher gross margins. |
|
|
§ |
|
Selling and marketing expenses as a percentage of revenue from our IT Products
segment has increased marginally from 3.42% for the year ended March 31, 2007 to 3.46%
for the year ended March 31, 2008. However, in absolute terms our selling and marketing
expenses have increased by 47%, primarily due to increase in the number of sales and
marketing personnel for this business segment. |
|
|
§ |
|
General and administrative expenses as a percentage of revenue from our IT Products
segment increased from 2.57% for the year ended March 31, 2007 to 3.63% for the year
ended March 31, 2008. This was primarily due to an increase in the volume of operations
and integration of our acquisition of 3D Networks. |
|
|
§ |
|
As a result of the above, operating income from our IT Products segment increased by
36%. |
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, we are increasing our presence in personal care products sector in south-east Asia. Our
Consumer Care and Lighting segment accounted for 5%, 7% and 8% of our revenue for the years ended
March 31, 2007, 2008 and 2009, respectively. Our Consumer Care and Lighting segment accounted for
3%, 5% and 5% of our operating income for the years ended March 31, 2007, 2008 and 2009,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
Year on Year change |
|
|
2009 |
|
2008 |
|
2007 |
|
2009-08 |
|
2008-07 |
|
|
(in millions) |
|
|
|
|
|
|
|
|
Revenue |
|
Rs. |
19,243 |
|
|
Rs. |
14,619 |
|
|
Rs. |
7,563 |
|
|
|
32 |
% |
|
|
93 |
% |
Gross profit |
|
|
8,458 |
|
|
|
5,938 |
|
|
|
2,658 |
|
|
|
42 |
% |
|
|
123 |
% |
Selling and marketing expenses |
|
|
(4,660 |
) |
|
|
(3,222 |
) |
|
|
(1,483 |
) |
|
|
45 |
% |
|
|
117 |
% |
General and administrative expenses |
|
|
(1,203 |
) |
|
|
(816 |
) |
|
|
(120 |
) |
|
|
47 |
% |
|
|
580 |
% |
Amortization of intangibles |
|
|
(365 |
) |
|
|
(111 |
) |
|
|
(5 |
) |
|
|
229 |
% |
|
|
|
|
Others, net |
|
|
64 |
|
|
|
53 |
|
|
|
17 |
|
|
No |
|
no |
Operating income |
|
|
2,294 |
|
|
|
1,842 |
|
|
|
1,067 |
|
|
|
25 |
% |
|
|
73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
24.22 |
% |
|
|
22.04 |
% |
|
|
19.61 |
% |
|
(218 |
) bps |
|
(243 |
) bps |
General and administrative expenses |
|
|
6.25 |
% |
|
|
5.58 |
% |
|
|
1.59 |
% |
|
(67 |
) bps | |
(399 |
) bps |
Gross margin |
|
|
43.95 |
% |
|
|
40.62 |
% |
|
|
35.14 |
% |
|
333 |
bps |
|
548 |
bps |
Operating margin |
|
|
11.92 |
% |
|
|
12.60 |
% |
|
|
14.11 |
% |
|
(68 |
) bps | |
(151 |
) bps |
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, our strategy is to sustain and
expand our market share in south-east Asia and introduce premium personal care products of Unza in
the Indian markets.
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. 7,559, Rs. 14,639 and Rs. 19,302 for the years ended March 31,
2007, 2008 and 2009, respectively.
46
Analysis of years ended March 31, 2009 and 2008
|
|
|
Our Consumer Care and Lighting revenue increased by 32%. The increase in revenue is
attributable to an increase in the volume of our soap, lighting, furniture products
and Personal Care Products of Unza. |
|
|
|
Our gross profit as a percentage of our revenues from the Consumer Care and Lighting
segment increased by 333 bps. This increase was primarily due to an increase in the
proportion of revenue from the range of products manufactured by Unza, which typically
have higher gross margins. |
|
|
|
Selling and marketing expense as percentage of revenue from our Consumer Care and
Lighting segment has increased from 22.04% for the year ended March 31, 2008 to 24.22%
for the year ended March 31, 2009. This increase is primarily
due to increase in proportion of revenues from Unza. Selling and distribution expense as a percentage of our revenue
is typically higher in Unza products. Further in fiscal 2009, we
incurred higher brand promotion and advertisement spends in Indian
market. |
|
|
|
General and administrative expense as percentage of revenue from our Consumer Care
and Lighting segment has increased from 5.58% for the year ended March 31, 2008 to
6.25% for the year ended March 31, 2009. This increase is primarily due to Unza. General and administrative expense as a
percentage of our revenue is typically higher in Unza products. |
|
|
|
As a result of the above, operating income from our Consumer Care and Lighting
segment increased by 25%. |
Analysis of years ended March 31, 2008 and 2007
|
§ |
|
Our Consumer Care and Lighting revenue increased by 93%. This increase in revenue is
attributable to an increase in sales volume of our soap, lighting and furniture
products, an increase in prices of certain products and the integration of Unza from
August 2007, which contributed additional revenues of Rs 4,823. |
|
§ |
|
Our gross profits as a percentage of our revenues from the Consumer Care and
Lighting segment increased by 548 bps. This increase was primarily due to an increase
in the proportion of revenues from the range of products manufactured by Unza, which
typically have higher gross margins. |
|
§ |
|
Selling and marketing expenses of our Consumer Care and Lighting segment increased
by 117%. This was primarily due to the increase in sales promotion expenses for
building brands and expanding market share in select geographies and the integration of
our acquisition of Unza group from August 2007 which resulted in additional selling and
marketing expenses of Rs. 1,630. |
|
§ |
|
General and administrative expenses of our Consumer Care and Lighting segment
increased by 580%. This is primarily attributable to integration of our acquisition of
Unza group from August 2007 which resulted in additional general and administrative
expenses of Rs. 600. |
|
§ |
|
As a result of the above, operating income of our Consumer Care and Lighting
business increased by 73%. |
Others, including reconciling items
Analysis of year ended March 31, 2009 and 2008
|
|
|
Revenue from our Others segment, including reconciling items, decreased by 10%, from
Rs. 11,930 for the year ended March 31, 2008 to Rs. 10,704 for the year ended March 31,
2009. This decrease was primarily driven by a decrease in revenue from our hydraulic
cylinders and tipping gear systems business. The decline in the revenues is
attributable to slowdown in the global markets which has impacted the market for
infrastructure engineering products in Indian and European markets. |
|
|
|
Operating income from our Others segment, including reconciling items, decreased
from Rs. 515 for the year ended March 31, 2008 to Rs. (932) for the year ended March
31, 2009. This is primarily due to loss Rs. 281 in our hydraulic cylinders and tipping
gear systems business as against income of Rs. 1,006 in the corresponding previous
year. This loss is attributable to the contraction in the sales volume of
infrastructure engineering business due to the slowdown in the global market. |
Analysis of year ended March 31, 2008 and 2007
|
|
|
Revenue from our Others segment, including reconciling items, increased by 64%, from
Rs. 7,263 for the year ended March 31, 2007 to Rs. 11,930 for the year ended March 31,
2008. This was primarily due to |
47
|
|
|
integration of our acquisition of Hydrauto Group for the full year in fiscal 2008 as
compared to a part of the year in fiscal 2007, and an increase in revenue from the sale
of hydraulic cylinders and tipping gear systems. |
|
|
|
As a result of the above, operating income of Others, including reconciling items,
increased from Rs. 273 for the year ended March 31, 2007 to Rs. 515 for the year ended
March 31, 2008. This increase in operating income was primarily due to increase in
profits of our infrastructure engineering business on account of increase in the volume
of operations. This increase was partially offset by the fringe benefit tax payment of
Rs. 375. |
Acquisitions
An active acquisition program is an important element of our corporate strategy. In the last
three fiscal years, we have invested over Rs. 47,268 in the aggregate, to acquire companies
including the acquisitions of Infocrossing and Unza. In January 2009, we acquired Citi Technology
Services Limited (Subsequently renamed as Wipro Technology Services Limited WTS), an India based
provider of information technology services and solutions. WTS has a strong competency in
Technology Infrastructure Services (TIS), application development and maintenance services (ADM)
for cards, capital markets and corporate banking. 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 greater scale to grow our earnings and
increase stockholders value. See Note 3 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, 2009. 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.
Stock compensation expense
Effective April 1, 2006, we adopted SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS
No. 123 (R)), which requires the measurement and recognition of compensation expense for all
stock-based payment awards based on the grant-date fair value of those awards. Previously, we used
the intrinsic value based method, permitted by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock issued to Employees, to account for our employee stock-based compensation
plans and had adopted the pro-forma disclosure provisions of SFAS No. 123, Accounting for
Stock-Based Compensation.
We have adopted SFAS No. 123(R) using the modified prospective application method. Under this
approach we have recognized compensation expenses for share-based payment awards granted prior to,
but not yet vested as of April 1, 2006, based on the grant date fair value estimated in accordance
with the provisions of SFAS No. 123. Pursuant to adoption of SFAS No. 123(R), we recognized an
additional compensation expense of Rs. 165 million for the year ended March 31, 2007.
As of March 31, 2009, 122,746 options are outstanding under our stock option plan and
16,270,226 options are outstanding under our restricted stock unit option plan. The compensation
cost arising from such grants is being amortized over the relevant vesting period. As a result of
the above, we have amortized stock compensation expenses of Rs. 1,336, Rs. 1,076 and Rs. 1,636 for
the years ended March 31, 2007, 2008 and 2009, respectively.
The stock compensation charge has been allocated to cost of revenue and selling and marketing
expenses and general and administrative expenses in line with the nature of the service rendered by
the employee who received the benefit.
The allocation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
|
2009 |
| |
2008 |
| |
2007 |
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
Cost of revenue |
|
Rs. |
1,232 |
|
|
Rs. |
840 |
|
|
Rs. |
1,044 |
|
Selling and marketing expenses |
|
|
197 |
|
|
|
137 |
|
|
|
169 |
|
General and administrative expenses |
|
|
166 |
|
|
|
99 |
|
|
|
122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rs. |
1,595 |
|
|
Rs. |
1,076 |
|
|
Rs. |
1,336 |
|
|
|
|
|
|
|
|
|
|
|
48
The Indian Finance Act, 2005 imposes an additional income tax on companies called a Fringe
Benefits Tax, or FBT. Pursuant to this Act, 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 a fringe benefit to the employees and
subjects a company to tax at a rate of 30%, exclusive of applicable surcharge and cess. FBT on all
stock options is assessed that are exercised on or after April 1, 2007, and is based on the
intrinsic value of the stock options on the vesting date. We record the FBT liability for employee
stock options at the time of exercise of employee stock options. The FBT and other similar taxes
enacted in the future by the Government of India could adversely affect our profitability. In our
income statement, the FBT is allocated as cost of revenues, selling and marketing expenses and
general and administrative expenses on the basis of its nature.
The Indian tax laws permit the employer to recover the FBT from the employee as the tax
relates to benefits accruing to the employees. Pursuant to such law, we have amended our stock
option plans to recover the amount from the employees relating to employee stock options. For
options granted prior to March 31, 2007, although the FBT expense will be recorded through our
income statement, the corresponding recovery, which is directly linked to exercise of stock
options, will be recorded as additional exercise price. The FBT liability for outstanding options
as of March 31, 2009, based on market price of our shares is approximately Rs. 1,281.
Amortization of Intangible Assets
Intangible assets are amortized over their estimated useful lives in proportion to the
economic benefits consumed in each period. We have amortized intangible assets of Rs. 379, Rs. 724
and Rs. 1,535 for the years ended March 31, 2007, 2008 and 2009, respectively. The increase is due
to amortization of intangibles of Infocrossing, Unza and CTS.
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 Other income, 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 accounting 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
transaction occurs, along with the hedged item. Changes in the fair value of derivative
instruments which are economic hedges in respect of debt denominated in foreign
currency are reported in Other income, net. |
Other Income, net
Our other income, net includes interest income on liquid and short-term investments, interest
and related expense on short-term borrowings from banks, short-term and long-term debt, dividend
income, exchange differences arising from the translation or settlement of debt denominated in
foreign currency and changes in fair value of related derivative instruments and realized
gains/losses on the sale of investment securities.
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 where General Electric, USA holds the balance of 51%.
Income Taxes
Our net income 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.
49
Software Technology and Hardware Technology Parks. Under this scheme there is provision for an
income tax deduction of 100 percent 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, 2009. The Finance Act, 2008 has extended the availability of the ten year tax holiday
by period of one year such that the tax holiday will be available until the earlier of fiscal year
2010 or ten years.
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 percent
of profits or gains derived from the export of services for the first five years from commencement
of provision of services and 50 percent 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.
Profits from certain other undertakings are also eligible for preferential tax treatment. In
addition, dividend income from certain category of investments is exempt from tax.
For
the years ended March 31, 2007, 2008 and 2009 our tax benefits
were Rs. 7,948, Rs. 8,450
and Rs. 10,368, respectively, from such tax incentives.
The Company received tax demands from the Indian income tax authorities for the financial
years ended March 31, 2001, 2002, 2003 and 2004, respectively aggregating to Rs. 11,127 (including
interest of Rs. 1,503). The tax demand was primarily on account of 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 favor of the Company, thus deleting
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 within the time
limits permitted under the statute.
Considering the facts and nature of disallowance and the order of the appellate authorities
upholding our claims for earlier years, we believe that the final outcome of the above disputes
should be in our favor and there should not be any material impact on the financial statements. The
range of loss relating to these contingencies is between zero and the amount of the demand.
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 for fiscal 2009 after considering MAT.
The excess tax paid under MAT provisions over and above normal tax liability can be carried forward
and set-off against future tax liabilities computed under normal tax provisions.
The unrecognized tax benefits has increased by Rs. 2,429 during the year ended March 31, 2009
primarily due to certain additional tax credit carryforward of Rs. 918 reported in the income tax filings for
the year ended March 31, 2008 and on account of additional impact in the current year in relation to
uncertain tax positions taken in the current year.
Liquidity and Capital Resources
The Companys cash flow from operating, investing and financing activities, as reflected in
the Consolidated Statement of Cash Flows on page 99, is summarized in the table below:
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
Year on Year Change |
|
|
2009 |
|
2008 |
|
2007 |
|
2009-08 |
|
2008-07 |
Net cash provided
by/(used in)
continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities |
|
Rs. |
36,832 |
|
|
Rs. |
24,595 |
|
|
Rs. |
30,161 |
|
|
Rs. |
12,237 |
|
|
Rs. |
(5,566 |
) |
Investing
activities |
|
|
(27,693 |
) |
|
|
(28,505 |
) |
|
|
(21,377 |
) |
|
|
812 |
|
|
|
(7,128 |
) |
Financing
activities |
|
|
44 |
|
|
|
30,798 |
|
|
|
(5,180 |
) |
|
|
(30,754 |
) |
|
|
35,978 |
|
Net change in cash and
cash equivalents |
|
|
9,184 |
|
|
|
26,888 |
|
|
|
3,604 |
|
|
|
(17,704 |
) |
|
|
23,284 |
|
Effect of exchange
rate changes on cash
and cash
equivalent |
|
|
663 |
|
|
|
(30 |
) |
|
|
(50 |
) |
|
|
693 |
|
|
|
20 |
|
As
of March 31, 2009, we had cash and cash equivalent, short-term
investments, and short-term deposits of Rs. 69,547. Cash and cash
equivalent, short-term investments and short-term deposits, net of
debt was Rs. 12,741. In addition we have unused credit lines of Rs. 19,160. 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. 12,237, while net income increased by
Rs. 2,174 during the same period. The increase in cash provided by operating activities was
primarily due to reduction in receivable days in the IT Services segment from 67 days in March 2008
to 60 days in March 2009 and greater focus on strengthening our working capital position resulting
in increase in accounts payable and accrued expenses. Receivable days as of a reporting date is the
proportion of receivables, including unbilled and unearned revenue to the revenues for the
respective fiscal quarter multiplied by 90.
Further, our net income included Rs. 3,973 of non-cash charge relating to reinstatement of
foreign currency loan and mark to market gains/losses on related cross-currency interest rate
swaps. These were offset by Rs. 12,196 of cash losses on roll-over of cash flow hedges and hedge of
net investment in foreign operation.
Cash provided by operating activities decreased from Rs. 30,161 for the year ended March 31,
2007 to Rs. 24,595 for the year ended March 31, 2008. Our net income increased by 11% during the
year ended March 31, 2008. The decline was primarily due to increases in our accounts receivable,
unbilled revenues, deferred contract costs and inventories. Increase in accounts receivable was
primarily due to an increase in receivable days in IT Services and Products. Unbilled revenues
increased due to an increase in the proportion of revenues from fixed price projects. This is
partially offset by the increase in unearned revenue and advance from customers. Inventories in our
infrastructure engineering products business increased due to our strategy to reduce impact of
procurement lead time.
Cash used in investing activities for the year ended March 31, 2009 was Rs. (27,693). Cash
provided by operating activities was utilized for the net purchase of investments amounting to Rs.
(1,030), the purchase of property, plant and equipment amounting to Rs. (16,234) and payments made
in connection with acquisitions of Rs. (6,679).
Cash used in investing activities for the year ended March 31, 2008 was Rs. (28,505) against
Rs. (21,377) in the year ended March 31, 2007. Cash provided by operating activities, net proceeds
from sale/maturity of investments and net proceeds from short-term borrowings/long-term debt were
utilized to finance the acquisitions amounting to Rs. (32,789) and purchase of property, plant and
equipment amounting to Rs. (14,674) which is primarily driven by the growth strategy of the
Company.
Cash provided by financing activities for the year ended March 31, 2009 was Rs. 44.
Cash provided by financing activities for the year ended March 31, 2008 was Rs. 30,798 against
Rs. (5,180) of cash used in financing activities during the year ended March 31, 2007. This
increase is primarily due to increase in net proceeds from short-term borrowings/long-term debt
partially offset by lower proceeds from issuance of equity shares. The funds were utilized to fund
the acquisitions.
We have proposed to pay a cash dividend of Rs. 4 per share on our equity shares and AD Rs. This
proposal is subject to approval by the shareholders of the Company. We expect a dividend payout
(excluding corporate dividend tax) of approximately Rs. 5,860 million.
We maintain 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. The increase in our outstanding debt and
borrowings is primarily due to depreciation of Indian rupee against the U.S. dollars and Japanese
Yen (JPY). Please refer to Note 16 of our Notes to the Consolidated Financial Statements for more
details on 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 would be
sufficient to meet the repayment obligations in respect of debt / borrowings.
51
As of March 31, 2009, we had contractual commitments of Rs. 5,371 ($ 106) related to capital
expenditures on construction or expansion of software development facilities, Rs. 7,091 ($ 139)
related to non-cancelable operating lease obligations and Rs. 3,255 ($ 64) 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 would 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). These transfers can be with
or without recourse. As at March 31, 2009, we had transferred financial assets of Rs. 539 without
recourse.
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 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.
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, 2009,
aggregated by type of contractual obligation, is given below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
contractual |
|
|
|
Payments due in |
|
2014-15 |
Particulars |
|
payment |
|
2009-10 |
|
2010-12 |
|
2012-14 |
|
onwards |
Short-term borrowings |
|
|
36,472 |
|
|
|
36,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
18,916 |
|
|
|
235 |
|
|
|
411 |
|
|
|
18,270 |
|
|
|
|
|
Obligations under capital leases |
|
|
1,418 |
|
|
|
504 |
|
|
|
513 |
|
|
|
334 |
|
|
|
67 |
|
Estimated interest payment (1) |
|
|
2,277 |
|
|
|
511 |
|
|
|
1,132 |
|
|
|
634 |
|
|
|
|
|
Capital commitments |
|
|
5,371 |
|
|
|
5,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cancelable operating lease
obligation |
|
|
7,901 |
|
|
|
1,064 |
|
|
|
2,020 |
|
|
|
1,649 |
|
|
|
3,168 |
|
Purchase obligations |
|
|
3,255 |
|
|
|
3,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities(2) |
|
|
932 |
|
|
|
786 |
|
|
|
41 |
|
|
|
10 |
|
|
|
95 |
|
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 interest rates as of March 31, 2009
for each relevant debt instrument. |
(2) |
|
|
In accordance with SFAS No. 87, Employers Accounting for Pensions, and SFAS
No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions, as
amended by SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans an amendment of FASB Statements No. 87, 88, 106, and 132(R),
the net accrued benefit liability for defined benefit recognized as of March 31, 2009,
was Rs. 269, which is reported as a component of other liabilities in the balance
sheet. Other liabilities in the balance sheet also include amount of
Rs. 2,321 towards
uncertain tax positions. For these amounts, the extent of the amount and timing of
payment/cash settlement is not reliably estimable or determinable, at present, and
accordingly have not been disclosed in the table above. |
52
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
Innovation Initiative.
CoEs are designed to enable growth of 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.
Innovation initiative is directed towards creating new solutions and intellectual property
which potentially expand our service offerings. Innovation initiative covers the entire cycle of
Idea Generation, Incubation and Successful Execution. We focus on Process Innovations, Delivery
Innovations, Technology Innovations, Product Innovations and Business Innovations.
Trend Information
IT Services. The shift in role of Information and Technology (IT) from merely supporting
business to transforming business, is driving productivity gains and helping create new business
models. This has led to an increase in the importance of IT. The increasing acceptance of
outsourcing and off-shoring of activities as an economic necessity has contributed to the continued
growth in our revenue.
However the recent crisis in the financial and credit markets in the United States, Europe and
Asia have resulted in global economic slowdown. According to World Economic Outlook Update
published by the International Monetary Fund in January 2009, the GDP of United States is projected
to contract by 1.6% in fiscal 2009 and during the same period the GDP of Euro area is projected to
contract by 2%.
In an economic slowdown our value proposition of delivering significant cost benefits through
superior execution, delivery of services through optimal mix of low cost and nearshore centers and
assuming responsibility for delivering targeted savings from defined baseline costs is very
compelling to our customers. However, in an economic slowdown, our clients could reduce, postpone
or defer decisions on IT spending and outsourcing. This could result in lower IT spending in the
near term. Our outlook on revenues for the IT Services segment for the three months ending June 30,
2009 in some measure reflects these factors.
Further, 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
innovating 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, 2009 is 33%. 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 the proportion of services performed at client location; 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;
|
|
|
Performance And Capital Efficiency (PACE) program- reduce capex spends, deliver
process and application optimization and assume ownership of specific IT areas to
reduce baseline IT spends for the client; |
|
|
|
strengthening our delivery model; |
|
|
|
cost containment initiatives and driving higher employee productivity; |
|
|
|
aligning our resources to expected demand; and |
53
|
|
|
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. As a result revenue from our IT Product business segment for the quarters ended March 31
and December 31 are typically higher than other quarters of the year.
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 net income 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.
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.
Recent accounting pronouncements
SFAS No. 141R. In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations (SFAS No. 141R), which is a revision of SFAS No. 141, Business Combinations. This
statement establishes principles and requirements for how an acquirer: recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities assumed and any
non-controlling interest in the acquiree; recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase; and determines what information to disclose
to enable users of the financial statements to evaluate the nature and financial effects of the
business combination. We are required to apply this new standard prospectively to business
combinations for which the acquisition date is on or after the beginning of the annual reporting
period beginning on or after December 15, 2008. Early adoption is prohibited. We will adopt this
statement effective April 1, 2009 and its effects on future periods will depend on the nature and
significance of business combinations subject to SFAS No. 141R.
On April 1, 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination
That Arise from Contingencies (the FSP), to amend and clarify the initial recognition and
measurement, subsequent measurement and accounting, and related disclosures arising from
contingencies in a business combination under SFAS No. 141R. The effects of this FSP on future
periods will depend on the nature and specific facts of business combinations subject to SFAS No.
141R.
SFAS No. 160. In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements (SFAS No. 160 an amendment of ARB No. 51). SFAS No. 160
establishes accounting and reporting standards for ownership interests in subsidiaries held by
parties other than the parent, the amount of consolidated net income attributable to the parent and
to the non-controlling interest, changes in a parents ownership interest and the valuation of
retained non-controlling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also
establishes disclosure requirements that clearly identify and distinguish between the interests of
the parent and the interests of the non-controlling owners. We are required to adopt this new
standard for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. We do not expect the adoption of this statement to have a material effect on the
Consolidated Financial Statements.
SFAS No. 161. In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities An Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS
No. 161 requires enhanced disclosures on derivative and hedging activities by requiring objectives
to be disclosed for using derivative instruments in terms of underlying risk and accounting
designation. This statement requires disclosures on the need of using derivative instruments,
accounting of derivative instruments and related hedged items, if any, under SFAS No. 133 and the
effect of such instruments and related hedge items, if any, on the financial position, financial
performance and cash flows. We are required to adopt this new statement for fiscal years beginning
after November 15, 2008. Pursuant to the transition provisions of the statement, we will adopt SFAS
No. 161 in fiscal year 2009 and will present the required disclosures in the prescribed format on a
prospective basis. This statement does not impact the consolidated financial results as it is
disclosure-only in nature.
54
FSP SFAS 142-3 In April 2008, the FASB issued FSP SFAS 142-3, Determination of the Useful
Life of Intangible Assets (FSP 142-3). This guidance is intended to improve the consistency
between the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other
Intangible Assets (SFAS 142), and the period of expected cash flows used to measure the fair value
of the asset under SFAS 141R when the underlying arrangement includes renewal or extension of terms
that would require substantial costs or result in a material modification to the asset upon renewal
or extension. Companies estimating the useful life of a recognized intangible asset must now
consider their historical experience in renewing or extending similar arrangements or, in the
absence of historical experience, must consider assumptions that market participants would use
about renewal or extension as adjusted for SFAS 142s entity-specific factors. FSP 142-3 is
effective for us beginning April 1, 2009. We would be required to adopt this FSP prospectively for
all assets acquired after April 1, 2009 and early adoption is prohibited. Its effects on future
periods will depend on the nature and specific facts of assets acquired subject to SFAS No. 142.
FSP 132 (R)-1 In December 2008, the FASB issued FSP SFAS 132(R)-1, Employers Disclosures
about Postretirement Benefit Plan Assets (FSP 132(R)-1). This guidance amends SFAS No. 132(R),
Employers Disclosures about Pensions and Other Postretirement Benefits, to require more detailed
disclosures about the fair value measurements of employers plan assets including (a) investment
policies and strategies; (b) major categories of plan assets; (c) information about valuation
techniques and inputs to those techniques, including the fair value hierarchy classifications (as
defined by SFAS No. 157) of the major categories of plan assets; (d) the effects of fair value
measurements using significant unobservable inputs (Level 3) on changes in plan assets; and (e)
significant concentrations of risk within plan assets. The disclosures required by the FSP is
effective for us beginning April 1, 2009. This statement does not impact the consolidated financial
results as it is disclosure-only in nature.
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 2 to the Notes to Consolidated Financial Statements.
Revenue Recognition
We derive our revenues primarily from two sources: (i) product revenue and (ii) service revenue.
Product Revenue
Product revenue is recognized when there is persuasive evidence of an arrangement, the product
has been delivered in accordance with the sales contract, the sales price is fixed or determinable,
and collectability is reasonably assured.
We generally consider a binding purchase order or a signed contract as persuasive evidence of
an arrangement. Persuasive evidence of an arrangement may take different forms depending upon the
customary practices of a specific class of customers.
We provide lease financing for our products primarily through sales-type leases. We classify
our leases in accordance with SFAS No. 13, Accounting for Leases. The vast majority of our leases
qualify as sales-type leases using the present value of minimum lease payments classification
criteria outlined in SFAS No. 13. We believe that our sales-type lease portfolio contains only
normal collection risk with no important uncertainties with respect to future costs. Accordingly,
we record the fair value of equipment as sales revenue, the cost of equipment as cost of sales and
the minimum lease payments plus the estimated residual value as gross finance receivables. The
difference between the gross finance receivable and the equipment fair value is recorded as
unearned income and is amortized as income over the lease term using the interest rate implicit in
the lease. Equipment residual values are determined at inception of the lease using estimates of
equipment fair value at the end of the lease term.
Revenue from sale of software products is recognized in accordance with SOP 97-2, Software
Revenue Recognition. In multiple element software arrangements, revenue is allocated to each
element based on fair value. The fair value of elements within the scope of SOP 97-2 is determined
using Vendor-Specific Objective Evidence (VSOE). In the absence of VSOE for all elements, the
residual method is used where VSOE exists for all the undelivered elements. Where VSOE of the
undelivered element cannot be determined, revenue for the delivered elements is deferred until the
undelivered elements are delivered. If sufficient VSOE does not exist to allocate revenue to the
elements and Post-Contract Customer Support (PCS) is the only undelivered element, the entire
arrangement fee is recognized ratably over the PCS term. Since there is no reasonable basis of
separating the license revenue from PCS, the entire revenue is classified as product revenues.
55
Service Revenue
Service revenue is recognized when there is persuasive evidence of an arrangement, the sales
price is fixed or determinable, and collectability is reasonably assured. Time-and-materials
service contract revenue is recognized as the services are rendered. Revenue from fixed-price,
fixed-timeframe contracts that involve significant production, modification or customization of the
software is accounted for in conformity with ARB No. 45, using the guidance in Statement of
Position (SOP) 81-1, and the Accounting Standards Executive Committees conclusion in paragraph 95
of SOP 97-2, Software Revenue Recognition. Fixed-price, fixed-timeframe contracts, which are
similar to contracts to design, develop, manufacture, or modify complex aerospace or electronic
equipment to a buyers specification or to provide services related to the performance of such
contracts and contracts for services performed by architects, engineers, or architectural or
engineering design firms as laid out in paragraph 13 of SOP 81-1, are also accounted for in
conformity with SOP 81-1. In these fixed-price, fixed-timeframe contracts revenue is recognized
using the percentage-of-completion method.
We use the input (cost expended) method to measure progress towards completion. Percentage of
completion method accounting relies on estimates of total expected contract revenue and costs. We
follow this method when reasonably dependable estimates of the revenues and costs applicable to
various elements of the contract can be made. Key factors we review to estimate the future costs to
complete include estimates of future labor costs and productivity efficiencies. Because the
financial reporting of these contracts depends on estimates that are assessed continually during
the term of these contracts, recognized revenue and profit are subject to revisions as the contract
progresses to completion. When estimates indicate that a loss will be incurred, the loss is
provided for in the period in which the loss becomes evident. To date, we have not had any
fixed-price, fixed-timeframe contracts that resulted in a material loss.
We evaluate change orders to determine whether such change orders are normal element and form
part of the original scope of the contract. If the change orders are part of the original scope of
the contract, no changes are made to the contract price. For other change orders, contract revenue
and costs are adjusted only after the approval of the changes to the scope and price by us and the
client.
Maintenance revenue is recognized ratably over the term of the agreement. Revenue from certain
service arrangement involving defined but dissimilar acts is generally recognized using the
proportional performance method. We defer certain upfront non-recurring costs incurred in the
initial phases of outsourcing contracts to the extent that such costs represent costs of initial
set-up activities or customer acquisition costs. The deferred costs are specific internal costs or
external costs directly related to set-up activities necessary to execute the outsourced services.
Deferred amounts are protected in the event of early termination of the contract and are monitored
regularly for impairment. Impairment is evaluated for a particular contract by comparing the
estimated undiscounted cash flows from the arrangement with the unamortized costs. If the
unamortized costs exceed the undiscounted cash-flow, a loss is recognized.
Revenues from BPO Services are derived from both time-based and unit-priced contracts. Revenue
is recognized as services are performed, under specific terms of the contracts with the customers.
We have determined that certain process transition activities performed in the initial phases of
certain BPO service contracts do not represent the culmination of a separate earning process.
Revenue and related costs of such activities are deferred and recognized ratably over the period in
which the subsequent BPO services are performed. Deferred costs are limited to the amount of
deferred revenues.
Revenue Arrangements with Multiple Deliverables
For all revenue arrangements with multiple deliverables, based on the guidance in EITF Issue
No. 00-21 we recognizes revenues on the delivered products or services only if:
|
|
|
The revenue recognition criteria applicable to the unit of accounting is met; |
|
|
|
The delivered element has value to the customer on a standalone basis. The delivered
unit will have value on a standalone basis if it is being sold separately by other
vendors or the customer could resell the deliverable on a standalone basis; |
|
|
|
There is objective and reliable evidence of the fair value of the undelivered
item(s); and |
|
|
|
If the arrangement includes a general right of return relative to the delivered
item, delivery or performance of the undelivered item(s) is considered probable and
substantially in our control. |
The arrangement consideration is allocated to the units of accounting based on their fair
values. The revenue recognized for the delivered items is limited to the amount that is not
contingent upon the delivery or performance of the undelivered items. In certain cases, the
application of the contingent revenue provisions of EITF Issue No. 00-21 could result in
recognizing a loss on the delivered element. In such cases, the cost recognized is limited to the
amount of non-contingent revenues recognized and the balance of costs are recorded as an asset and
are reviewed for impairment based on
the estimated net cash flows to be received for future deliverables under the contract. These
costs are subsequently recognized on recognition of the revenue allocable to the balance of
deliverables.
56
Assessments about whether the delivered units have a value to the customer on a standalone
basis, impact of returns and similar contractual provisions, and determination of fair value of
each unit would affect the timing of revenue recognition and would impact our results of
operations.
Accounting Estimates
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.
Specifically, 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.
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.
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.
Accounting for Income taxes
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.
We also assess the temporary differences resulting from differential treatment of certain
items for tax and accounting purposes. These differences result in deferred tax assets and
liabilities, which are recognized in our consolidated financial statements. We assess our deferred
tax assets on an ongoing basis by assessing our valuation allowance and adjusting the valuation
allowance appropriately. In calculating our valuation allowance we consider the future taxable
incomes and the feasibility of tax planning initiatives. If we estimate that the deferred tax asset
cannot be realized at the recorded value, a valuation allowance is created with a charge to the
statement of income in the period in which such assessment is made. We have not created a deferred
tax liability in respect of the basis difference in the carrying value of investments in domestic
subsidiaries, since we expect to realize this in a tax-free manner and the current tax laws in
India provide means by which we can realize our investment in a tax-free manner.
We are subject to a 15% branch profit tax in the United States to the extent the net profit
attributable to our U.S. branch for the fiscal year is greater than the increase in the net assets
of the U.S. branch for the fiscal year, as computed in accordance with the Internal Revenue Code.
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, 2009.
We account for uncertainty in income taxes in the financial statements in accordance with
Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income
Taxes an Interpretation of FASB Statement No. 109 (FIN 48). The accounting and disclosure of tax
positions taken or expected to be taken on a tax return are based on the recognition threshold and
measurement attribute as prescribed by FIN 48. We recognize penalties and interest related to
unrecognized tax benefits as a component of other income, net.
Derivatives and Hedge Accounting, and Exchange Rate Risk
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. The derivative instruments also include short term forward foreign exchange
contracts pursuant to a roll-over hedging strategy which are replaced with successive new contracts
up to the period in which the forecasted transactions are expected to occur. We also
designate zero-cost collars, which qualify as net purchased options, to hedge the exposure to
variability in expected future foreign currency cash inflows due to exchange rate movements.
57
We designate the derivatives in respect of forecasted transactions, which meet the hedging
criteria, as cash flow hedges. Changes in the derivative fair values that are designated, effective
and qualify as cash flow hedges, under SFAS No. 133 Accounting for Derivative Instruments and
Hedging Activities, are deferred and recorded as a component of accumulated other comprehensive
income until the hedged transactions occur. On occurrence of the hedge transaction, these amounts
are reclassified to the consolidated statements of income and reported along with the hedged item.
With respect to derivatives acquired pursuant to the roll-over hedging strategy, the changes in the
fair value of discount or forward premium points are recognized in consolidated statements of
income of each period.
Gains and losses upon roll-over of derivatives acquired pursuant to the roll-over hedging
strategy are deferred and recorded as a component of accumulated other comprehensive income until
the hedged transactions occur and are reclassified to the consolidated statements of income and
reported along with the hedged item.
We have also hedged the foreign currency risk relating to a portion of our investment in
overseas operations through foreign exchange derivative contracts and net purchased options. The
entire mark to market and realized gains/losses relating to the effective portion of the hedges is
recognized in other comprehensive income to offset the translation gains/losses relating to the
hedged investments. This would be transferred to the income statement upon sale or disposal of
foreign operation.
Changes in fair value for 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, 2009, 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.
Business Combinations, Goodwill and Intangible Assets
We allocate the purchase price of acquired companies to the tangible and intangible assets
acquired and liabilities assumed based on their estimated fair values. We may engage third-party
appraisal firms to assist us in determining the fair values of certain assets acquired and
liabilities assumed. Such valuations require us to make significant estimates and assumptions,
especially with respect to intangible assets. Acquired intangible assets may represent
indefinite-life intangibles (e.g., certain brands), determinable life intangibles (e.g.,
customer-related intangibles) or residual goodwill. Of these, only the costs of determinable life
intangibles are amortized to expense over their estimated useful life. The estimated useful life
determined based on a number of factors, ranges from two to thirty years. The value of indefinite
life intangible assets and residual goodwill is not amortized, but is tested at least annually for
impairment.
In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we have assigned all
the assets and liabilities, including goodwill, to the reporting units. We review goodwill for
impairment annually and whenever events or changes in circumstances indicate the carrying value of
goodwill may not be recoverable. The provisions of SFAS No. 142 require that a two-step impairment
test be performed on goodwill. In the first step, we compare the fair value of the reporting unit
to its carrying value. We determine the fair value of our reporting units using the income
approach. Under the income approach, we calculate the fair value of a reporting unit based on
measurement techniques such as discounted cash flow analyses. If the fair value of the reporting
unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired
and we are not required to perform further testing. If the carrying value of the net assets
assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform
the second step in order to determine the implied fair value of the reporting units goodwill and
compare it to the carrying value of the reporting units goodwill. The implied fair value of
goodwill is determined in the same manner as the amount of goodwill recognized in a business
combination. That is, the fair value of the reporting unit is allocated to all of the assets and
liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit
had been acquired in a business combination and the fair value of the reporting unit was the
purchase price paid to acquire the reporting unit. If the carrying value of a reporting units
goodwill exceeds its implied fair value, then we must record an impairment loss equal to the
difference.
To assist in the process of determining goodwill impairment, we perform internal valuation
analyses and consider other market information that is publicly available. We may also obtain
appraisals from independent valuation firms in certain cases. The discounted cash flow approach and
the income approach, which we use to estimate the fair value of our
58
reporting units, are dependent on a number of factors including estimates of future market
growth and trends, forecasted revenue and costs, appropriate discount rates and other variables. We
base our fair value estimates on assumptions we believe to be reasonable, but which are
unpredictable and inherently uncertain. Actual future results may differ from those estimates.
Goodwill Impairment Testing
We test goodwill for impairment
at least on an annual basis.
In accordance with the guidance in paragraph 20 of SFAS No. 142,
Goodwill and Other Intangible Assets we
also evaluate goodwill for impairment, if there are events and conditions
which require evaluation for impairment. Determining whether an
impairment has occurred requires valuation of the respective reporting unit, which we estimate
using the discounted cash flow method. Valuation of reporting unit is judgmental in nature and
involves the use of significant estimates and assumptions which includes revenue growth rates and
operating margins used to calculate projected future cash flows, risk-adjusted discount rate,
future economic and market conditions. The results of our evaluation showed that the fair value of
all our reporting units exceeded their book values.
Item 6. Directors, Senior Management and Employees
Directors and Senior Management
Our directors and executive officers, their respective ages and positions as of March 31, 2009
were as follows:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Azim H. Premji
|
|
|
63 |
|
|
Chief Executive Officer, Chairman of the Board and
Managing Director (designated as Chairman) |
Dr. Ashok S Ganguly
|
|
|
73 |
|
|
Director |
B.C. Prabhakar
|
|
|
65 |
|
|
Director |
Dr. Jagdish N. Sheth
|
|
|
70 |
|
|
Director |
Narayanan Vaghul
|
|
|
72 |
|
|
Director |
William Arthur Owens
|
|
|
69 |
|
|
Director |
P.M. Sinha
|
|
|
68 |
|
|
Director |
Suresh C. Senapaty
|
|
|
52 |
|
|
CFO and Director |
Suresh Vaswani
|
|
|
49 |
|
|
Joint CEO, IT Business and Director |
Girish S Paranjpe
|
|
|
51 |
|
|
Joint CEO, IT Business and Director |
Anurag Behar
|
|
|
40 |
|
|
Chief Executive, Wipro Infrastructure Engineering |
Vineet Agrawal
|
|
|
47 |
|
|
President, Wipro Consumer Care and Lighting |
Pratik Kumar
|
|
|
43 |
|
|
Executive Vice President HR,
Brand and Corp.
Communication |
T K Kurien
|
|
|
49 |
|
|
President, Global Programs, Consulting Practice and New
Initiatives, Wipro Limited |
Ranjan Acharya
|
|
|
48 |
|
|
Senior Vice President, Human Resources Development, Wipro Limited |
S Deb
|
|
|
51 |
|
|
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 currently the
Chairman of Firstsource Solutions Limited and ABP Private Limited (Ananda Bazar Patrika Group) and
has been a Director on the Central Board of Reserve Bank of India, since November 2000. Dr Ganguly
also currently serves as a non-executive director of Mahindra & Mahindra, ICICI Knowledge Park and
Tata AIG Life Insurance Co Limited and a Director on the Advisory Board of Microsoft Corporation
(India) Private Limited and Hemogenomics Private Limited. He is a member of the Prime Ministers
Council on Trade and Industry as well as the Investment Commission and the India-USA CEO Council,
set up by the Prime Minister of India and the President of the U.S.A. He is also a member of the
National Knowledge Commission to the Prime Minister of India. He is a former member of the Board of
British Airways Plc (1996-
59
2005) and Unilever Plc/NV (1990-97). Dr Ganguly was formerly Chairman of
Hindustan Unilever Limited (1980-90). 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.
B.C. Prabhakar has served as a Director on our Board since February 1997. He has 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. B C Prabhakar serves as a non-executive Director of
Automotive Axles Limited and 3M India Limited
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.,
Adayana Inc, Shasun Chemicals and Drugs Limited and Shasun Pharma Solutions Limited (UK). Dr.
Sheth holds a B. Com (Honors) from Madras University, India, 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 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, National Aviation Company of India Limited, IAL Airport Services Limited, Air India Air
Transport Services Limited, Air India Engineering Services 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. N Vaghul is also a member of the Audit Committee in Nicholas Piramal India
Limited. Mr. N. Vaghul is also the lead independent Director of our Company. Mr. Vaghul holds
Bachelor (Honors) degree in Commerce from Madras University
William Arthur Owens 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., a media
communications company; Embarq, Intelius and Force 10. 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. Mr Owens has been a director in
the company from July 1, 2006.
Priya Mohan Sinha became a Director of our Company on January 1, 2002. 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. From 1981 to 1985 he also served as Sales Director of Hindustan Lever. Currently, he is
also on the Boards of ICICI Bank Limited, Bata India Limited,
Lafarge India Pvt. Limited and Azim Premji Foundation. 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, U.S.A. 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.
Suresh C. Senapaty has served as our Chief Financial Officer and Executive 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 of the Institute of Chartered Accountants of
India.
Suresh Vaswani has served as Joint CEO, IT Business and Executive 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.
Girish S Paranjpe has served as Joint CEO, IT Business and Executive 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.
Anurag Behar has served as CEO of Wipro Infrastructure Engineering since March 20, 2008 and
has served with us 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.
60
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
23rd June, 2008 and has served with us in other positions since February 11, 2000. Mr.
Kurien is a Chartered Accountant and holds a B. Com.
Ranjan Acharya has served as Senior Vice-President-Human Resources Development since April
2002, and has served with us in other positions since July 1994. Mr. Acharya holds a B.S. from Pune
University, India and an M.B.A. from Symbiosis Institute of Business Management, Pune, India.
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 MBA 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 $393 (Rs. 20,000 wef August 1, 2008 and prior to that Rs 10,000) 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, 2009, we paid an aggregate of $
0.28 million (Rs. 14.6
million) as commission to our non-employee directors.
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 two tables present the annual and long-term compensation earned, awarded or paid for
services rendered to us for the fiscal year 2009 by our Executive Directors and members of our
administrative, supervisory or management bodies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation ($) |
| |
|
|
|
|
|
|
Salary and |
| | | | |
Commission/ |
|
|
|
|
|
|
|
|
Long-term compensation |
Name |
|
allowances |
|
|
|
|
| Incentives (1) |
|
Housing (2) |
|
Others |
(Deferred Benefit (3)&(4)) |
Azim H. Premji |
|
$ |
84,729 |
|
|
|
|
|
|
$ |
105,710 |
|
|
$ |
58,974 |
|
|
$ |
12,947 |
|
|
$ |
33,782 |
|
Suresh C. Senapaty |
|
|
215,388 |
|
|
|
|
|
|
|
119,443 |
|
|
|
29,486 |
|
|
|
433 |
|
|
|
33,496 |
|
Pratik Kumar |
|
|
183,234 |
|
|
|
|
|
|
|
86,914 |
|
|
|
|
|
|
|
770 |
|
|
|
19,283 |
|
Vineet Agrawal |
|
|
190,562 |
|
|
|
|
|
|
|
58,097 |
|
|
|
|
|
|
|
4,682 |
|
|
|
27,740 |
|
Suresh Vaswani |
|
|
209,035 |
|
|
|
|
|
|
|
161,979 |
|
|
|
10,967 |
|
|
|
2,327 |
|
|
|
36,299 |
|
Ranjan Acharya |
|
|
141,485 |
|
|
|
|
|
|
|
50,413 |
|
|
|
|
|
|
|
95 |
|
|
|
11,877 |
|
Girish S. Paranjpe |
|
|
202,368 |
|
|
|
|
|
|
|
150,944 |
|
|
|
10,084 |
|
|
|
159 |
|
|
|
35,097 |
|
S Deb |
|
|
106,280 |
|
|
|
|
|
|
|
91,808 |
|
|
|
|
|
|
|
1,067 |
|
|
|
19,013 |
|
Anurag Behar |
|
|
100,181 |
|
|
|
|
|
|
|
56,229 |
|
|
|
|
|
|
|
1,165 |
|
|
|
14,142 |
|
T K Kurien |
|
|
169,679 |
|
|
|
|
|
|
|
151,182 |
|
|
|
10,615 |
|
|
|
1,286 |
|
|
|
19,446 |
|
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. |
61
2. |
|
The value of housing perquisite accounts for more than 25% of the total value of all
perquisites and personal benefits received in fiscal 2009. |
|
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 March 31, 2009, we had ten
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 the Annual General meeting of the shareholders. Mr. B C Prabhakar, Dr Jagdish N Sheth and
Mr. William Arthur Owens, the three directors who will retire by rotation at the next annual
General meeting of shareholders, are eligible for reelection. It has been proposed that they be
reappointed at the forthcoming Annual General meeting of the Company to be held in July, 2009. A
retiring director is eligible for re-election. Up to one-third of our directors can be appointed as
non-retiring directors. Currently, Azim H. Premji is a non-retiring director. The term of the
non-retiring director expires on July 30, 2009. The terms of each of our directors and their
expiration dates are:
|
|
|
|
|
|
|
Expiration of current term of |
|
|
Name |
|
office |
|
Term of office |
Azim H. Premji
|
|
July 30, 2009
|
|
2 years |
Dr. Jagdish Sheth
|
|
Annual General Meeting 2009
|
|
Retirement by rotation |
Dr. Ashok S Ganguly
|
|
Annual General Meeting 2010
|
|
Retirement by rotation |
B. C. Prabhakar
|
|
Annual General Meeting 2009
|
|
Retirement by rotation |
N. Vaghul
|
|
Annual General Meeting 2010
|
|
Retirement by rotation |
P. M. Sinha
|
|
Annual General Meeting 2010
|
|
Retirement by rotation |
William Arthur Owens
|
|
Annual General Meeting 2009
|
|
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 2008 and 2009. Details of options granted to other
senior management executives till March 31, 2009 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 fiscal year ended March 31, 2009.
The details of stock options held and exercised till March 31, 2009 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.
62
The terms of our employment arrangements with Azim H. Premji, Pratik Kumar, Suresh C.
Senapaty, Ranjan Acharya, 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. This
Committee was renamed as Audit/Risk and Compliance Committee with effect from April 22, 2009. The
primary responsibilities are:
|
|
|
Auditing and accounting matters, including recommending the appointment of our
independent auditors to the shareholders, |
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|
|
Compliance with legal and statutory requirements, |
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|
|
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, |
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|
Performance of the Companys Internal Audit function, Independent Auditors and
accounting practices, |
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|
Review of related party transactions, functioning of Whistle Blower mechanism, and |
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|
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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 five meetings during our 2009 fiscal year. Our
Audit/Risk and Compliance Committee has adopted an amended charter in April 2009. The amended
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 Board Governance & Nomination Committee and Compensation
Committee. The amended charters of these two Committees were approved by the Board in April 2009
and this reconstitution is with effect from April 22,
2009. These charters committees are available on our website under www.wipro.com. After this
reconstitution, the members of the Board Governance & Nomination Committee are as follows:
63
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
All members of the Board Governance and Nomination Committee are independent non-executive
directors
The primary responsibilities of the Board Governance and Nomination Committee are:
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|
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Develop and recommend to the Board Corporate Governance Guidelines applicable to
the Company, |
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|
|
Evaluation of 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, and |
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|
Lay down policies and procedures to assess the requirements for induction of new
members on the Board. |
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Implementing policies and processes relating to corporate governance principles |
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|
Ensuring that appropriate procedures are in place to assess Board membership needs
and Board effectiveness |
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Reviewing the Companys policies that relate to matters of Corporate Social
Responsibility, including public issues of significance to the Company and its
stakeholders |
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Developing and recommending to the Board of Directors for its approval an annual
evaluation process of the Board and its Committees. |
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|
Formulating the Disclosure Policy, its review and approval of disclosures;
Overseeing |
Compensation Committee
The members of the Compensation Committee are as under:
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
The primary responsibilities of the Compensation Committee are:
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|
|
Determine and approve salaries, benefits and stock option grants to senior
management employees and Directors of our Company. |
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|
|
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 2008-09, our
erstwhile Board Governance and Compensation Committee held four meetings.
Employees
As of March 31, 2009, we had over 100,000 employees, including over 70,000 IT professionals.
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.
64
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, compensation and benefit programs that are tailored to address
the needs of each of our business segments.
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 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.
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 and 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. We have
started an in-house wellness program called Fit for Life aimed at increasing health quotient of
employees.
Share Ownership
The following table sets forth, as of March 31, 2009, 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 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 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, 2009, which was Rs. 50.87 per $ 1.00. The share
numbers and percentages listed below are based on 1,464,980,746 equity shares outstanding as of
March 31, 2009.
65
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|
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|
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) |
|
|
1,161,116,260 |
|
|
|
79.25 |
|
|
|
|
|
|
|
|
|
|
|
|
B. C. Prabhakar (2) |
|
|
3,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Jagdish Sheth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Ashok S Ganguly |
|
|
1,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
N. Vaghul |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P. M. Sinha (3) |
|
|
20,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
Suresh C. Senapaty |
|
|
115,250 |
|
|
|
* |
|
|
|
4,800 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
8,400 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
May 2013 |
Pratik Kumar |
|
|
32,800 |
|
|
|
* |
|
|
|
4,800 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
8,400 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
0.05 |
|
|
May 2013 |
Vineet Agrawal |
|
|
141,020 |
|
|
|
* |
|
|
|
4,800 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
8,400 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
0.05 |
|
|
May 2013 |
Suresh Vaswani |
|
|
57,168 |
|
|
|
* |
|
|
|
5,600 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
8,400 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
May 2013 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
9.61 |
|
|
May 2013 |
S Deb |
|
|
72,000 |
|
|
|
* |
|
|
|
4,000 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
7,200 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
|
|
0.05 |
|
|
May 2013 |
Girish S. Paranjpe |
|
|
28,800 |
|
|
|
* |
|
|
|
5,600 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
8,400 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
May 2013 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
9.61 |
|
|
May 2013 |
T K Kurien |
|
|
64,808 |
|
|
|
* |
|
|
|
3,200 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
7,200 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0.05 |
|
|
May 2013 |
Ranjan Acharya |
|
|
21,100 |
|
|
|
* |
|
|
|
4,000 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
5,400 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
9,000 |
|
|
|
0.05 |
|
|
May 2013 |
Anurag Behar |
|
|
30,866 |
|
|
|
* |
|
|
|
4,000 |
|
|
|
0.05 |
|
|
October 2010 |
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
|
|
0.05 |
|
|
July 2011 |
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
0.05 |
|
|
May 2013 |
|
|
|
* |
|
Represents less than 1% of the total equity shares outstanding as of March 31, 2009. |
|
(1) |
|
Includes 326,259,000 shares held by Hasham Traders (a partnership), of which
Mr. Premji is a partner, 325,017,000 shares held by Prazim Traders (a partnership), of
which Mr. Premji is a partner, 324,244,800 shares held by Zash Traders (a partnership),
of which Mr. Premji is a partner, 38,263,000 shares held by Napean Trading Investment
Co. Pvt. Ltd., of which Mr. Premji is a director, 51,014,200 shares held by Regal
Investments Trading Co. Pvt. Ltd., of which Mr. Premji is a director, 38,860,600 shares
held by Vidya Investment Trading Co. Pvt. Ltd., of which Mr. Premji is a director,
1,414,600 shares held jointly by Mr. Premji and members of his immediately family. In
addition 8,316,000 shares are held by Azim Premji Foundation (I) Pvt. Ltd. Mr. Premji
disclaims beneficial ownership of 8,316,000 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 provides for grant of options to
eligible employees and directors. Our stock option plans are administered by our Board Governance
and Compensation Committee (by the Compensation Committee wef April 22, 2009) (the Committee)
appointed by our Board of Directors. The committee has the sole power to determine the
66
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 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:
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Range of |
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Authorized |
|
|
exercise |
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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 |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wipro Employee Stock Option Plan 2000 (2000 Plan) |
|
|
150,000,000 |
|
|
Rs. |
171 490 |
|
|
September 15, 2000 |
|
September 15, 2010 |
|
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.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
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|
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|
|
|
|
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|
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 |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
67
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 March 31, 2009, 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 1,464,980,746 equity shares
outstanding as of March 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares beneficially |
|
|
Name of Beneficial Owner |
|
Class of Security |
|
held as of March 31, 2009 |
|
% of Class |
Azim H. Premji (1) |
|
Equity |
|
1,161,116,260 |
|
|
79.25 |
|
Hasham Traders |
|
Equity |
|
326,259,000 |
|
|
22.27 |
|
Prazim Traders
|
|
Equity |
|
325,017,000 |
|
|
22.18 |
|
Zash Traders
|
|
Equity |
|
324,244,800 |
|
|
22.13 |
|
|
|
|
(1) |
|
Includes 326,259,000 shares held by Hasham Traders (a partnership), of which
Mr. Premji is a partner, 325,017,000 shares held by Prazim Traders (a partnership), of
which Mr. Premji is a partner, 324,244,800 shares held by Zash Traders (a partnership),
of which Mr. Premji is a partner, 38,263,000 shares held by Napean Trading Investment
Co. Pvt. Ltd., of which Mr. Premji is a director, 51,014,200 shares held by Regal
Investments Trading Co. Pvt. Ltd., of which Mr. Premji is a director, 38,860,600 shares
held by Vidya Investment Trading Co. Pvt. Ltd., of which Mr. Premji is a director,
1,414,600 shares held jointly by Mr. Premji and members of his immediately family. In
addition 8,316,000 shares are held by Azim Premji Foundation (I) Pvt. Ltd. Mr. Premji
disclaims beneficial ownership of 8,316,000 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 March 31, 2009, are held by approximately 14,945
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. Currently, 7.53% of the Companys equity shares are held by
these FIIs, and NRIs, 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.
68
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, 2009:
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Report of the independent registered public accounting firm; |
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Consolidated Balance Sheets as of March 31, 2008 and 2009; |
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Consolidated Statements of Income for the years ended March 31, 2007, 2008 and 2009; |
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Consolidated Statements of Stockholders Equity and Comprehensive income for the
years ended March 31, 2007, 2008 and 2009; |
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Consolidated Statements of Cash Flows for the years ended March 31, 2007, 2008 and
2009; and |
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Notes to the Consolidated Financial Statements. |
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 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 2007, we paid an interim cash dividend of Rs. 5 per share and a final cash
dividend of Rs. 5 per share. During fiscal 2008, we paid an interim cash dividend of Rs. 2 per share
and a final dividend of Rs. 1 per share. During fiscal 2009, we paid a final cash dividend of Rs.
4 per share.
We have proposed to pay a cash dividend of Rs. 4 per share on our equity shares and ADRs. This
proposal is subject to approval by the shareholders of the Company. We expect a dividend payout
(excluding corporate dividend tax) of approximately Rs. 5,860 million.
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.
69
As of March 31, 2009, we had 1,464,980,746 issued and outstanding equity shares. As of March
31, 2009, there were approximately 14,945 record holders of ADRs evidencing 23,692,051 ADSs
(equivalent to 23,692,051 equity shares). As of March 31, 2009, there were approximately 228,457
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.
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BSE |
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NSE |
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NYSE |
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Price per equity share |
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Price per equity share |
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Price per ADS |
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High (Rs.) |
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Low (Rs.) |
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High ($) |
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Low ($) |
|
High (Rs.) |
|
Low (Rs.) |
|
High ($) |
|
Low ($) |
|
High ($) |
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Low ($) |
Fiscal Year
ended March 31, |
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|
|
|
|
|
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|
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|
|
|
|
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|
2009 |
|
|
537.90 |
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|
|
181.70 |
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|
|
10.57 |
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|
|
3.57 |
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|
|
535.00 |
|
|
|
180.40 |
|
|
|
10.52 |
|
|
|
3.55 |
|
|
|
14.53 |
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|
|
5.04 |
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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 |
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2006 |
|
|
573.00 |
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|
|
285.55 |
|
|
|
12.88 |
|
|
|
6.41 |
|
|
|
585.90 |
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|
|
272.00 |
|
|
|
13.17 |
|
|
|
8.65 |
|
|
|
22.38 |
|
|
|
9.62 |
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2005 |
|
|
389.00 |
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|
|
200.00 |
|
|
|
8.91 |
|
|
|
4.59 |
|
|
|
387.50 |
|
|
|
198.00 |
|
|
|
8.88 |
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|
|
4.54 |
|
|
|
12.85 |
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|
|
5.81 |
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Quarter Ended |
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March 31, 2009 |
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261.40 |
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|
195.00 |
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5.14 |
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|
3.83 |
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263.8 |
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|
196.50 |
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5.19 |
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|
|
3.86 |
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|
|
8.75 |
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|
|
5.04 |
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December 31, 2008 |
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351.70 |
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|
|
181.70 |
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|
|
6.91 |
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|
|
3.57 |
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|
364.40 |
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|
|
180.40 |
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|
7.16 |
|
|
|
3.55 |
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|
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9.98 |
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|
5.66 |
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September 30, 2008 |
|
|
460.90 |
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|
|
317.00 |
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|
|
9.06 |
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|
|
6.23 |
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|
|
465.00 |
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|
|
320.10 |
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9.14 |
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|
|
6.29 |
|
|
|
12.18 |
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|
|
8.88 |
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June 30, 2008 |
|
|
537.90 |
|
|
|
402.00 |
|
|
|
10.57 |
|
|
|
7.90 |
|
|
|
535.00 |
|
|
|
401.10 |
|
|
|
10.52 |
|
|
|
7.88 |
|
|
|
14.53 |
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|
|
10.89 |
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March 31, 2008 |
|
|
528.00 |
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|
|
325.00 |
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|
|
13.19 |
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|
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8.12 |
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|
|
529.05 |
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|
|
324.00 |
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|
|
13.22 |
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|
|
8.10 |
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|
|
14.99 |
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|
|
9.85 |
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December 31, 2007 |
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|
552.00 |
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|
|
428.00 |
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|
|
13.79 |
|
|
|
10.69 |
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|
|
552.00 |
|
|
|
426.15 |
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|
|
13.79 |
|
|
|
10.65 |
|
|
|
16.49 |
|
|
|
12.81 |
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September 30, 2007 |
|
|
530.50 |
|
|
|
425.00 |
|
|
|
13.26 |
|
|
|
10.62 |
|
|
|
532.00 |
|
|
|
425.00 |
|
|
|
13.29 |
|
|
|
10.62 |
|
|
|
16.40 |
|
|
|
12.49 |
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June 30, 2007 |
|
|
600.00 |
|
|
|
507.10 |
|
|
|
14.99 |
|
|
|
12.67 |
|
|
|
635.00 |
|
|
|
505.00 |
|
|
|
15.89 |
|
|
|
12.62 |
|
|
|
17.24 |
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|
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15.13 |
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Six Months Ended |
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April 30, 2009 |
|
|
332.00 |
|
|
|
240.00 |
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|
|
6.53 |
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|
|
4.72 |
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|
|
333.45 |
|
|
|
240.15 |
|
|
|
6.55 |
|
|
|
4.72 |
|
|
|
9.60 |
|
|
|
6.90 |
|
March 31, 2009 |
|
|
261.40 |
|
|
|
195.00 |
|
|
|
5.14 |
|
|
|
3.83 |
|
|
|
263.80 |
|
|
|
196.50 |
|
|
|
5.19 |
|
|
|
3.86 |
|
|
|
7.82 |
|
|
|
5.04 |
|
February 28, 2009 |
|
|
231.90 |
|
|
|
204.25 |
|
|
|
4.56 |
|
|
|
4.02 |
|
|
|
232.00 |
|
|
|
204.05 |
|
|
|
4.56 |
|
|
|
4.01 |
|
|
|
7.33 |
|
|
|
5.69 |
|
January 31, 2009 |
|
|
255.00 |
|
|
|
200.00 |
|
|
|
5.01 |
|
|
|
3.93 |
|
|
|
255.00 |
|
|
|
201.00 |
|
|
|
5.01 |
|
|
|
3.95 |
|
|
|
8.75 |
|
|
|
6.09 |
|
December 31, 2008 |
|
|
264.25 |
|
|
|
214.20 |
|
|
|
5.19 |
|
|
|
4.21 |
|
|
|
265.00 |
|
|
|
214.00 |
|
|
|
5.21 |
|
|
|
4.21 |
|
|
|
8.49 |
|
|
|
6.1 |
|
November 30, 2008 |
|
|
289.90 |
|
|
|
208.00 |
|
|
|
5.70 |
|
|
|
4.09 |
|
|
|
286.00 |
|
|
|
206.80 |
|
|
|
5.62 |
|
|
|
4.07 |
|
|
|
8.74 |
|
|
|
5.66 |
|
|
|
|
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. 50.87 |
|
(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.
70
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 10:00 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.
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 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,
2009 was approximately Rs. 28.96 trillion or approximately $ 569 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, 2009, the NSE had 117 members comprised of 96 corporate members, 11 individual
members and 10 firms.
71
Bombay Stock Exchange Limited
The estimated aggregate market capitalization of stocks trading on the BSE as of March 31,
2009 was approximately Rs. 30.86 trillion or approximately $ 606 billion. The BSE began allowing
online trading in May 1995. As of March 31, 2009, the BSE had 1,007 members, comprised of 175
individual members, 809 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 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 is 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, 2009, 1,464,980,746
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.
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 Articles of Association, and Memorandum of Association, of
Wipro Limited that are included as exhibits to our registration statement on Form F-1 filed with
the Securities and Exchange Commission on September 26, 2000.
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 March 31, 2009, we have 10 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, 2009. 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.
72
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. |
|
|
|
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 vegetable oil, manufacture and deal 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 and 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 have the authority to make borrowings upto a limit of one time the
Companies paid-up capital and free reserves. Borrowings beyond this limit will require the approval
of the shareholders of the Company.
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.
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 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. |
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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 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 like 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.
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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 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, including the rights of non-resident or
foreign shareholders to hold the securities, imposed by Indian law 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.
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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.
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.
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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 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 of
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.
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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 be made at a price
not less than the higher of the following two averages:
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The average of the weekly high and low of the closing prices of the related shares quoted
on the stock exchange in India during the six months preceding the relevant date; or |
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The average of the weekly high and low of the closing prices of the related shares quoted
on a stock exchange in India during the two weeks preceding the relevant date. |
The relevant date means the date thirty days prior to the date on which the meeting of the
general body of shareholders is held, in terms of section 81 (IA) of the Companies Act, 1956, to
consider the proposed issue.
Foreign Direct Investment
Over a period of time particularly since 1991, the Government of India has relaxed the
restrictions on foreign investment and most industry sectors does 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. 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.
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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.
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. |
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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 namely education cess of 3% on such tax and surcharge,
after which the dividend distribution tax payable would be 17%.
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 non-resident upon the sale of equity shares
obtained through the redemption of ADSs, 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, 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. |
In addition to the above rates, a surcharge of 10% will be levied on the above taxes, in the
case of resident employees and 2.5% in the case of non-resident individuals, in case their
aggregate taxable income exceed Rs. 10,00,000 during the relevant financial year and an additional
surcharge called education cess of 3% on the above tax and surcharge.
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 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
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.
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
the 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
case of a foreign company and at graduated rate with a maximum of 30%, in case of resident
employees and non-resident individuals. In addition to this, there will be a surcharge of 2.5% in
the case of all corporate holders and in the case of non-corporate holders with an aggregate
taxable income exceeding Rs. 1,000,000 and an additional surcharge called education cess of 3% on
the above tax and surcharge.
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;
(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.
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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 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 Tax Consequences
The following is a summary of the material U.S. federal income and estate 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 and
estate 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 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, financial institutions, dealers in
securities or currencies, tax-exempt entities, 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 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.
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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 will be treated as
the owners of equity shares represented by such ADSs.
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, 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. 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. The reduced rate of taxation will not apply to dividends
received in taxable years beginning after December 31, 2010. 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 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.
Estate Taxes. An individual shareholder who is a citizen or resident of the United States for
U.S. federal estate tax purposes will have the value of the equity shares or ADSs held by such
holder included in his or her gross estate for U.S. federal estate tax purposes. An individual
holder who actually pays Indian estate tax with respect to the equity shares will, however, be
entitled to credit the amount of such tax against his or her U.S. federal estate tax liability,
subject to a number of conditions and limitations.
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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 a backup
withholding tax (currently at a
rate of 28%) 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.
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 2005. Since this determination is made on an annual basis, however, no assurance can be
given that we will not be considered a passive foreign investment company in 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:
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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, 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 |
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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.
The above summary is not intended to constitute a complete analysis of all tax consequences
relating to ownership of equity shares or ADSs. You should consult your own tax advisor concerning
the tax consequences of your particular situation.
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:
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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, DC 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)
General
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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, commodity prices, 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 debt.
Our exposure to market risk is a function of our investment and borrowing activities and our
revenue generating activities in foreign currency. The objective of market risk management is to
avoid excessive exposure of our earnings and equity to loss.
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 our 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 on a daily basis.
Components of Market Risk
Our exposure to market risk arises principally from exchange rate risk and Interest rate risk.
Other sources of risk include credit risk, counter-party risk and liquidity risk.
Exchange rate risk. Our exchange rate risk primarily arises from our foreign exchange revenue,
receivables, cash balances, forecasted cash flows, payables and foreign currency debt. A
significant portion of our revenue is in U.S. dollars, euro and pound sterling, while a significant
portion of our costs are in Indian rupees. The exchange rate between the rupee and 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 forward foreign exchange contracts to hedge
forecasted cash flows denominated in foreign currency. See Note 14 of our Notes to the Audited
Consolidated Financial Statements for information relating to outstanding derivative contracts as
of March 31, 2009.
All derivative instruments are recognized in the balance sheet and measured at fair value.
Changes in fair value for foreign currency derivative instruments that do not qualify as hedges
and/ or any ineffective portion of hedges are recognized in our consolidated income statement in
the current period. In connection with cash flow hedges, we have recorded Rs. 72, Rs. (1,097) and
Rs. (16,859) of net gains/(losses) as a component of accumulated and other comprehensive income
within stockholders equity as of March 31, 2007, 2008 and 2009.
As of March 31, 2009, Rs. 1 increase / decrease in the spot rate for exchange of Indian Rupee
with U.S. dollar would result in approximately Rs. 1,498 decrease / increase in the fair value of
the Companys foreign currency dollar denominated derivative instruments.
As of March 31, 2009, 1% movement in the exchange rate between U.S. Dollar and Yen would
result in approximately Rs. 183 increase/decrease in the fair value of cross-currency interest rate
swaps.
Interest rate risk. Our interest rate risk primarily arises from our investment securities and
floating rate debt, including various revolving and other lines of credit (refer note 16 to the
financial statements). 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, through the proportion of fixed rate borrowing and floating rate borrowing in its total
borrowing portfolio. To manage this 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, 2009, substantially all of our debt was subject to
floating interest rates, which reset at short intervals. Accordingly, the carrying value of such
debt approximates fair values. If interest rates were to increase by 100 bps from March 31, 2009,
an additional annual interest expenses on our floating rate debt would amount to approximately Rs.
2,276 on a pre-tax basis.
Credit risk. Our 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 position, past experience and other
factors. Individual risk limits are set accordingly. No single customer accounted for 5% or more of
the accounts receivable as of March 31, 2008 and 2009 and revenues for the years ended March 31,
2007, 2008 and 2009 and there is no significant concentration of credit risk.
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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 at highly rated banks or financial institutions. Exposure to these risks is closely
monitored and kept within predetermined parameters. We have policies that limit the amount of
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 would 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, liquidity and
funding risks, related processes and policies are overseen by management. Management monitors our
net liquidity position through rolling forecasts on the basis of expected cash flows. As on March
31, 2009, our cash and cash equivalents are held with major regulated financial institutions.
Fair value. The fair value of our market rate risk sensitive instruments, other than
derivative instruments, closely approximates their carrying value.
Item 12. Description of Securities Other Than Equity Securities
Not applicable.
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.
Based on their evaluation as of March 31, 2009, our principal executive officer and principal
financial officer have concluded that 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,
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.
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. The
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 accounting principles generally accepted in the
United States of America.
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 the assets of the Company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with accounting principles generally accepted in the United States of America, and
that receipts and expenditures of the Company are being made only in accordance with authorizations
of management and directors of the company; and (iii) 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.
87
Management, with the participation of the Companys Chief Executive Officer and Chief
Financial Officer, assessed the effectiveness of internal control over financial reporting as of
March 31, 2009. 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). Based on this
assessment, management concluded that the companys internal control over financial reporting was
effective as of March 31, 2009.
Our independent registered public accounting firm, KPMG, has audited the consolidated
financial statements in this Annual Report on Form 20-F, and as part of their audit, has issued
their report, included herein, on the effectiveness of our internal control over financial
reporting as of March 31, 2009.
88
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Wipro Limited
We have audited Wipro Limited and subsidiaries (the Company) internal control over
financial reporting as of March 31, 2009, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The management of the Company 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 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, 2009, based on criteria
established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the Company as of March 31,
2009 and 2008, and the related consolidated statements of income, stockholders equity and
comprehensive income, and cash flows for each of the years in the three-year period ended March 31,
2009, and our report dated May 15, 2009 expressed an unqualified opinion on those consolidated
financial statements.
KPMG
Bangalore, India
May 15, 2009
89
Change in internal controls over financial reporting.
During the period covered by this Annual Report, there were no 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.
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 fee 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
In millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
Audit fees |
|
Rs. |
48.20 |
|
|
Rs. |
62.21 |
|
|
Rs. |
74.69 |
|
Audit related fees |
|
|
|
|
|
|
6.07 |
|
|
|
|
|
Tax fees |
|
|
18.69 |
|
|
|
14.12 |
|
|
|
37.25 |
|
All other fees |
|
|
2.04 |
|
|
|
2.20 |
|
|
|
3.36 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Rs. |
68.93 |
|
|
Rs. |
84.60 |
|
|
Rs. |
115.30 |
|
|
|
|
|
|
|
|
|
|
|
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.
Audit related fees relate to financial duediligence services provided in connection with
the acquisition of Infocrossing Inc.
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
Beacause 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 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.
91
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, 2009 consolidated financial statements prepared under United
States Generally Accepted Accounting Principles, the Audit Committee: (1) reviewed and discussed
the consolidated financial statements with management; (2) discussed with the auditors the matters
required by 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 |
May 15, 2009
|
|
Chairman
|
|
Member
|
|
Member |
92
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 U.S. generally accepted accounting principles (U.S. GAAP) 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
May 15, 2009
93
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Wipro Limited
We have audited the accompanying consolidated balance sheets of Wipro Limited and subsidiaries
(the Company) as of March 31, 2009 and 2008, and the related consolidated statements of income,
stockholders equity and comprehensive income, and cash flows for each of the years in the
three-year period ended March 31, 2009. 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 March 31, 2009 and 2008, and the
results of their operations and their cash flows for each of the years in the three-year period
ended March 31, 2009, in conformity with U.S. generally accepted accounting principles.
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, 2009, 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
May 15, 2009 expressed an unqualified opinion on the effectiveness of the Companys internal
control over financial reporting.
KPMG
Bangalore, India
May 15, 2009
94
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, |
|
|
|
2008 |
|
|
2009 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
|
|
translation |
|
|
|
|
|
|
|
|
|
|
|
into US$ |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (Note 4) |
|
Rs. |
39,270 |
|
|
Rs. |
49,117 |
|
|
$ |
966 |
|
Short-term investments (Note 8) |
|
|
14,808 |
|
|
|
16,180 |
|
|
|
318 |
|
Accounts receivable, net of allowances (Note 5) |
|
|
38,908 |
|
|
|
46,217 |
|
|
|
909 |
|
Unbilled revenue |
|
|
8,305 |
|
|
|
13,843 |
|
|
|
272 |
|
Inventories (Note 6) |
|
|
7,172 |
|
|
|
8,686 |
|
|
|
171 |
|
Deferred income taxes (Note 21) |
|
|
790 |
|
|
|
3,639 |
|
|
|
72 |
|
Other current assets (Note 7) |
|
|
19,092 |
|
|
|
27,040 |
|
|
|
532 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
128,345 |
|
|
|
164,722 |
|
|
|
3,238 |
|
Property, plant and equipment, net (Note 9) |
|
|
39,822 |
|
|
|
49,862 |
|
|
|
980 |
|
Investments in affiliates (Note 13) |
|
|
1,343 |
|
|
|
1,670 |
|
|
|
33 |
|
Investment securities |
|
|
355 |
|
|
|
338 |
|
|
|
7 |
|
Deferred income taxes (Note 21) |
|
|
|
|
|
|
169 |
|
|
|
3 |
|
Intangible assets, net (Note 10) |
|
|
12,480 |
|
|
|
17,604 |
|
|
|
346 |
|
Goodwill (Note 3,10) |
|
|
38,943 |
|
|
|
49,502 |
|
|
|
973 |
|
Other assets (Note 7) |
|
|
3,214 |
|
|
|
6,681 |
|
|
|
131 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
Rs. |
224,502 |
|
|
Rs. |
290,548 |
|
|
$ |
5,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings (Note 16) |
|
Rs. |
28,804 |
|
|
Rs. |
36,472 |
|
|
$ |
717 |
|
Current portion of long-term debt (Note 16) |
|
|
406 |
|
|
|
235 |
|
|
|
5 |
|
Current portion of obligations under capital leases (Note 9) |
|
|
323 |
|
|
|
504 |
|
|
|
10 |
|
Accounts payable |
|
|
13,082 |
|
|
|
18,017 |
|
|
|
354 |
|
Accrued expenses |
|
|
8,110 |
|
|
|
14,452 |
|
|
|
284 |
|
Accrued employee costs |
|
|
5,160 |
|
|
|
7,035 |
|
|
|
138 |
|
Advances from customers |
|
|
2,136 |
|
|
|
3,127 |
|
|
|
61 |
|
Unearned revenue |
|
|
4,162 |
|
|
|
6,918 |
|
|
|
136 |
|
Other current liabilities (Note 11) |
|
|
12,519 |
|
|
|
26,121 |
|
|
|
513 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
74,702 |
|
|
|
112,881 |
|
|
|
2,220 |
|
Long-term debt, excluding current portion (Note 16) |
|
|
14,522 |
|
|
|
18,681 |
|
|
|
367 |
|
Obligations under capital leases, excluding current portion (Note
9) |
|
|
701 |
|
|
|
914 |
|
|
|
18 |
|
Deferred income taxes (Note 21) |
|
|
2,098 |
|
|
|
4,023 |
|
|
|
79 |
|
Other liabilities (Note 11) |
|
|
3,011 |
|
|
|
3,632 |
|
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
95,034 |
|
|
|
140,131 |
|
|
|
2,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
114 |
|
|
|
235 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Equity shares at Rs. 2 par value: 1,650,000,000 shares authorized; Issued and
outstanding: 1,461,453,320 and 1,464,980,746 shares as of March 31, 2008 and
2009 (Note 17) |
|
|
2,923 |
|
|
|
2,930 |
|
|
|
58 |
|
Additional paid-in capital (Note 22) |
|
|
26,441 |
|
|
|
29,025 |
|
|
|
571 |
|
Accumulated other comprehensive loss |
|
|
(1,076 |
) |
|
|
(9,873 |
) |
|
|
(194 |
) |
Retained earnings (Note 18) |
|
|
101,066 |
|
|
|
128,642 |
|
|
|
2,529 |
|
Equity shares held by controlled Trusts: 7,961,760 and 8,930,563 shares as of
March 31, 2008 and 2009 (Note 22) |
|
|
|
|
|
|
(542 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
129,354 |
|
|
|
150,182 |
|
|
|
2,952 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
Rs. |
224,502 |
|
|
Rs. |
290,548 |
|
|
$ |
5,712 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
95
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation into |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
Rs. |
117,819 |
|
|
Rs. |
146,170 |
|
|
Rs. |
193,924 |
|
|
$ |
3,787 |
|
Products |
|
|
31,612 |
|
|
|
51,258 |
|
|
|
60,640 |
|
|
|
1,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
149,431 |
|
|
|
197,428 |
|
|
|
254,564 |
|
|
|
5,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
(76,488 |
) |
|
|
(98,606 |
) |
|
|
(129,769 |
) |
|
|
(2,527 |
) |
Products |
|
|
(25,980 |
) |
|
|
(40,630 |
) |
|
|
(48,407 |
) |
|
|
(976 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(102,468 |
) |
|
|
(139,236 |
) |
|
|
(178,176 |
) |
|
|
(3,503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
46,963 |
|
|
|
58,192 |
|
|
|
76,388 |
|
|
|
1,502 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
|
(9,173 |
) |
|
|
(13,807 |
) |
|
|
(17,762 |
) |
|
|
(349 |
) |
General and administrative expenses |
|
|
(7,639 |
) |
|
|
(10,820 |
) |
|
|
(14,696 |
) |
|
|
(289 |
) |
Amortization of intangible assets (Note 10) |
|
|
(269 |
) |
|
|
(616 |
) |
|
|
(1,488 |
) |
|
|
(29 |
) |
Foreign exchange gains/(losses), net |
|
|
(197 |
) |
|
|
125 |
|
|
|
(1,596 |
) |
|
|
(31 |
) |
Others, net |
|
|
221 |
|
|
|
640 |
|
|
|
544 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
29,906 |
|
|
|
33,714 |
|
|
|
41,390 |
|
|
|
814 |
|
Other income, net (Note 19) |
|
|
2,628 |
|
|
|
2,167 |
|
|
|
(1,816 |
) |
|
|
(36 |
) |
Equity in earnings of affiliates (Note 13) |
|
|
318 |
|
|
|
257 |
|
|
|
362 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes, minority interest and
cumulative effect of change in accounting
principle |
|
|
32,852 |
|
|
|
36,138 |
|
|
|
39,936 |
|
|
|
785 |
|
Income taxes (Note 21) |
|
|
(3,723 |
) |
|
|
(3,873 |
) |
|
|
(5,422 |
) |
|
|
(107 |
) |
Minority interest |
|
|
|
|
|
|
(24 |
) |
|
|
(99 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in
accounting principle |
|
|
29,129 |
|
|
|
32,241 |
|
|
|
34,415 |
|
|
|
677 |
|
Cumulative effect of change in accounting principle
(Note 2) |
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
Rs. |
29,168 |
|
|
Rs. |
32,241 |
|
|
Rs. |
34,415 |
|
|
$ |
677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per equity share: (Note 23) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change
in accounting principle |
|
|
20.42 |
|
|
|
22.23 |
|
|
|
23.67 |
|
|
|
0.47 |
|
Cumulative effect of change in accounting
principle |
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
20.45 |
|
|
|
22.23 |
|
|
|
23.67 |
|
|
|
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change
in accounting principle |
|
|
20.17 |
|
|
|
22.16 |
|
|
|
23.63 |
|
|
|
0.46 |
|
Cumulative effect of change in accounting
principle |
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
20.20 |
|
|
|
22.16 |
|
|
|
23.63 |
|
|
|
0.46 |
|
Weighted-average number of equity shares used in
computing earnings per equity share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
1,426,709,163 |
|
|
|
1,450,604,615 |
|
|
|
1,454,010,222 |
|
|
|
|
|
Diluted |
|
|
1,444,467,557 |
|
|
|
1,454,780,607 |
|
|
|
1,456,290,715 |
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
96
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(in millions, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
|
|
Equity Shares held by |
|
|
Total |
|
|
|
Equity Shares |
|
|
Paid in |
|
|
Deferred Stock |
|
|
Comprehensive |
|
|
Comprehensive |
|
|
Retained |
|
|
controlled Trusts |
|
|
Stockholders |
|
|
|
No. of Shares |
|
|
Amount |
|
|
Capital |
|
|
Compensation |
|
|
Income |
|
|
Income/(loss) |
|
|
Earnings |
|
|
No. of Shares |
|
|
Amount |
|
|
Equity |
|
Balance as of March 31, 2006 |
|
|
1,425,754,267 |
|
|
Rs. |
2,852 |
|
|
Rs. |
16,521 |
|
|
Rs. |
(2,202) |
|
|
|
|
|
|
Rs. |
434 |
|
|
Rs. |
61,161 |
|
|
|
(7,869,060 |
) |
|
Rs. |
|
|
|
Rs. |
78,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends (Note 17) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,382 |
) |
|
|
|
|
|
|
|
|
|
|
(16,382 |
) |
Elimination of deferred stock compensation balance on adoption of
SFAS No. 123 (R) (Note 2) |
|
|
|
|
|
|
|
|
|
|
(2,202 |
) |
|
|
2,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting principle (Note 2) |
|
|
|
|
|
|
|
|
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39 |
) |
Issuance of equity shares on exercise of options (Note 22) |
|
|
32,095,328 |
|
|
|
64 |
|
|
|
8,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,894 |
|
Issuance of equity shares on exercise of options through
non-recourse note (Note 22) |
|
|
1,150,055 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity shares forfeited, net of issuance by Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(92,700 |
) |
|
|
|
|
|
|
|
|
Compensation cost related to employee stock incentive plan |
|
|
|
|
|
|
|
|
|
|
1,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,336 |
|
Excess income tax benefit related to employees stock incentive
plan |
|
|
|
|
|
|
|
|
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65 |
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,169 |
|
|
|
|
|
|
|
29,169 |
|
|
|
|
|
|
|
|
|
|
|
29,169 |
|
Other comprehensive income / (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments (Note 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(131 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on investment securities, net (net of tax effect
of Rs. 25) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on cash flow hedging derivatives, net
(Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(130 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216 |
) |
|
|
(216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to initially apply SFAS No. 158 (net of tax effect of
Rs. (18)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(124 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(124 |
) |
Balance as of March 31, 2007 |
|
|
1,458,999,650 |
|
|
Rs. |
2,918 |
|
|
Rs. |
24,508 |
|
|
Rs. |
|
|
|
|
|
|
|
Rs. |
94 |
|
|
Rs. |
73,948 |
|
|
|
(7,961,760 |
) |
|
Rs. |
|
|
|
Rs. |
101,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends (Note 17) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,123 |
) |
|
|
|
|
|
|
|
|
|
|
(5,123 |
) |
Issuance of equity shares on exercise of options (Note 22) |
|
|
2,453,670 |
|
|
|
5 |
|
|
|
687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
692 |
|
Compensation cost related to employee stock incentive plan |
|
|
|
|
|
|
|
|
|
|
1,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,076 |
|
Gain on sale of long-lived assets to the controlling
shareholder,(net of tax effect of Rs. 52) |
|
|
|
|
|
|
|
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102 |
|
Excess income tax benefit related to employees stock incentive
plan |
|
|
|
|
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68 |
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
|
|
Equity Shares held by |
|
|
Total |
|
|
|
Equity Shares |
|
|
Paid in |
|
|
Deferred Stock |
|
|
Comprehensive |
|
|
Comprehensive |
|
|
Retained |
|
|
controlled Trusts |
|
|
Stockholders |
|
|
|
No. of Shares |
|
|
Amount |
|
|
Capital |
|
|
Compensation |
|
|
Income |
|
|
Income/(loss) |
|
|
Earnings |
|
|
No. of Shares |
|
|
Amount |
|
|
Equity |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,241 |
|
|
|
|
|
|
|
32,241 |
|
|
|
|
|
|
|
|
|
|
|
32,241 |
|
Other comprehensive income / (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments (Note 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized actuarial loss, net [net of tax effect of Rs. (17)
] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investment securities, net [net of tax effect
of Rs. (25)] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on cash flow hedging derivatives, net (Note 14
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,170 |
) |
|
|
(1,170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2008 |
|
|
1,461,453,320 |
|
|
Rs. |
2,923 |
|
|
Rs. |
26,441 |
|
|
Rs. |
|
|
|
|
|
|
|
Rs. |
(1,076) |
|
|
Rs. |
101,066 |
|
|
|
(7,961,760 |
) |
|
Rs. |
|
|
|
Rs. |
129,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend (Note 17) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,839 |
) |
|
|
|
|
|
|
|
|
|
|
(6839 |
) |
Issuance of
equity shares to wholly owned trust (Note 17) |
|
|
968,803 |
|
|
|
2 |
|
|
|
540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(968,803 |
) |
|
|
(542 |
) |
|
|
|
|
Issuance of equity shares on exercise of options (Note 22) |
|
|
2,558,623 |
|
|
|
5 |
|
|
|
431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
436 |
|
Compensation cost related to employee stock incentive plan (Note
22) |
|
|
|
|
|
|
|
|
|
|
1,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,595 |
|
Excess income tax benefit related to employee stock incentive plan |
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
|
Comprehensive income / (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,415 |
|
|
|
|
|
|
|
34,415 |
|
|
|
|
|
|
|
|
|
|
|
34,415 |
|
Other comprehensive income / (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments (Note 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized actuarial gain, net [net
of tax effect of Rs. 27] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investment securities, net (net of tax effect
of Rs. (131)) (Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(260 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on cash flow hedging derivatives, net (net of
tax effect of Rs. (2,353)) (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,797 |
) |
|
|
(8,797 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,797 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2009 |
|
|
1,464,980,746 |
|
|
Rs. |
2,930 |
|
|
Rs. |
29,025 |
|
|
Rs. |
|
|
|
|
|
|
|
Rs. |
(9,873) |
|
|
Rs. |
128,642 |
|
|
|
(8,930,563 |
) |
|
Rs. |
(542 |
) |
|
Rs. |
150,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2009 ($) |
|
|
|
|
|
$ |
58 |
|
|
$ |
571 |
|
|
$ |
|
|
|
|
|
|
|
$ |
(194 |
) |
|
$ |
2,529 |
|
|
|
|
|
|
$ |
(11 |
) |
|
$ |
2,952 |
|
See accompanying notes to the consolidated financial statements
98
WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation into |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
Rs. |
29,168 |
|
|
Rs. |
32,241 |
|
|
Rs. |
34,415 |
|
|
$ |
677 |
|
Adjustments to reconcile net income to net cash provided
by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of property, plant and equipment |
|
|
(10 |
) |
|
|
(20 |
) |
|
|
(28 |
) |
|
|
(1 |
) |
Cumulative effect of change in accounting principle |
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
4,309 |
|
|
|
6,067 |
|
|
|
8,357 |
|
|
|
164 |
|
Deferred tax expense/(benefit) |
|
|
(29 |
) |
|
|
(409 |
) |
|
|
(799 |
) |
|
|
(16 |
) |
Unrealized exchange (gain) / loss |
|
|
470 |
|
|
|
(596 |
) |
|
|
6,770 |
|
|
|
133 |
|
Deferred cancellation losses relating to roll-over
cash flow hedges |
|
|
|
|
|
|
|
|
|
|
(11,357 |
) |
|
|
(223 |
) |
Cancellation losses relating to net investment in
foreign operations |
|
|
|
|
|
|
|
|
|
|
(839 |
) |
|
|
(16 |
) |
Gain on sale of investment securities |
|
|
(549 |
) |
|
|
(771 |
) |
|
|
(681 |
) |
|
|
(13 |
) |
Stock based compensation |
|
|
1,336 |
|
|
|
1,076 |
|
|
|
1,595 |
|
|
|
31 |
|
Equity in earnings of affiliates |
|
|
(318 |
) |
|
|
(257 |
) |
|
|
(362 |
) |
|
|
(7 |
) |
Minority interest |
|
|
|
|
|
|
24 |
|
<