(By Anthony Miller) In the wake of the Satyam scandal, the skeletons are forcing their way out of the closet! Wipro revealed earlier today that it too had been excluded from doing business with the World Bank (see here). The ban was imposed in June 2007 after it became apparent that Wipro offered its US ADR shares (listed in 2000) to World Bank staff at the IPO price. Wipro claims that the value of shares purchased was only around $72K and that in any event, World Bank was an insignificant customer so who cares anyway (OK, they didn’t say that exactly, but that’s what it seems they meant). The ban remains effective until 2011. Wipro’s shares took a bit of a hammering when the Mumbai stock exchange opened this morning, but had since settled back to ‘only’ 9% down.
This really doesn’t help restore confidence in Indian SI corporate governance, particularly in those companies where the founders have a controlling interest. Almost 80% of Wipro’s stock is controlled by founding Chairman, Azim Premji (see Indian SIs: Who owns the stock?), the highest ‘promoter’ concentration among its peers. Wipro has also been subject to a series of high profile senior management defections in recent times (for example, see Ex-Wipro exec resurfaces at L&T Infotech) in my view because it was clear to all that Premji was never going to let go of the reins to an ‘outsider’. Indeed, there is regular speculation that Premji is lining his son up for the top job when he eventually steps down. This is quite unlike Infosys, which has seen a regular series of promotions at top management levels over the past few years. Over the weekend, Vineet Nayar, HCL's CEO, issued a letter to all 'stakeholders' promising "continued commitment to the highest standards of Trust and Transparency". HCL's promoters control some two-thirds of the company's stock.
Meanwhile, Satyam’s shares rallied over 50% this morning after the Indian government intervened over the weekend to appoint new directors, including a prior Nasscom head. Raju, his brother Ramu, and CFO Srinivas currently languish in an Indian jail awaiting the next stage of what is sure to be a long and drawn out investigation. There will be a news conference at 11:30 our time and I will report on this afterwards.
In a few week’s time, the great and the good of the Indian offshore services scene assemble in Mumbai for the annual Nasscom (the Indian offshore services trade body) conference. I wonder what the main topic of conversation is now going to be?
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