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Wipro, Aptech plan NASDAQ listing

Mar 4, 2000

Wipro has planned a $ 150 m ADR issue while Aptech also plans for one. Both the companies have plans to acquire companies abroad which are expected to drive growth in the future. Wipro has however done groundwork and is expected to be the first of the blocks. Wipro has one of the strongest revenue portfolios with almost 50% of its revenues coming from high–end projects such as systems software, networking and e–commerce. The company focusses on five vertical domains: technology solutions, technology based products, telecom and datacom solutions, finance, healthcare and utilities.

Aptech’s is the second largest training company (with a 39% market share) with interests in software. The software division accounted for 19% of the company’s revenues in 1999, the balance 81% being accounted by training. The company delivers software solutions in Internet enablement, e–commerce portals and technology based training software.

An ADR listing would make both the companies eligible for $ 100 m automatic acquisition limit since this is applicable only for those companies, which have already made an ADR issue. This would also make them eligible for any increase in the automatic approval limit in the future. This would also enable them to offer employee stock options to their overseas employees.

However, the percentage of equity that would be diluted for the ADR issue has not been specified by both the companies. Obviously both the companies would be aiming at the maximum possible price that would enable the least dilution.

Perhaps the only grey area is the fact that Infosys, which has made an ADR issue, is finding it difficult to acquire companies. The Infosys management has gone on record saying that the type companies they would like to acquire are not willing to sell out while the companies that are available are not worth acquiring.

More important would also be the valuation, which the managements of both Wipro and Aptech are willing to pay since the US stock market has witnessed a rapid increase in the valuation of tech stocks over the last six months.

Market View:
Wipro’s premium valuations are expected to sustain owing to the quality of its software services and the fact that 75% of its stock is held by its promoters.

Aptech has also been rated as a buy by analysts since the company has successfully leveraged its training business to provide software solutions as well as IT consulting which is on the higher end of the value chain. With the demand for software professionals expected to grow by 25% per annum over the next three year’s even the training business is on a strong wicket.

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