Wipro: World Bank report to affect biz

NEW YORK: IT major Wipro has warned that its businesses could be "adversely" affected due to the disclosure made by World Bank nearly four month

s ago that the Indian company was ineligible to work with the international lending institution.

"Disclosure about our vendor status with World Bank could adversely affect our business and results of operations," India's third largest IT exporter has informed its American shareholders and market regulator Securities and Exchange Commission.

Wipro has further warned that the "negative publicity" from the disclosure could lead to its existing and potential customers altering their business relationship with the firm.

In a disclosure about ineligible firms in January this year, World Bank had barred Wipro from any direct contract with it for a period of four years, starting June 2007, and cited "providing improper benefits to Bank staff" as the reason.

After the World Bank disclosure, Wipro had said in a regulatory filing on January 13, 2009, that its revenue from World Bank was insignificant and its "inability to get future business from World Bank will not adversely affect our business and results of operations".

However, in its latest communication to US regulator SEC, which is the company's annual report filing for the financial year ended March 31, 2009, Wipro has said that the negative publicity emanating from the World Bank disclosure could adversely affect its business.

"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," Wipro has said.

While the World Bank's debarment came into effect way back in June 2007, it was disclosed nearly one-and-half years later in January 2009. For

its action, the bank had charged Wipro of providing improper benefits to its staff, which was contested by Wipro.

The debarment of Wipro coincided with the disclosure about two other Indian IT firms -- Satyam and Megasoft. This happened after Satyam's founder and then chairman Ramalinga Raju admitted to the country's largest-ever corporate fraud.

Satyam was debarred for eight years, starting September 2008, for "providing improper benefits to Bank staff and failing to maintain documentation to support fees charged for its subcontractors."

Besides, Megasoft was debarred for four years, beginning December 2007, for "participating in a joint venture with Bank staff while also conducting business with the Bank."

In its statement post-Word Bank action in January, Wipro had said, "In 2000, in connection with its Initial Public Offering (IPO) of American Depository Shares (ADS) in the United States, Wipro offered a commonly utilised and Securities and Exchange Commission approved Directed Share Program (DSP) that allowed employees and clients to purchase ADSs at the IPO market price.

"The programme's objective was to involve employees and customers with the public offering to expand our recognition and brand. A majority of the shares sold under the DSP were allotted to our employees," the company said.

"Pursuant to this programme, Wipro representatives offered the World Bank, through its Chief Information Officer (CIO) and a senior staff, participation in the programme and they directed this offer to members of their family and friends.

The aggregate number of shares purchased by them was 1,750 for approximately $72,000 at the IPO price.

"All participants in the programme signed a conflict of interest statement that their purchase did not violate any ethics or conflict of interest policies of their company," Wipro had said.