Business Today

Wipro's bagful of ideas

Across businesses ranging from engineering to personal products, Azim Premji has quietly built a non-IT portfolio that’s worth a billion dollars - that's roughly a fourth of the annual revenues of the infotech flagship.

Rahul Sachitanand        Print Edition: November 29, 2009

In an office located down a narrow passage in the C block of Wipro’s Sarjapur Road headquarters, 47-year-old Vineet Agrawal, President of Wipro Consumer Care and Lighting (WCCL), is up to his elbows in work. Agrawal is wrapping up quarterly reviews and planning strategy for a division that is as old as the company itself (which started in 1947 as Western India Palm Refined Oils, a vegetable oil trading company). After a few quarters of struggle, this unit is finally showing some signs of stability, with its Santoor soaps sneaking ahead of Dettol to become the third-most popular personal wash brand across urban and rural India.

Now, Agrawal, who joined Wipro way back in 1982, is looking to take his company to the next level by first expanding his consumer care products out of India into East Asia and beyond, and then rapidly ramping up a slew of new initiatives he has either built or bought over the last few years.

Beyond IT
Wipro is looking to expand beyond its staple business.
Wipro is the world leader in hydraulic cylinders, which are the heart of heavy equipment such as tippers, excavators and earthmovers, a little-known fact.
It is investing in clean energy and water, pin-pointed by Premji as a key long-term prospect. Already, it has a 300-strong team with some 90 energy specialists.
Wipro Consumer Care and Lighting has forayed into chairs, furniture and storage. It is betting on a transition to modular designs from carpentered furniture.
Wipro-GE Healthcare, in which the company owns a 49 per cent stake, generates $300 million in revenue.
 
Billion-Dollar Baby
Wipro’s non-IT businesses are gathering steam.
Infrastructure engineering: $300 mn
Wipro-GE Healthcare: $300 mn
Consumer Care and Lighting: $417 mn

Agrawal is only one part of the emerging face of Wipro, a company most readers would immediately link to its $4 billon-plus (Rs 19,200-croreplus) IT business. But there’s much more, both old (other than vegetable oil and consumer care, there’s also hydraulics) and new (clean energy and waste). The result? An eclectic and seemingly esoteric mix of businesses that aren’t even remotely connected to each other—but which account for a billion dollars or roughly 25 per cent of Wipro’s total revenues. For Wipro Chairman Azim Premji, amidst this apparent madness lies a clear-cut method—and huge prospects. “We do this (diversify) strategically, looking into the mid and long term, and making definitive bets on what Wipro should be doing, and which opportunities should we be creating and pursuing,” says Premji, the architect of the soaps-to-software conglomerate.

Long-time Wipro watchers say that Premji prefers to make opportunistic moves into segments with massive—and latent—potential, adding its own twist to the conglomerate approach of large Indian business houses. “When Wipro started the IT business, it was one of the (hidden) gems,” points out Bala Balachandran, the J.L. Kellogg Distinguished Professor Emeritus of Accounting and Information Management at Northwestern University, and Founder and Dean, Great Lakes Institute of Management, Chennai. “(Premji) found IT to be a strategically a superior opportunity. As a company Wipro is a nexus of opportunities rather than simply a diversified conglomerate.”

Just one manifestation of that “nexus of opportunities” is visible in consumer care and lighting, where the company is looking beyond its core business of soaps and bulbs into emerging categories of health foods. These include a honey range and sugar substitutes, which Wipro is rolling out nationally. And last fortnight, Wipro closed a deal to buy the Asia-Pacific and North Africa business of Yardley, a personal care products brand, which is part of the $650 million Lornamead Group. The Rs 215-crore deal for the more than two-century-old Yardley will help WCCL string together a complete range of personal care products.

A World Leader
However, if there is one business where Wipro can claim to be a world leader, it isn’t IT or its consumer care and lighting business. In his fifth floor office, Anurag Behar, 41, the CEO of Wipro Infrastructure Engineering, makes that claim. According to him, Wipro is perhaps the world’s #1 maker of hydraulic cylinders, which are at the heart of heavy equipment such as tippers, excavators and earthmovers. The company, which was a $20-million business until 2004, rode the economic boom—especially sustained spending on infrastructure projects such as the Golden Quadrilateral—to become a $300 million (Rs 1,440 crore at current rates) entity by 2008.

For a business that generates $300 million in revenue for Wipro, its JV with GE for the healthcare business, Wipro-GE Healthcare, gets scant attention. The venture, where Wipro holds a 49 per cent stake, was recently reshaped when three related businesses, GE Medical Systems India, GE Healthcare Life Sciences and GE Healthcare Medical Diagnostics, were absorbed into it. The 19-year-old entity is growing at 25 per cent annually— double the rate of the $3 billion (Rs 14,400-crore) industry—and is expected to also double its revenues in three to five years.

Picture of the Future
However, the picture of Wipro two decades from today may be dictated by a team of some 300 people working across two segments—clean energy and water—which the company has identified as key to its long-term prospects. The process of identification happened two years ago, when Wipro’s top managers and board met to discuss the future direction of the company and decided that these two areas would lie at the centre of its future strategy. “We think that ecology will be the defining issue for humanity and for the planet for the next few decades,” says Premji. “This is why we have invested in businesses in renewables, water treatment and reuse, and added LEDs to our lighting unit and Green IT to our IT division.”

The 300-strong team includes some 90 energy specialists, who provide solutions on the use of clean energy to companies. The company claims to be have implemented 30-odd contracts for companies such as Dabur, UB and Asian Paints to improve their energy efficiency and increase the use of renewable energy sources. For the second quarter of this fiscal, Wipro Eco-Energy reported deal wins amounting to over Rs 75 crore, including contracts to set up a ‘green’ data centre and factory.

On the water front, Wipro made its first clear move when it acquired Aquatech Industries back in December 2007 to increase its presence in the commercial water purification market. Wipro’s using its own water recycling initiatives—it reuses 65 per cent of water at its Electronics City campus near Bangalore—to promote this nascent business. For the moment, at least, the water business will be focussed on India, before possibly expanding into Asia and beyond. “In India, just 0.2 per cent of water is recycled, compared to 10 per cent in Australia,” says Behar.

Wipro by the Numbers
In terms of accounting, consumer care is the smallest of the three declared businesses—the other two being IT services and products/hardware— accounting for 9 per cent of Wipro’s revenues. Acquisitions of Glucovita (glucose drink) and Chandrika (soap) in 2003 did give it a leg-up, but the game changer, according to Agrawal, was the acquisition of Unza Holdings, a Singapore-based personal care products marketer, for $250 million in June 2007. Unza instantly gave Wipro access to key markets in South-East Asia, especially Indonesia, which many people see replacing Russia in the BRIC classification of emerging markets. In the first quarter of the current fiscal, Unza’s volumes grew 13 per cent to Rs 231 crore, with Vietnam leading the pack as far as growth goes (at a rate of 45 per cent), followed by China and Indonesia. Overall, Unza accounts for 40 per cent of WCCL’s revenues.

Patchy Record
Over the last decade, Wipro has made several attempts to enter new businesses, with limited success. While it did make an opportunistic entry into IT in the late ’70s, when IBM left India, and has grown from strength to strength, other businesses have not been so successful. For example, in 2002 Premji sold the 10-year-old Wipro Finance, having made little headway in a competitive market, and also shut down its Internet service provider business Wipro Net around the same time. The top brass avers that they’re not emotionally attached to any business—particularly those that don’t make the cut. “If we are not among the top few players in the market, we will get out of these businesses,” Suresh Senapathy, CFO, Wipro, says. Premji is more precise. “(We want to) be in the top two (positions) in their respective sectors not just from the stand point of financials and market share—but also in technology and innovation, customer satisfaction and quality.”

This patience may be severely tested by the current slowdown, which has especially hit the fortunes of Wipro’s infrastructure engineering activities. According to some industry estimates, the revenues for the business have come down from $250 million in 2007-08 to $200 million in the last fiscal, as orders have dried up from struggling mining, real estate and infrastructure companies, which form a large chunk of its customer base. “There is little sign of a recovery in Europe, but we have been untouched in India,” says a defiant Behar. He’s betting on a strong recovery, first in India and the emerging markets, followed by the developed countries, to reignite growth. As a regular and fanatical runner, Behar seems to be preparing more for a marathon rather than a 100 metre-dash.

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