Wipro HealthPlan acquisition: Buying Growth?

Wipro announced its second biggest acquisition ever on Thursday stating that it was acquiring healthcare BPM service provider. It has announced that it is paying $460 mn for HealthPlan Services which is about twice of the revenues the US company recorded in 2015 of $233 mn. The company has about 2000 employees who will onboard to Wipro's rolls once the formalities are completed.
 
Unlike its disastrous acquisition of Infocrossing in 2007, for which it overpaid $600 million, most analysts say that the price paid by Wipro for HealthPlan is in line with the current valuation. Wipro currently clocks about $1 billion in revenue from its healthcare and lifesciences vertical and the new acquisition is seen as a good fit which will help the company consolidate its position in the lucrative US market.
 
The acquisition is also the first major move by the new CEO Abidali Neemuchwala. It is no secret that the company has been struggling to grow in the recent past and has failed to even record double digit revenue growth in the last few years. By this acquisition, Wipro will be hoping to offer a more integrated suite of services in its healthcare vertical and thus boost growth.
 
While Wipro is sitting on more than Rs 25,450 crore and easily afford the purchase price of Rs 3150 crore for HealthPlan, it must make acquisitons, that are strategic in nature. Wipro will be hoping that unlike some of its other past acquisitions, HealthPlan proves to be more strategic and delivers greater value. The new regime will be closely watched by the markets.