After Satyam, India’s Wipro under World Bank Scanner
After World Bank banned fraud-laden Satyam Computer Services to do
business with it, now Wipro –another leading IT services company from
India – has disclosed that World Bank has closed its doors for Wipro
also until 2011. The company states that its revenue from the Bank is
insignificant while its shares tumbled upon disclosure.
Wipro
Technologies disclosed today (Jan. 12) that “in connection with
revised disclosure policies, Wipro and the World Bank are disclosing
that in June 2007 the World Bank determined Wipro to be ineligible to
contest direct contracts from the World Bank for the period 2007 –
2011.”
The
company says that in 2000, in connection with its Initial Public
Offering (IPO) of American Depository Shares (ADS) in the U.S., Wipro
had offered Securities and Exchange Commission approved Directed Share
Program (DSP) that allowed employees and clients to purchase ADSs at
the IPO market price.
Wipro
offered the World Bank also to take the shares. Some of them directed
this offer to members of their family and friends. The aggregate
number of shares purchased by them was 1,750 for about $72,000 at the
IPO price.
Although Wipro is projecting that it followed corporate norms while
allotting these shares, markets circles view this move as a violation
of generally accepted corporate ethics. As a result, Wipro shares fell
9.7% to Rs. 226.60.
Wipro,
in a statement, has said that to date, its revenue from World Bank is
insignificant. “Our inability to get future business from World Bank
will not adversely affect our business and results of operations,” it
believes.
Earlier, last month, the World Bank had banned Satyam
from doing business with it for 8 years due to inappropriate payments
to the World Bank staff.
It's
believed that other
major tech service providers in India are also
facing various bottlenecks in running their businesses
particularly in the recession-hit global markets. As they may be using
different means to sell their services, they're likely to be exposed.
