Financial Daily from THE HINDU group of publications
Wednesday, Mar 13, 2002
Mergers & Acquisitions
Wipro to buy out netKracker from ICICI arm
BANGALORE, March 12
TECHNOLOGY major Wipro Ltd plans to buy out minority stake in loss-making retail Internet services unit netKracker Ltd for Rs 3 crore from the venture capital arm of ICICI.
Wipro will also spin off its Fluid Power unit, which manufactures hydraulic equipment, and combine netKracker's business under a new subsidiary company called Wipro Fluid Power Ltd. netKracker had accumulated losses of Rs 37 crore as of December 31, 2001.
Such a move was in response to changing market conditions, the company informed the Bombay Stock Exchange. Losses accumulated by netKracker could be offset against the profits of Wipro Fluid, Mr J. Shankar, Corporate Treasurer, Wipro Ltd said.
Explaining the rationale of merging Netcracker with Wipro Fluid, Mr Shankar said that since Wipro Net, the enterprise ISP arm of Wipro focused on corporates, it was not prudent to merge netKracker with Wipro Net.
Referring to future growth of netKracker, Mr Shankar said: ``We will grow in customer base only if it is profitable''. However, Wipro Fluid Power will continue to service the existing 112,000 subscribers of netKracker.
Wipro originally held a 49 per cent stake in netKracker, which was set up in 2000 to offer Internet access services to retail customers, and the ICICI Venture Funds owned 51 per cent.
Wipro also held convertible preference shares in netKracker which have now been converted into equity, taking its
stake to 79 per cent, the statement said. It is now buying out the remaining 21 per cent stake.
The Wipro Chairman, Mr Azim Premji, said in a statement that the hive-off would help the fluid power business to grow more aggressively and also give it the option to seek strategic investors for growth. Wipro had been in the mobile hydraulic equipment business for the past 25 years and was a market leader in the space, the statement said.
The fluid power business had revenue of Rs 75.7 crore as per the US GAAP accounting standards in the year ended March 31, 2001.
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