Wipro's Inorganic Growth Strategy

Case Code: BSTR427 Case Length: 17 Pages Period: 2007-2013 Pub Date: 2013 Teaching Note: Not Available

Price: Rs.400 Organization: Wipro Industry: Diversified Countries: India; Asia Themes: Growth Strategy, Mergers & Acquisitions, Post Merger Integration

Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

Wipro's Acquisitions and Alliances

Wipro Ltd was one of India's leading companies of Consumer Products, Lighting, Furniture, Eco Energy, Water treatment, and Hydraulics and a provider of IT Services, including Business Process Outsourcing (BPO) services, globally across the Americas, Europe, the Middle East, and the Asia Pacific. In 1994-95, the company secured ISO 9001 certification for its five manufacturing and development facilities and in 2001, it became the first software technology and services company in India to be certified for ISO: 14001 for complying with the international standards for Environmental Management System (EMS)...

Unza - The Largest of Wipro's Acquisitions

Since the 1970s, Wipro had made several attempts to enter into new businesses but with limited success, except its entry into the IT business, which over a period had become strong and the main revenue contributor of the group. However, other businesses that Wipro entered into were not doing too well. For instance, Wipro Finance could not withstand the competitive market place and was sold in 2000. Similarly, Wipro Net, the internet services business was also shut down. Suresh Senapathy, CFO, Wipro said, "If we are not among the top few players in the market, we will get out of these businesses, (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." Despite these failures, the company kept growing at a steady pace – more so in the IT sector. The consumer care division of the company had only two local brand acquisitions in 2003 to its credit, which added value to the company's portfolio but only on a small scale. However, Wipro's soap brand 'Santoor' was making strides in the Indian market and had become the 3rd largest soap brand sold in the country...

Overcoming the Integration Problems

Prior to Unza, Wipro had taken up smaller acquisitions (Glucovita and Chandrika). These were in its domestic market (India). Therefore, it was easy for the businesses to integrate. Moreover, in both of those acquisitions, Wipro only acquired the brands and not the factories. However, Unza was a much larger company and had around 4,000 employees, 5 manufacturing plants, and salesforce in several Asian countries and hence integrating them all was not an easy task for Wipro.

The scale of the company's operations had doubled. Agrawal said, "We were buying a company bigger than us (Wipro's consumer care revenue that time was Rs 6.0 billion, and we had 1,300-1,400 people. Unza was doing Rs 7.5 billion and had 4,000-4,500 people in various countries.) If it had tanked, it would be difficult for me to get the confidence to acquire another company."...

Reaping the Rewards

Unza and Wipro put together made revenues of Rs 15.21 billion and PBIT of Rs 1.9 billion for the year ended March 31, 2008. With such revenues, Wipro figured among the top-10 FMCG companies in India and among the top-3 India-based FMCG companies. "The Unza acquisition has put us into a new league altogether-we have grown from being Rs. 10 billion business to Rs. 20 billion business," said Agrawal. Though at first Wipro had stated that it was not keen on bringing Unza brands into India, in January 2008, it said it planned to launch at least 3 brands from Unza in the Indian market, "We plan to launch male-grooming and women skin-care brands from Unza's portfolio...

Other Acquisitions Follow

After two years of acquiring Unza, in November 2009, Wipro signed an agreement to acquire the Yardley business in Asia, Middle East, Australasia, and certain African markets for US$45.5 million , from UK-based Lornamead Group. However, the US and Europe business of Yardley was retained by Lornamead. Commenting on the transaction, Nagender Arya, Regional Director (East Asia, Middle East and Africa), WCCL, said, "This further demonstrates our focus on investing in strong brands in Asian markets and our desire to be a strong FMCG player across Asia. The Yardley brand complements our portfolio of Enchanteur and Santoor brands....

Looking Ahead

In the fiscal year 2011-12, WCCL had posted revenues of Rs. 33.4 billion with profit before interest and tax at Rs. 3.956 billion. The company, however, decided to focus on growing its brands rather than acquiring more brands. "Acquisition costs are going up and we now want to do a good job of brand extensions... All the brands the company acquired in the last few years, such as Yardley and Unza, have performed well," said Agrawal. During the fiscal 2011-12, Yardley grew by 60%, Unza by 20%, and Santoor became the No. 1 brand in the south and west Indian markets with a market share of 13.9%. In all, there was a 23% growth in Wipro's consumer care division. The LD Waxson group was expected to add 10% to the WCCL revenues by the next fiscal and create further inroads into the markets of Singapore, Malaysia, China, Taiwan, Hong Kong, and Thailand...

Exhibits

Exhibit I: Wipro: A Timeline
Exhibit II: Wipro's Businesses and Segments
Exhibit III: Wipro's Key Financials
Exhibit IV: Wipro - History of Acquisitions
Exhibit V: Wipro's Acquisitions for its Consumer Care Business
Exhibit VI: About Unza

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