After Satyam: Is Wipro Next?

Posted by: Bruce Einhorn on January 12, 2009

The fall of Satyam was supposed to have created a big opportunity for Wipro. The Indian outsourcing powerhouse, a member of India’s Big Three (along with Infosys and TCS), might be well-positioned to scoop up customers defecting from scandal-plagued Satyam. Wipro still might do that. But today the news is not good. Wipro’s stock plunged, down over 9% after the company revealed it, like its beleaguered rival Satyam, was on a World Bank blacklist, barred from doing any business with it for several years.

The World Bank says Wipro can’t get any of its work till 2011 (typo fixed Jan 13) as punishment for “providing improper benefits to bank staff.” (The Indian company allowed certain World Bank employees to buy shares during the IPO of the company’s ADRs in New York in 2000.) The World Bank’s statement is uncomfortably similar to one it made against Satyam, which ended up on the blacklist in September for, as one of its sins, “providing improper benefits to bank staff.” Perhaps worse still, at least from a short-term point of view, it turns out Wipro has been on that list for over a year but only revealed the news now because of new disclosure rules. Kudos to Wipro for following those new rules and getting the news out at last. But given how jittery investors and customers are now about India’s outsourcers, nobody is in the mood for unpleasant surprises like this.

Meanwhile, there might still be some life in Satyam after all. The company’s stock soared today, rising 44% a day after the Indian government appointed three respected new directors to the company. For more, see my colleague Manjeet Kripalani’s Eye on Asia item about the Satyam story.

Reader Comments

Blair

January 12, 2009 11:37 AM

I guess in some sense it's better that Wipro is on the list for the sales blunders rather than project blunders. When I hear of blacklists for consulting firms, it's usually project blunders that are cited as reasons for listing certain competitors of Wipro. Let's also hope that this isn't a sign of other skeletons in the closet at Wipro and other firms.

Anand

January 12, 2009 11:51 AM

The Wipro story doesn't look as scary as the Satyam story did with the World bank.

Governance has a long way to go in India and it appears it has a long way with IT companies too who until the recent Satyam fiasco looked set to be setting the trend for the rest of corporate India to follow along.

I'm slightly uncomfortable with Wipro as its a family run business like Satyam. Any family run business could have illegal activities happening under the hood.

Sang

January 12, 2009 11:58 AM

Barred till 2001?

swaminathanpattabhiraman

January 12, 2009 12:01 PM

there is no more life in SATYAM - at the best if a merger takes place there may be some relief.

Arun

January 12, 2009 12:10 PM

Please fix this line "The World Bank says Wipro can’t get any of its work till 2001" to "The World Bank says Wipro can’t get any of its work till 2011"

Thanks.

VoiceofReason

January 12, 2009 12:28 PM

Is it me or this is the proof that outsourcing is bad and fear of my private information fall into the wrong hands. Thank you, american companies for being dumb and letting me lose less sleep at night.

Joe Canada

January 12, 2009 12:48 PM

Enron took down Anderson, will Satyam take down their auditor (PWC) ?

Devender

January 12, 2009 12:52 PM

Is the following statement valid at present
"The World Bank says Wipro can’t get any of its work till 2001"

Johny

January 12, 2009 1:06 PM

Don't you mean 2010 as opposed to 2001?

Ralph

January 12, 2009 1:13 PM

All Indian IT companies must be banned, at least from doing business in America. These are big names but there are a number of small companies shiping American jobs to their pathetic land. We are witnessing an end to the bubble Indian economy. Come 2010 Indian's Government should be looking for IMF loans.

E.Karnika Yashwant

January 12, 2009 1:14 PM

At any cost we Indian should stand together to keep brand India intact.

_____________
E.Karnika Yashwant
www.ens.org.in

Apple

January 12, 2009 1:35 PM

Most of Indians IT companies cook their accounting report

Me

January 12, 2009 1:38 PM

Wipro has good sence. Wipto can face these loses without a loss.

Aruna Sreeram

January 12, 2009 1:55 PM

I heard you say something about Wipro being a clean company ??

Milind

January 12, 2009 2:10 PM

I dont think this article heading has any sense than senseational attraction.
Wipro has got altogether different shareholding pattern.No doubt,it has got public involved in shareholding pattern, but it is altogether different than satyam. Mr.Raju was holding 8% where as Mr. Premji holds 70%.
Also Wipro has seen business for more than half a century. In this long duration in which there was never a single doubt for its business ethics.

If Wipro would have been really guilty , then the American Stock Exchange would be the first to take action. It is clear that Wipro has followed all the guidelines for American Stock Exchange. Nowhere it is clearly prooved that Wipro has got any benifit.

Lets see what Indian IT Industry will see in next coming month.

ABC 123

January 12, 2009 2:16 PM

This article makes no sense. I don't think author has any clue about the things that are happening in reality.

shanthim

January 12, 2009 2:19 PM

i'm bloack listing world bank for accepting bribes. I'll not conduct any business with world bank or its affiliates.

Luis B Aramburu

January 12, 2009 3:08 PM

Till 2001? When was this article written?

Chuck Gaffney

January 12, 2009 3:23 PM

How about we just use this a way to drop the whole outsourcing garbage in the first place and bring jobs back to the US. There are many American IT workers who sit and watch their over-rated and over-priced college degrees collect dust.

Ram

January 12, 2009 3:47 PM

Some facts - Satyam was not a Family run business (though the Family used it that way).... in fact in the big 5 of Indian IT they probalby had the least (8%) of family owning the equity unlike a Wipro where more than 75% is held by Premji. The need for QoQ performance and constant pressures on balance sheet was more at Satyam than presumably can be on Wipro. Talking about governance - do you think what happened at Enron, KPMG, all of Wall Street in OND, Maddoff ... was about something else... these things can happen globally. I feel Wipro is a little unlucky to be getting into the news in this way. Its a temporary blip which I think Wipro and the Indian IT industry will cross..

Squeezebox

January 12, 2009 4:10 PM

In other words, WIPRO's been accused of bribery (letting people with connections to buy stock from an IPO when others can't). How many other Indian IT companies have been debarred for the same reason?

Nandeeshmathurinathanpamaswiramamithur

January 12, 2009 4:26 PM

Good luck to Wipro if they pulled a Satyam.

LJ

January 12, 2009 4:56 PM

I would say, well not say i would know for sure. Only TCS will survive, because it is huge and they will have time to cover things up. One thing everyome MUST know about India culture. It is full of corruption and that can not be denied. These big companies will come down. Wipro is going to follow Satyam and then Infosys. Bunch of liars and greedy CEO's.

guest

January 12, 2009 7:57 PM

Don't you ever compare the case of Wipro with Sathyam. You are comparing apples to oranges. I think the media should shut their mouth about this issue and stop spreading wrong implications about Wipro. You don't know the effect of this. Mind that in the internet age millions of people are watching and reading your news. Let's not spoil India's IT image ourselves. This is a seven year old issue that WB un-necessary brings to the notice of the media. Pls stop propogating this news immeidaitely. This is very minuscule in nature compared to what happened in Sathyam. Also in this case Wipro has not cheated anyone.

Krishna Moorthy K

January 12, 2009 11:30 PM

Are those World Bank officials Indians? So far only hearing about the news of Indian politicians being bought to finalize defence deals, etc. Kudoos to Indian IT scamers for exposing the clean officials of the developed world.

Vishnu

January 12, 2009 11:32 PM

Oh, the Indian media should sit silent when skeletons tumble of IT wardrobes! IT companies in India have crafted a 'clean'image and have always occupied the high moral ground. It is this false image that is falling down. And a few are terribly disturbed by this. The reasons are obvious.

It is Wipro themsleves who broke the news, not the media. And everybody knows that Wipro does not pay employees much. The irony is that the IT giant has money to pay bribes, but not as salaries to many who put in more than 12 hours daily!

Sharad

January 13, 2009 12:55 AM

WB’s ban on firm’s indulging in unethical practices is justified, but at the same time what I would like to know what have they; in turn done internally to prevent these kind of incidences happening again.
We don’t see any media releases from WB on action against its CIO or others found guilty.

Robert K

January 13, 2009 1:33 AM

PWC is equally responsible in Satyam's case and stringent actions should be taken against such corrupt auditors.

ankit

January 13, 2009 3:30 AM

TO Ralph...
While making any statement just mind your language...In today's world you have to fight for your place.We work hard to achieve what are capable of. If we just sit and cry like you then our job will be gone too.

Will Bartlett

January 13, 2009 6:20 AM

Wipro came out with bad news only after they found out World Bank was putting the news at the web site. Wipro is just liek any other company, like Satyam and a like every other company. Take an 5 companies in US, analyze their balance sheets for 5-6 years at a stretch and you know half of them do this. I have seen it, because my wife did.

Skeptic

January 13, 2009 7:06 AM

Wipro's action was dodgy. I saw their CFO on TV saying that the officials who bought their ADRs in World Bank were no different from all the other applicants of their IPO because they got the shares at market price. Oh yeah? Normal IPO applicants get shares allotted on a proportionate basis. So in heavily subscribed issues , normal folks tend to get a miniscule number of shares. By giving about 2000 shares to each WB official, Wipro sure as hell gave them inappropriate benefits. So whether it was legal or not, it sure was unethical.

Rashmi

January 13, 2009 10:22 PM

Wonder what World Bank did to prevent such things from happening in the future! May be it should have penalised its employees who were involved as well!!
Such comments from a respectable company being re-announced (after years) at a time of worry like now is not any good of the media.

anitha prasad

January 15, 2009 10:58 AM

WIPRO will always rock

Sangeeta

January 18, 2009 1:16 AM

To Ralph,

Obviously you have been upset about business being outsourced to India. If I may ask, would the American companies have outsourced without good reason? So request you not to use this incident to vent your anger and label my land "Pathetic". Scams happen all over the world, why don't you call the whole world pathetic?

Chris

January 19, 2009 1:30 AM

Oh,India is pathetic alright, there's no doubt. Satyam is just the tip of the iceberg.You can never trust india.

Viveka

February 10, 2009 6:02 AM

We have good number of banking bursts in US. Does anyone say all because of stupid banking system you have it there? See Good and Bad are the two sides everywhere... whether US or India or anywhere in the world. This is not fair to put it into the sector. If so what is the level of Auto and banking sector as whole in the US. What ever fraud happened, people who involved in this will be get punished as investigation is on in this front. And fraud will be there everywhere and US if you look back, you could see all that you wrote earlier with in you.

Thanks,
Viveka

Viveka

February 10, 2009 6:15 AM

If you are worried of your job getting shipped to other location, its time for you to realize how "FAT" (efficient for that job) you are instead showing your frustrations in words:-)

Deepa

February 10, 2009 10:33 AM

Hey Ralph and Chris,

Never compare Incredible India with another pathetic land like yours! India cannot be beaten with your words in vain.. Please understand that India is the only economy least affected by YOUR OWN FINANCIAL CRISIS! You call whole world pathetic as Sangeeta commented, but exclude India from it.

Satyam is just an incident, which can happen to any companies in any other world. Most of the companies in US cook their profit, as all of us know. That is why you have to cry now to get job and food. We Indians work hard, and with less talking! Shame on you for calling us 'pathetic'.

Abhinav

February 11, 2009 8:50 AM

My two bits ... wipro is a good company and did no wrong in offering stocks to World Bank employees who certified in writing that their company rules do not prevent them from getting this benefit.

An interesting read on future of Wipro. Senior guys / management guys will only appreciate it

http://wiseinforesight.blogspot.com/2009/02/satyam-gone-wipro-next.html

pun

April 9, 2009 9:16 PM

Though i am an indian; way beauracrats; politicians and inflential individuals or corporates are shiphoning huge amounts of peoples money through scams; country sure dosent have any future.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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