Billionaire Premji Makes His Biggest Purchase With Capco

(Bloomberg) -- Wipro Ltd., an Indian software exporter, agreed to acquire Capco for $1.45 billion, in its biggest purchase to spur growth that's been lagging behind local rivals.

London-based Capco employs 5,000 consultants and will help Wipro add banking, insurance and financial services clients, the company said in a filing to stock exchanges. The transaction is expected to close in the quarter ending June 30, the company said.

The purchase comes less than a year after the company controlled by billionaire Azim Premji hired Thierry Delaporte from Capgemini SE to help it regain ground it lost to rivals such as HCL Technologies Ltd. and Infosys Ltd. Delaporte is using Wipro's $6 billion of cash to turn around the Bangalore-based company.

“The deal suggests new CEO Thierry Delaporte could aggressively look to M&A for expansion opportunities,” said Bloomberg Intelligence analyst Tamlin Bason. It's an “ambitious purchase that we think underscores Wipro's focus on matching peers' top-line growth rates,” he said.

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Wipro's shares rose 0.8% to 438.80 rupees in Mumbai. The company unveiled the deal after market hours.

The latest purchase is Wipro's biggest since the company acquired Infocrossing Inc. for $548 million in 2007. Capco had revenue of $700 million in 2020, according to Wipro's presentation. The purchase will help it add 30 new clients.

Still, the deal will dilute Wipro's margins before interest and taxes by about 2% in the first year, although the measure is expected to improve in the future due to revenue and cost synergies, Wipro said in the presentation. It will also dilute earnings per share in the first year, and will start adding to it from the third year.

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“Although revenue synergies and growth acceleration are the primary objectives of the acquisition, there are identified cost synergies to be realized post integration,” Wipro said in a presentation.

Wipro, which was India's third-largest software developer by sales and market value in March 2019, lost the spot to HCL Technologies a year later, according to data compiled by Bloomberg.

Premji's wealth of $27.6 billion makes him India's third-richest man, according to the Bloomberg Billionaires Index.

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