Indian IT giant Wipro announced on Wednesday that it is about to sell its Workday and a cornerstone on-demand business to the US IT company Alight, for $110 million. The transaction consists of business and employees in the US, the UK, Ireland, Portugal, India, and certain other countries.
Revenues of the aforementioned business stood at $49.7 million for 2017-18, accounting for 0.6% of Wipro’s total revenue for the financial year. The Bangalore based company said in a press release that it signed a definitive agreement with Alight solution to divest the business to Alight for cash consideration of $110 million. Out of the total consideration, $100 million is payable at the closure of agreement, while the rest $10 million would be paid in 12 months from the date of closure.
In a regulatory filing, Wipro stated that following the closing of its 10-year agreement announced back in September last year, Illinois based Alight and Wipro would continue to explore additional strategic opportunities and possible alignment of portfolios based on their respective strengths. India’s second largest IT company further added that the agreement between Alight and itself would see approximately 350 employees in Wipro’s Workday and a cornerstone on demand teams move to Alight.
Wipro bagged an engagement from Alight solution LLC in September last year worth over $1.5 billion, making it its biggest deal till date. In July 2018, Wipro partnered with Alight solutions to take over Alight’s captive operations in India, Alight HR Services India, for a consideration of $117 million.
The Indian IT major further added that the transaction would expand Alight’s capabilities and resources in HCM and financial solutions, banking on Wipro’s advisory, implementation and integration offerings. This would strengthen its position as a large implementation partner in the Workday and cornerstone on demand ecosystems. Wipro will continue focusing its investments plan for the cloud applications and platforms space, including growing and expanding its Salesforce business under the Appirio brand. It will also continue its support to Workday’s suite of solutions for application management, testing and integration services for which existing clientele.
CEO and Executive Director of Wipro, Abidali Z Neemuchwale stated that the agreement would require unable Wipro to enhance its focus on key offerings where it enjoys a leadership position in the market. He further added that the company would continue to make considerable investments in a bid to grow its cloud application and platforms business.
Wipro acquired the Workday and Cornerstone on-demand business in 2016, as a part of its Appirio acquisition. Currently, the business has multiple customers spread across the US, Europe, the Middle East, Asia, and Africa. The transaction is subjected to receipt of regulatory approvals and customary closing condition. The deal is expected to close at the end of the fourth quarter ending March 31, 2019.
Following the announcement, Wipro share prices slipped 1% on Thursday. Morgan Stanley has maintained an underweight call on Wipro, targeting Rs 300 per share. On the other hand, Axis Capital has maintained a whole rating on Wipro, raising the target to Rs 340 per share from the current Rs 320. It is backing Wipro as it believes the divestments in Workday and cornerstone business will sharpen the focus on key offerings.
Axis Capital expects 4.5% revenue growth over the FY18-21 period.
