Wipro is in talks with 6 foreign investment banks to raise over $1 billion to partially fund the Capco deal. | Photo credit: BCCL
New Delhi: Information and technology (IT) giant Wipro plans to raise more than $1 billion through short-term loans or long-term offshore bonds to partially finance its acquisition of the company London-based IT consultancy Capco, and is in talks with around six foreign investment banks. Although a final decision on this has yet to be made, the Bengaluru-based software services company is also planning a combination of loans and bonds.
Earlier this month, Wipro announced it had signed a pact to buy Capco for $1.45 billion in cash, giving it much-needed firepower to bolster its position in banking. , Financial Services and Insurance (BFSI).
The latest acquisition is Wipro Chairman Rishad Premji and CEO Thierry Delaporte’s boldest move to drive growth after the IT giant lost its position as India’s third-largest IT company to HCL Technologies Ltd.
“In our announcement, we mentioned that we will finance the acquisition of Capco through a combination of internal accruals and debt. We have no further comment on the matter,” according to HEY which quoted an email response from Wipro.
Citing people familiar with the matter, the financial daily said the company is likely to explore an initial overseas bond sale to raise around $750 million with a maturity of three or five years. More importantly, Wipro has a cash balance of $5.8 billion, but raising funds overseas will facilitate future acquisitions and business growth.
Wipro is said to have carried out an exercise to raise short-term foreign currency loans of up to $1.4 billion over 6 to 12 months which will be refinanced by long-term foreign bonds.
In 2020, Capco recorded over $700 million in advisory revenue for banks and financial institutions. The UK-based advisory firm has over 5,000 employees, including several hundred professionals in India advising banks and financial institutions.
The acquisition will likely boost Wipro’s BFSI revenue by around 25% to $3.2 billion from $2.5 billion, the business daily said. It should be mentioned here that the buyout is subject to customary closing conditions and regulatory approvals and is expected to close during the quarter ending June 30, 2021.