Wipro slips 1% after co sells cloud biz to Alight for $110mn; Axis Capital raises target to Rs 340

Shares of Wipro slipped 1 percent in the early trade on Thursday after company sells its Workday and Cornerstone OnDemand business to Alight.

Wipro and Alight Solutions have agreed to expand their relationship by signing a definitive agreement to divest Wipro’s Workday and Cornerstone OnDemand business to Alight for cash consideration of up to USD 110 million, as per company release.

Out of total transaction value USD 100 million would be payable at closing and the balance, USD 10 million, would be a deferred consideration payable at the end of 12 months based on the achievement of performance targets, it added.

The divestiture agreement will result in approximately 350 employees in Wipro’s Workday and Cornerstone OnDemand teams moving to Alight.

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In 2016, Wipro acquired the Workday and Cornerstone OnDemand business as part of its Appirio buyout.

The transaction is subject to receipt of regulatory approvals and customary closing conditions and is expected to close during the quarter ending March 31, 2019.

Abidali Z. Neemuchwala, Chief Executive Officer and Executive Director of Wipro said, “We are delighted to expand our strategic relationship and collaboration with Alight. This agreement will enable Wipro to sharpen its focus on key offerings where it has a leadership position in the market. We will continue to make significant investments to grow our cloud applications and platforms business.”

Morgan Stanley has maintained underweight call on Wipro with a target at Rs 300 per share. Workday & Cornerstone business divestment is marginally accretive to FY20e EPS.

Axis Capital has maintained hold rating on Wipro and raised target to Rs 340 from Rs 320 per share.

According to research house, divesting Workday & Cornerstone business will sharpen the focus on key offerings, while the divestment is aligned to its offering for larger clients.

The company is going to benefit from being a strategic partner for Alight and will gain access to down-stream revenue opportunities.

Axis Capital expects 4.5% revenue CAGR over FY18-21.

At 09:25 hrs Wipro was quoting at Rs 370.25, down Rs 3.30, or 0.88 percent on the BSE.

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First Published on Feb 28, 2019 09:48 am

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