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Wipro Share Auction Gets Weak Response, Raises About $150 Million

03/14/2012 | 11:44am US/Eastern

-- Wipro's founder trust raises around INR7.50 billion by selling 17.8 million shares

-- Wipro's founder trust had planned to sell 35 million shares

-- Floor price for share sale was set at INR418.00 a share

(Rewrites introduction, adds Azim Premji Trust comments in first, third and seventh paragraphs.)

   By Khushita Vasant and Romit Guha 

The Azim Premji Trust, controlled by chairman of Wipro Ltd. (507685.BY), said Wednesday it has raised about INR7.50 billion ($150 million) for charity through an auction of the software exporter's shares, though a weak response saw just over half the shares on offer being covered.

The trust had targeted to raise at least $293 million by auctioning 35 million shares, or a 1.4% stake in India's third-largest locally listed software exporter by sales, at a minimum of INR418 each.

"The sale of 17.8 million shares generated around INR7.50 billion of cash for the APT (Azim Premji Trust) at prices around today's [Wednesday] daily trading range," the trust said in a statement. As per calculations, the shares were sold at about INR421.3 apiece. The Wipro stock fell 1.4% to close at INR425.40, compared with a 0.6% gain in the Bombay Stock Exchange's benchmark index.

The trust of Azim Premji, Wipro's billionaire chairman, was planning to use the proceeds to fund educational projects.

The sale was the second through an auction--the first was the government's March 1 sale of Oil & Natural Gas Corp. (500312.BY) shares--since India allowed this route for founders to sell stakes by avoiding complicated regulatory procedures.

The ONGC auction that got a tepid response--it barely succeeded after a state-run insurer stepped into buy most of the shares--and the indications from the Wipro offer so far may damp the plans of other companies that want to sell shares, especially through auctions.

The trust indicated that investors had to overcome challenges posed by the "unfamiliarity" of the new offer-for-sale process, or the auction, process.

"The undersubscription, if we go by the given data, is understandable," said Prakash Diwan, head of institutional clients group at Asit C. Mehta Investment Interrmediates. "Wipro is not a much sought-after stock in the current environment."

Wipro, in line with India's software industry, has been maintaining a cautious stance on its growth prospects, as its main markets of the U.S. and Europe face a tough economic environment.

To quicken its return to high growth that the company had been reporting before the global economic slowdown, it last year restructured the software and services division that accounts for three-fourths of Wipro's overall sales. But it has yet to post a significant turnaround.

The trust, along with the Azim Premji Foundation, held 9.1% of Wipro as of Dec. 31. The stake sale will also help the founder group to cut its stake in Wipro from 79.15% to comply with new rules that require at least 25% public shareholding in listed companies.

-By Khushita Vasant and Romit Guha, Dow Jones Newswires; 91 99675-86928; romit.guha@dowjones.com

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