Azim Premji’s trusts to get biggest bite of Wipro share buyback

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Bengaluru: Billionaire and philanthropist Azim Premji’s two philanthropic arms, Azim Premji Philanthropic Initiatives Pvt. Ltd (APPI) and Azim Premji Trust (APT), will be the biggest beneficiaries of Wipro Ltd’s proposed Rs.2,500 crore share repurchase programme, getting at least Rs.1,000 crore.

Both APPI and APT have, additionally, sought approval from market regulator Securities and Exchange Board of India (Sebi) to sell more shares than other promoters back to the firm.

“We have written to the market regulator of the decision Mr. Premji made to let APPI and Azim Premji Trust tender more shares than what is entitled to them. Now, we will wait for Sebi’s reply. But yes, we expect to get between Rs.1,000 andRs.1,500 crore, depending on how the buyback happens,” said an executive involved in the two philanthropies who asked not to be named. The executive added that the two trusts will plough back this money into philanthropic work.

Current rules governing share buybacks mandate proportionate participation from every entity of the promoter group, unless otherwise approved by Sebi.

“The promoters, on the basis of proportion of shareholding, are eligible to tender their shares under the general category only. As set out in the Letter of Offer (LoF), in order to augment more funds to advance their philanthropic activities Azim Premji Trust and Azim Premji Philanthropic Initiative wish to maximize the acceptance of the equity shares held by them in the buyback against the entitlement available to the other members of the promoter and promoter group,” said a spokesman for Wipro in an emailed response.

“The promoter and promoter group of the company have communicated, in the LoF, that they have no objection to APPI and APT tendering equity shares in the buyback against the entitlement of the other promoters shareholders. APPI and APT are subject to the jurisdiction of Indian tax law,” he added.

Premji and family, through eight promoter groups, own 55.5% of Wipro’s shares while APPI and APT own another 17.83%, thereby bringing the total holding of the promoter group to 73.34% in the country’s third largest software firm, which ended the year to 31 March with $7.35 billion in revenue.

Under the proposed share buyback, which starts on 17 June and ends on 30 June, Wipro will repurchase up to 40 million shares at a price of Rs.625 a share. The company will fund this share repurchase from the $1.5 billion cash on its books as on 31 March. After the repurchase, assuming there is 100% participation in the buyback, the promoter group’s holding in Wipro will increase to 73.52%, even as the ownership of banks, mutual funds and the public declines to 26.48% from 26.66%.

Opinion is divided on share buybacks.

Some analysts say they are the best way to return money on the books of a company to shareholders. Others say the money can be put to good use, especially if the company in question operates in a growth business such as technology. In this case, Premji seems happy to allow his philanthropic arms to get more than their due. If Sebi allows it, the two philanthropies could together end up with almost double of what they would have otherwise received.

Over the last decade, Premji, 70, has been quietly helping improve the quality of education in primary schools across the country, through APT. In 2014, Premji set up a grant-making body, APPI, on the lines of the Bill and Melinda Gates Foundation, with the aim of giving grants to non-governmental organizations (NGOs). The shares held by the Azim Premji Foundation, which was established in 2001, were transferred to APPI.

Over the past few years, Premji has also organized once-a-year philanthropy events to let other rich Indians hear from the world’s respected philanthropists such as Bill Gates, and persuade them to share their wealth with society.

Earlier this month, Kiran Mazumdar-Shaw, founder of Biocon Ltd, became the second Indian after Premji to take the Giving Pledge, an initiative started by Gates and Warren Buffett in 2010, asking the rich to give away half their wealth.

Donor apathy and mistrust in NGOs was one central theme of Bain and Co.’s India Philanthropy Report 2015, which found that the country added more than 100 million donors since 2009. “The space is dominated by a large number of ‘disconnected’ donors who donate out of guilt or due to personal relationships rather than a personal connection to the cause,” said the report.

It is this mistrust which entities such as APPI look to bridge. APPI is headed by G. Ananthapadmanabhan, formerly head of Amnesty India.