"Previously, we did small acquisitions in the range of $30-60 million. Now we have an appetite for larger acquisitions of over $100 million. With acquisitions contributing significantly to the company's profitability in the past, we feel we have the capability to manage larger acquisitions now," said Sudip Banerjee, president, enterprise solutions division, Wipro Technologies.
The company is eyeing acquisitions in the pharmaceutical and avionic sectors. It is looking at companies in the US and continental Europe. In the pharma industry, the infrastructure, package implementation, drug discovery and analytics space is being considered.
"We can do this organically, but it will take at least two years to have competency in these areas. By acquisitions, we can do this in less than 9 months," added Sudip Nandy, chief strategy officer, Wipro. Wipro currently has 3-4 customers in the pharma space. In aerospace, Wipro has about five customers.
The company now wants to position itself both in the mechanical designing and electronics space. "We are looking at both the areas," said Nandy, adding the possible geographies could be Canada and Europe.
In 2005-06, Wipro's IT businesses had made five acquisitions. The last of these was the acquisition of 3D Networks and Planet PSG by Wipro Infotech, the company's India and Asia Pacific IT services and products division.
"During the last 12 months, we made four acquisitions globally and one in the domestic IT space. The results show that from acquisitions, we are growing at twice the average rate. We have learnt the risks and rewards associated with the inorganic strategy. Now, we are looking at slightly bigger acquisitions," said Nandy.
Most of Wipro's acquisitions during the last one year were in Europe. The company says its European operations will continue to grow on expected lines. It is now getting into language-specific markets such as Germany and France, apart from the traditional bastion of the UK, Belgium, the Netherlands and Luxembourg (BENELUX).
Europe contributes about 25 per cent to the revenues of the company. The UK leads the pack with about 17 per cent. Going by the growth in the company's European operations, the share of Europe might go up to 30 per cent in the next couple of years, according to Nandy.
Acquisitions improved Wipro's operating margins by 950 basis points and all acquisitions turned net positive in the fourth quarter ended March 31.
The acquisitions contributed Rs 501.1 crore (Rs 5.01 billion) to Wipro's top line of Rs 15,000.8 crore (Rs 150 billion) in FY07 as against Rs 50 crore (Rs 500 million) in FY06.
The share of acquisitions to Wipro's profit before interest and tax (PBIT) was Rs 21 crore (Rs 210 million) in FY07 as against Rs 4.5 crore (Rs 45 million) in FY06.
