The untold story of a piece of Wipro’s shares

Wipro Limited, established on 29 December 1945, is the youngest member of this elite club (Tata Steel is the oldest, followed by ITC, Hindustan Unilever, Asian Paints and M&M).

The 30th edition of Twitch+ reveals a never-before-told story about a member of the Premji family selling their stake, attracting interest from some of the biggest names in global finance, but the transaction didn’t happen due to a Byzantine law . ,

So, who was this Premji family member and what actually happened?

First, a quick recap on Wipro.

Mohammad Hussain Hashem Premji founded Western India Vegetable Products Limited on 24 December 1945 in Amalner, a town about 350 km from Bombay, now Mumbai. Hasham Premji was the father of four children, two daughters and two sons. Azim, the youngest of them, went to Stanford in 1963 to pursue an engineering degree. In the same year, Azim Premji’s elder brother, Farooq MH Premji was inducted into the company’s board. He also owned some shares of the company.

Two years later in 1965, Farooq resigned from the board and decided to move to Pakistan after getting married.

Back in Bombay on 11 August 1966, Hasham Premji, who was 51 years old, died of a heart attack. His wife Gulbanu Premji now had to withdraw her youngest son from college in America to run the company. So Azim Premji, who was just two semesters short of completing his four-year bachelor’s degree, went on to join the family business. Two years later, at the age of 23, he became the Managing Director.

Over the next half century, AHP (as he was known by his associates) transformed Wipro into a global brand, before stepping down as chairman in 2019 and handing over the reins to his eldest son, Rishad.

Meanwhile, the value of shares owned by Farooq increased manifold as Wipro continued to reward investors with stock splits and bonus shares.

In the summer of 2008, some of the most well-known names in the finance world, including Elliott Management and BlackRock, were surprised when they were offered a deal to buy 9.22 million, or 0.62% of Wipro’s shares, according to one executive that worked. deal. These shares belonged to Farooq, who is now based in Pakistan.

A consultant representing Farooq made the deal even sweeter: $120 million worth of shares could be bought at a discount, and the entire transaction could be closed for between $75 million and $80 million.

What did Farooq do to find out the share sale and why at this huge discount?

In 1968, India enacted a law called the Enemy Property Act, under which all movable and immovable property owned by people who migrated to Pakistan and China were confiscated by New Delhi. This meant that shares in public and private companies and in the immovable property of Indian citizens were essentially held by the government before moving to the two countries.

All these properties eventually came under the ownership of the custodian of enemy property for India, a department under the Ministry of Home Affairs.

It is important to mention here that during World War II, the US and Britain, too, took control of the properties of citizens who decided to settle in countries such as Japan and Germany. Elliott, the hedge fund, was among the first to make what appeared to be a mouth-watering transaction. BlackRock was next.

Not surprisingly, the country’s leading domestic investment bankers including JM Financial and DSP BlackRock were reluctant to engage with Azim Premji on the subject. Nimesh Kampani and Hemendra Kothari both knew that the AHP, which was adamant about the rules, would not talk to the government about the transaction.

Still, that didn’t stop some of the biggest names in the American political establishment from lobbying the Indian government. Former US Secretary of State Henry Kissinger and then Secretary of State Condoleezza Rice discussed the matter with Finance Minister P. Chidambaram in 2008 and the late Pranab Mukherjee the following year.

The request was that Wipro’s shares be exempted from the stringent law.

The then government realized that this could not be done as allowing such a transaction would open Pandora’s box.

As the government refused to give in, the deal remained unfinished, and by the summer of 2010, both US firms had abandoned their plans to continue the transaction.

It was not just the big boys in the finance world who eyed this prized possession.

In 2011, a US citizen, Abubakar Kochinwala, claimed to be the owner of these shares and sought the help of the Bombay High Court to direct the central government to issue the shares. Five years later, Amjad Bakhsh, an accused in the 1993 Mumbai bombings and who was later released by the Supreme Court, wrote to the Home Ministry, claiming to be the owner.

At the end of the decade, New Delhi finally amended the Enemy Act and decided to sell all such shares and properties as the government was looking to raise funds.

In April 2019, the government earned $165 million by selling 44.3 million shares of Wipro (an increase in the number of shares due to a stock split and bonus shares) to three state-owned insurance companies. Life Insurance Corporation of India bought 38.6 million shares, while General Insurance Corp and The New India Assurance Corp bought the remainder.

These shares were valued at $401 million on January 5, when Wipro shares touched a three-year high, but the decline in IT stocks over the past six months means they are worth $245 million as of August 16.

In an ideal world, this money should have gone to the legal owner of the shares: Farooq Premji, the elder brother of one of the world’s greatest philanthropists.

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