Indian giant Wipro has decided to move its non-IT businesses out of the company to give it a higher focus on IT services.
The outsourcer said its board approved the demerger of the company's non-IT businesses such as consumer care, lighting, furniture, hydraulics and medical diagnostics into a separate company to be named Wipro Enterprises.
In the company's first fiscal quarter ended June 30, IT services accounted for 78 percent of Wipro's total revenue.
While Wipro will continue as a publicly listed company that will focus exclusively on IT, Wipro Enterprises will be an unlisted company.
The outsourcer needs to do more to revive its IT business which has seen revenue growth in U.S. dollar terms fall for over four quarters, analysts said.
"This plan is not a dramatic development as Wipro was already focused on IT which is the largest source of revenue," said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm. The company's non-IT businesses are small, and operate quite independently of its IT business, he added.
Wipro's IT services do not differentiate the company from its competitors as it is still focused on technology, improved productivity, and cost-cutting, which though relevant, do not meet customers' requirement to have technology transform their businesses and make them more efficient, Apte said.
The decision comes a day ahead of the company announcing its financial results for its fiscal second quarter ended Sept. 30.
In the previous quarter, Wipro reported that its IT services revenue was US$1.5 billion, a year-on-year increase of 8 percent, which was lower than the 17 percent growth the company recorded in the same quarter last year.
This demerger is subject to Indian court approval and regulatory approvals, and is expected to be completed by Wipro's next fiscal year which begins 1 April , 2013.