BENGALURU: Wipro’s construction of Capco’s “high values” can be a challenge for itself, say analysts. In nature, the construction should focus on the margins of IT services, “ICICI Securities said in a report.
Last week, IT major Wipro Ltd announced an agreement to acquire UK-based management and technology consultancy Capco for $ 1.45 billion. Purchases are expected to close in the quarter ending in June.
Capco’s revenue has been virtually non-stop for the previous three years. EBIT margins are said to be close to the Wipro edge image of the site. “Given the depreciating value of the unrelated items, Wipro expects the margins of its IT services to weaken by 2% in the first year with construction turning EPS-accretive from the third year, “the report said.
Capco provides consulting, digital and technology services to financial institutions in America (55% of revenue), Europe (41% of revenue) and Asia-Pacific (4% of income). As part of the purchase, Wipro will also have access to 30 pavilion banking, financial services and insurance (BFSI) clients and more than 5,000 Capco advisors.
Upon completion of the build, Wipro intends Capco to operate as a separate entity, which is seen as a breakthrough by the bankruptcy company. “Capco should be kept as a separate organization dealing with branding, market penetration, and to some extent cultural conflict issues,” ICICI Securities said.