The reputation of India’s IT services industry took another blow today after it emerged that Wipro has been barred from working for the World Bank, less than a month after Satyam Computer Services was blacklisted by the institution.
The Bank said the move is in line with its disclosure practices for companies involved in wrongdoing that work on development projects financed by the World Bank and those that provide goods and services directly to the institution. “This change was made in the interest of fairness and transparency,” the Washington-based lender said in a statement, reports Reuters.
According to Reuters, “The World Bank on Sunday said it plans to publish in the future the names of all companies it bans from doing work with the poverty-fighting institution, and immediately listed three Indian companies.” Wipro was blacklisted after offering World Bank staff shares in connection with its initial public offering (IPO) of American Depository Shares (ADS) in the US in 2000.
Wipro says its representatives offered the World Bank, through its chief information officer (CIO) and a senior staff, participation in the programme and they directed this offer to members of their family and friends. This led to World Bank staff and their families buying 1750 shares for around $72,000 at the IPO price.
The vendor says that, to date, its revenue from the World Bank is “insignificant” and the ban will “not adversely affect our business”. But this did not stop its share price falling by up to 12% on the Bombay Stock Exchange in morning trading.
Megasoft Consultants has also received a four year ban for “participating in a joint venture with Bank staff while also conducting business with the Bank”. News of the Wipro and Megasoft bans comes less than a month after it emerged that Satyam had been barred from World Bank contracts for eight years for “providing improper benefits to Bank staff and failing to maintain documentation to support fees charged for its subcontractors”.
This was followed last week by the resignation of Satyam’s founder B Ramalinga Raju, after he admitted the company’s profits have been falsely inflated for several years, leading to a $1 billion hole in the balance sheet.
Raju and his brother have since been arrested on charges including criminal conspiracy and forgery. The firm’s shares have rebounded over 50% today after the Indian government appointed Deepak S Parekh, chairman of HDFC, Kiran Karnik, former president of Nasscom and C Achuthan, a director at the National Stock Exchange, to the board.