Tata group firm Voltas Ltd is in advanced discussions to acquire soaps-to-software major Wipro’s water purification and treatment business, people familiar with the matter said, as the engineering solutions provider looks to bulk up its operations.
Wipro has mandated investment bank Anand Rathi to find a suitor for the water treatment business, which it entered about four years ago. This is part of Wipro’s strategy to exit smaller businesses that are facing increased competition and are not easily scalable. Wipro garners almost 80% of its revenue from the mainstay IT services, while consumer products and lighting account for bulk of the remaining pie.
The sale of the water business could be Wipro’s first divestment even though it has attempted selling other smaller businesses like baby diapers and vanaspati oil in recent past. A Wipro spokesperson declined to comment citing the company was in silent period ahead of the quarterly results.
Voltas may be looking at this tuck-in acquisition (aimed at acquiring technology) to expand its water treatment business, which undertakes works for local civic bodies and for Tata group firms. The water treatment business is part of Voltas’ electro-mechanical projects and services division, which contributes the bulk of 70% to its Rs 5,191 crore revenue. A significant change in the last few years is that the 57-year-old company is moving towards becoming a dominant player in the electro mechanical projects business. And for that, the company had said it would look at acquisitions that would enhance its strengths and capabilities in the projects domain.
Wipro’s water treatment business undertakes projects for marquee clients such as Coca-Cola, GSK Pharma and United Breweries and would help Voltas with a stronger institutional business. One source said Wipro could announce the sale of water business within a few weeks if talks stay on course. There is no definitive agreement in place at the moment. Earth Water Group, a New Delhi-based water purification firm, also looked at the deal but Wipro’s discussions with Voltas had moved ahead.
Wipro had entered the water business by acquiring Aquatech Industries in 2008. It is part of Wiipro Infrastructure Engineering, which also operates the hydraulics cylinders business, an area that the company is bullish on currently. The water treatment business in India is estimated to be between $2 billion and $2.5 billion and the players include VATech, Ion Exchange, Thermax, Hindustan Dorr-Oliver and Driplex.
