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Azim Premji: India's Generous Manufacturing Mogul

Investopedia logoInvestopedia 30-04-2015 David Rodriguez
Azim Premji transformed a cooking fat company into a conglomerate that's advanced India's IT sector, but he's also someone who helps the less privileged.© Thinkstock Azim Premji transformed a cooking fat company into a conglomerate that's advanced India's IT sector, but he's also someone who helps the less privileged.

The third richest man in India currently and the richest man in India in the early 2000's, Azim Premji is these days perhaps more known for his philanthropy than his wealth or business skills. He derives his wealth from his approximately 74% ownership of Wipro, the third largest Indian IT services company. (See article: India Is Eclipsing China's Economy As Brightest BRIC star.)

Wipro was started as Western India Vegetable Products Ltd. in 1945 by Mohamed Premji, father of Azim Premji, as a manufacturer of hydrogenated cooking fats. At the time, Premji's father was already an established rice merchant. Azim Premji completed his schooling in Mumbai and was pursuing engineering at Stanford University, USA, when in 1966 he had to leave and return to India due to his father’s sudden demise. He then became the chairman of Wipro at the young age of 21 amidst shareholder revolt. He expanded the company's product line to include hydraulic cylinders, soaps, lighting products etc., and renamed the company Wipro in 1977.

Wipro entered the IT space in 1980 after IBM had withdrawn from the country. The company started with manufacturing microcomputers under a technology-sharing agreement with US-based Sentinel Computers. Later, it started providing software solutions to complement its hardware operations. The 80’s saw a series of ventures by Azim Premji and Wipro. He started a manufacturing plant for the production of hydraulic tipping systems in 1983, followed by an entry into the manufacturing of industrial cylinders and hydraulic cylinders. In 1989, Wipro formed a joint venture with General Electric ( GE) for the manufacture and distribution of imaging products called Wipro GE Medical Systems, which became a subsidiary of Wipro the following year. (For related reading, see article: General Electric: Good News/Bad News.)

Following India’s economic deregulation in 1991, Wipro further diversified into the manufacturing of lamps, powders, oil-based natural ingredients, medical and diagnostic equipment and IT hardware products such as printers and scanners etc. in the 1990’s. It also entered the IT services business in the 1990’s and was among the first to experiment with offshore IT services. 1999 saw Wipro become the only Indian computer manufacturer to receive Y2K-compliant certification from the National Software Testing Laboratory in the US. It also entered into a joint venture with KPN to provide internet services in India. The following year saw Wipro list in the US via American Depositary Receipts and emerge as one of India’s largest software exporters and the second largest listed company in India. Throughout the late 1990’s and early 2000's Wipro continued to perform well, with IT remaining its core business. It also opened a Business Process Outsourcing (BPO) unit in 2002 and was one of the best performing stocks during 1998-2003 on the Indian stock exchanges. Premji created a culture of striving for excellence in business operations and Wipro was successful in implementing the objectives that were part of this culture and being one of the first software companies to get SEI Level 5 certification.  (See article: An Introduction To The Indian Stock Market.)

Currently, Azim Premji is the chairman of the board of Wipro and for a brief time between 2005 and 2008 was also the CEO. Under his leadership Wipro’s revenues grew from US $2mn in the early 60’s to around US $7bn currently, with IT contributing around 75% of total revenue. The exit in 2005 of CEO Vivek Paul, who played a key role in making Wipro a billion-dollar enterprise, led to Azim Premji becoming the CEO till 2008, followed by a change in corporate structure that led to the installation of joint CEO’s till 2011, when there was a reversion in the company back to a single CEO. Recently, a COO post has also been added in the company to support the CEO and look after day-to-day operations, product delivery and customer satisfaction in order to allow the CEO to focus on global operations and future strategies. The IT business's top management hasn’t been that stable, with growth reaching a plateau recently (Wipro’s revenue growth under the current CEO remained the same as it was under the joint CEO’s, even though they had taken charge during the financial crisis.). Recently, one of Wipro’s oldest serving executives and its CFO also left Wipro -- a move that created doubts over the long-term leadership of the company, especially after Azim Premji also left. Azim Premji’s son, Rishad Premji, the company's current chief strategy officer, who recently got promoted to the board, is likely to take charge of Wipro eventually, though the exact timing of such a promotion is not yet known.

Azim Premji has his own family wealth management company, Premji Invest, that manages around US $1 bn of his personal wealth and invests in public as well as private companies.

One of the many reasons -- perhaps the most significant -- that Azim Premji will be remembered is for his philanthropy. He has already given away 25% of his wealth as part of the Giving Pledge, the first Indian and only third non-American initiative to do so. This includes 8.7% of his Wipro stock, which has been placed in a separate trust and will be used for educational purposes. The Azim Premji Foundation was set up as a non-profit organization in 2001 with an aim of improving primary education in India. It has also set up a university in Bengaluru, India, and works with schools and governments in various districts of India to improve education in a holistic way, rather than just through financing.  

Something else that is noteworthy about Azim Premji is that he has managed to build an organization that has a reputation for being an ethical company committed to certain core values, and he has taken a keen interest in creating high-performance teams.

The Bottom Line

Azim Premji is one of India’s most well-known and respected business leaders and has received many awards during his lifetime, most notably India’s second highest civilian honor for his contribution to business. He was also selected as one of the 30 Greatest Global Entrepreneurs of all time by Business Week and was named one of the 100 most influential people in the world. He has transformed Wipro under his leadership from a US $2mn cooking fat company into a conglomerate spanning multiple businesses that is generating revenue of US $7bn. Premji is indeed one of the pioneers in developing the IT sector in India and putting the sector on the global stage.

But perhaps his most lasting legacy will be the way he has used his wealth to improve the lives of others who are less privileged.  

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