At a time when the World Bank appears to be on a banning frenzy, Tata Consultancy Services (TCS) has pulled off the impossible by bagging direct contracts from the global anti-poverty agency.

Though India's top technology outsourcer was tightlipped about the deal, a World Bank official confirmed that they have hired TCS to do much of the IT work that Satyam used to do. TCS, the official said, had bagged much of Satyam's work through a competitive bidding process early last year.

The official, however, refused to disclose the size of the deal, saying they do not share contract details with third parties as a matter of policy.

It may be recalled that on Monday the World Bank disclosed that it had found two Indian IT companies - Wipro and Megasoft - ineligible for doing direct business with it for a period of 4 years each, beginning June 2007 and December 2007 respectively.

The World Bank said it had found Wipro ineligible for direct contracts as it was providing improper benefits to Bank staff, while Megasoft, the World Bank said, was barred for participating in a joint venture with Bank staff while also conducting business with the Bank.

Earlier, in December, the World Bank said it found a third Indian IT company, Satyam Computer Services, ineligible for direct contracts for a period of eight years, effective from September 2008, on grounds of bribery, fraud and business malpractice.

The blacklisted names were made public by the World Bank on Monday in the interest of fairness and transparency. The bans, the World Bank said, were imposed with respect to its corporate procurement program. The World Bank has debarred as many as 111 companies and individuals from across the world from doing business or bidding for its projects till date.

With 3 Indian IT companies in the World Bank's blacklist, a general gloom had fallen on India's IT industry, with rumors spreading that the World Bank was specifically targeting Indian IT companies. However, the latest news indicates that the World Bank is still keen on doing business with Indian technology outsourcers that have a strong record of corporate governance and transparency.

Meanwhile, Wipro has vehemently denied that the World Bank has barred it from bidding for direct contracts because it had done something wrong or unethical. It also urged the media to restrain themselves from comparing its case with Satyam's.

In 2000, as part of our initial public offering (IPO) of American Depository Shares (ADS) to our employees and clients in the US, our representatives made an offer to World Bank employees to purchase the shares at market price under the Securities and Exchange Commission approved Directed Share Programme (DSP). The World Bank, however, directed the offer to the family members and friends of its employees. Though they purchased 1750 shares for about $72,000 at the IPO price ($52.48), they signed a conflict of interest statement that purchasing the shares did not violate any ethics or conflict of interest policies. The programme objective was to involve employees and customers with the public offering to expand our recognition and brand. A majority of the shares sold under the DSP were allotted to our employees. [Later] The World Bank determined in June 2007 that Wipro would be ineligible to contest direct contracts from 2007-2011, Wipro said in a regulatory filing with the Bombay Stock Exchange on Monday, in line with the revised disclosure policies that mandate that the company must reveal its vendor status with the World Bank.

However, Wipro said that its cumulative revenues from the World Bank are less than a $1 million in the past 8 years. Our inability to get future business from World Bank will not adversely affect our business and results of operations. To date, Wipro's revenue from the World Bank is insignificant, it added.

According to Girish S. Paranjpe, joint-CEO of Wipro's IT business, the shares offered by the company to World Bank employees were too little to amount to an inducement. It was a goodwill gesture. We have done nothing wrong or unethical, Paranjpe said, adding that Wipro did not discuss the ban earlier as it was a World Bank policy not to discuss such investigations.

But once the bank had changed its position, Wipro thought it proper to issue a statement and clarify, Paranjpe said. I am surprised at the timing of the statement by World Bank. This is a more than an eight year old story, he added.

In light of the current developments, we decided it was better to disclose more rather than less, Wipro CFO Suresh Senapaty said, adding that he is not worried that Wipro stock plunged on the debarment news. It takes time for people to come to terms with this. Once people understand the story, the stock will be back, he said.

Let me reaffirm that Wipro was right from a legal as well as ethical standpoint. We believe what we did was right and we did it in the right manner, said Wipro chairman Azim Premji in an email to employees.

We have always prided ourselves for setting the highest standards of business ethics in our dealings with all our stakeholders. We have built a strong culture which upholds compliance in letter and spirit. The approach was no different in this instance also, Premji said.

Satyam, the World Bank said, was declared ineligible for contracts for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors.

World Bank sources also claimed Satyam has been accused of installing spy software on workstations inside the bank's Washington headquarters that resulted in theft of sensitive financial data in 2007 but the charge could never be proved.

Satyam had subsequently described the statement by the World Bank as inappropriate, and demanded an apology from the global lender but the World Bank stood its ground.

The promoters and directors of Satyam are currently being investigated for their role in $1.4 billion accounting fraud admittedly committed by founder-chairman B. Ramalinga Raju over a period of seven years.

India Inc. has also come out in support of Wipro, saying Wipro, like TCS and Infosys Technologies, has been practising the highest standards of business ethics for several years.

Wipro did nothing wrong, said D.S. Rawat, secretary general of Associated Chambers of Commerce and Industry of India (ASSOCHAM), adding that India Inc. would back the leading software firm.

ASSOCHAM has termed the World Bank's ban on Wipro as improper. There were hardly any corporate governance guidelines in 2000 that Wipro could have violated, it added.

ASSOCHAM said the Satyam case was an isolated incident which is under investigation by the Government.

Market analysts have also rallied behind Wipro, saying the outsourcer had done nothing wrong. The analysts have also criticized the World Bank for going public with the blacklist now, though it had debarred Wipro way back in 2007.

There is a blip, but people are likely to put this aside because the business impact of this is not great for Wipro, said Tejas Doshi, research head at Sushil Finance.

According to Frances Karamouzis, IT analyst at Gartner, the debarment would not affect Wipro's operations or revenues much. Wipro has done nothing wrong, as its share sales were approved by the SEC, she said.

We continue to believe that Wipro is one of the best corporates in India in terms of corporate governance. However, such disclosures increase apprehension amongst investors in the backdrop of the Satyam fraud. We believe that it would be in the best interest of Indian IT companies to be prompt in disclosing price sensitive information to investors given nervousness post the Satyam debacle, said JPMorgan Asia Pacific Equity Research in a note to its clients.

Forrester Research (FORR) analyst John McCarthy believes the Wipro news ultimately will have little effect on its international clients. The Wipro issue is eight years old - which raises the question why it took the World Bank seven years to figure it out, McCarthy said.

Suresh Surana, founder of RSM Astute Consulting Group, said the World Bank statement shows that it is not a legal disqualification of Wipro but just a ban as a vendor. From the revenue standpoint, it makes no difference to Wipro, Surana said.

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