UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the Quarter ended December 31, 2005

Commission File Number 001-16139

WIPRO LIMITED

     Indicate by check mark if registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F          þ                    Form 40-F          o

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g- 3-2(b) under the Securities Exchange Act of 1934.

Yes          o                    No          þ

     If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 12g 3-2(b)

     Not applicable.

 

 

TABLE OF CONTENTS

CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Item 4. Controls and Procedures
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Default upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits
SIGNATURES
EXHIBIT INDEX
EXHIBIT 19.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

Currency of Presentation and Certain Defined Terms

In this Quarterly Report references to “U.S.” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to U.K. are to the United Kingdom. Reference to “$” or “US$” or “dollars” or “U.S. dollars” are to the legal currency of the United States, references to “£” or “Pound Sterling” are to the legal currency of the United Kingdom, references to “€”or “Euro” are to the legal currency of the European Union and references to “Rs.” or “Rupees” or “Indian rupees” are to the legal currency of India. All amounts are in Rs. or in U.S. dollars unless stated otherwise. Our financial statements are presented in Indian rupees and translated into U.S. dollars and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). References to “Indian GAAP” are to Indian Generally Accepted Accounting Principles. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year.

All references to “we”, “us”, “our”, “Wipro” or the “Company” shall mean Wipro Limited and, unless specifically indicated otherwise or the context indicates otherwise, our consolidated subsidiaries. “Wipro” is our registered trademark in the United States and India. All other trademarks or trade names used in this Quarterly Report on Form 6K are the property of the respective owners.

Except as otherwise stated in this Quarterly Report, all translations from Indian rupees to U.S. dollars are based on the noon buying rate in the City of New York on December 30, 2005, for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York which was Rs. 44.95 per $1.00. No representation is made that the Indian rupee amounts have been, could have been or could be converted into United States dollars at such a rate or any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Information contained in our website, www.wipro.com, is not part of this Quarterly Report.

Forward-Looking Statements May Prove Inaccurate

IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE SECTIONS ENTITLED “RISK FACTORS” AND “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS” AND ELSEWHERE IN THIS REPORT. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT MANAGEMENT’S ANALYSIS ONLY AS OF THE DATE HEREOF. IN ADDITION, READERS SHOULD CAREFULLY REVIEW THE OTHER INFORMATION IN THIS QUARTERLY REPORT AND IN THE COMPANY’S PERIODIC REPORTS AND OTHER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) FROM TIME TO TIME.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)

		As of December 31,												As of March 31,
		2004				2005				2005				2005
										Convenience
										translation into
										US$
		(Unaudited)				(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (Note 4)		Rs.	3,214.59			Rs.	4,279.48			$	95.21			Rs.	5,670.76
Accounts receivable, net of allowances (Note 5)			13,142.60				19,025.84				423.27				14,806.36
Costs and earnings in excess of billings on contracts in progress			2,845.40				4,240.63				94.34				2,739.65
Inventories (Note 6)			1,619.02				1,908.89				42.47				1,769.16
Investments in liquid and short-term mutual funds (Note 8)			21,605.05				31,122.97				692.39				22,957.59
Deferred income taxes			343.21				91.39				2.03				242.17
Other current assets (Note 7)			3,625.61				4,459.90				99.22				2,950.58
Total current assets			46,395.48				65,129.10				1,448.92				51,136.27
Property, plant and equipment, net (Note 9)			12,250.57				16,156.80				359.44				13,201.28
Investments in affiliates (Note 13)			744.06				1,002.23				22.3				769.24
Deferred income taxes			234.26				230.60				5.13				209.31
Purchase price pending allocation (Note 3)			—				1,929.28				42.92				—
Intangible assets, net (Note 10)			381.38				342.33				7.62				363.11
Goodwill (Note 3,10)			5,588.51				5,944.94				132.26				5,614.98
Other assets (Note 7)			662.54				1,168.09				25.99				780.92
Total assets		Rs.	66,256.80			Rs.	91,903.37			$	2,044.57			Rs.	72,075.11
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Borrowings from banks (Note 15)		Rs.	513.08			Rs.	1,054.36			$	23.46			Rs.	563.97
Convertible bonds issued by subsidiary			—				272.05				6.05
Accounts payable			3,247.65				3,168.65				70.49				3,713.22
Accrued expenses			3,740.45				5,820.81				129.5				3,882.00
Accrued employee costs			2,929.13				4,109.12				91.42				3,112.94
Advances from customers			1,242.15				1,836.61				40.86				1,279.64
Other current liabilities (Note 11)			1,976.30				4,290.71				95.46				2,135.16
Total current liabilities			13,648.76				20,552.31				457.23				14,686.93
Other liabilities			577.41				439.81				9.78				126.20
Total liabilities			14,226.17				20,992.12				467.01				14,813.13
Minority interest			518.83				—				—				533.03
Stockholders’ equity:
Equity shares at Rs.2 par value: 1,650,000,000 shares authorized; Issued and outstanding: 1,407,141,044, 1,404,241,862 and 1,420,739,099 and shares as of March 31, 2005, December 31, 2004 and 2005 (Note 16, 17)			1,404.24				2,841.48				63.21				1,407.14
Additional paid-in capital (Note 22)			12,444.73				15,023.04				334.22				13,272.57
Deferred stock compensation (Note 22)			(3,235.89	)			(2,385.79	)			(53.08	)			(3,185.14	)
Accumulated other comprehensive income			233.03				246.77				5.49				96.09
Retained earnings (Note 18)			40,665.77				55,185.83				1,227.72				45,138.37
Equity shares held by a controlled Trust: 7,893,060, 7,893,060 and 7,869,060 shares as of March 31, 2005, December 31, 2004 and 2005 (Note 22)			(0.08	)			(0.08	)			—				(0.08	)
Total stockholders’ equity			51,511.80				70,911.25				1,577.56				56,728.95
Total liabilities and stockholders’ equity		Rs.	66,256.80			Rs.	91,903.37			$	2,044.57			Rs.	72,075.11

See accompanying notes to the consolidated financial statements.

WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except share data)

		Three months ended December 31,												Nine months ended December 31,
		2004				2005				2005				2004				2005				2005
										Convenience												Convenience
										translation into												translation into
										US$												US$
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenues:
Global IT Services and Products
IT Services		Rs.	14,083.56			Rs.	19,595.02			$	435.93			Rs.	39,478.05			Rs.	52,249.00			$	1,162.38
BPO Services			1,705.82				1,933.11				43.01				4,763.97				5,585.17				124.25
India and AsiaPac IT Services and Products
Services			1,209.01				1,490.12				33.15				3,285.94				4,335.46				96.45
Products			2,031.16				2,376.45				52.87				5,607.43				6,845.27				152.29
Consumer Care and Lighting			1,231.21				1,460.73				32.5				3,367.40				4,141.75				92.14
Others			641.21				878.36				19.54				1,892.02				2,408.73				53.59
Total			20,901.97				27,733.79				616.99				58,394.81				75,565.38				1,681.10
Cost of revenues:
Global IT Services and Products
IT Services			9,029.18				12,428.88				276.5				24,644.23				33,337.69				741.66
BPO Services			1,238.36				1,402.19				31.19				3,302.21				4,264.72				94.88
India and AsiaPac IT Services and Product
Services			658.76				834.07				18.56				1,845.43				2,514.34				55.94
Products			1,777.40				2,066.29				45.97				5,026.69				6,052.37				134.65
Consumer Care and Lighting			810.83				919.18				20.45				2,160.12				2,623.45				58.36
Others			438.15				655.64				14.59				1,290.96				1,794.77				39.93
Total			13,952.68				18,306.25				407.26				38,269.64				50,587.34				1,125.41
Gross profit			6,949.29				9,427.54				209.73				20,125.17				24,978.04				555.68
Operating expenses:
Selling and marketing expenses			(1,385.82	)			(1,712.62	)			(38.10	)			(4,002.68	)			(4,952.12	)			(110.17	)
General and administrative expenses			(896.57	)			(1,406.00	)			(31.28	)			(2,689.30	)			(3,838.53	)			(85.40	)
Research and development expenses			(69.86	)			(52.49	)			(1.17	)			(201.19	)			(141.35	)			(3.14	)
Amortization of intangible assets			(22.61	)			(10.54	)			(0.23	)			(122.02	)			(35.62	)			(0.79	)
Foreign exchange gains/(losses), net			152.94				(407.39	)			(9.06	)			(287.45	)			(500.33	)			(11.13	)
Others, net			23.72				13.58				0.30				55.64				45.78				1.02
Operating income			4,751.09				5,852.08				130.19				12,878.17				15,555.87				346.07
Loss on direct issue of stock by subsidiary			(10.42	)			—				—				(206.58	)			—				—
Other income, net			178.65				366.87				8.16				593.59				874.03				19.44
Equity in earnings of affiliates (Note 13)			70.50				93.79				2.09				132.90				232.99				5.18
Income before income taxes and minority interest			4,989.82				6,312.74				140.44				13,398.08				16,662.89				370.70
Income taxes			(694.15	)			(989.27	)			(22.01	)			(1,970.91	)			(2,366.25	)			(52.64	)
Minority interest			(24.69	)			—				—				(67.02	)			(1.40	)			(0.03	)
Net income		Rs.	4,270.98			Rs.	5,323.47			$	118.43			Rs.	11,360.15			Rs.	14,295.24			$	318.03
Earnings per equity share:
Basic			3.07				3.78				0.08				8.18				10.18				0.23
Diluted			3.02				3.74				0.08				8.11				10.07				0.22
Weighted average number of equity shares used in computing earnings per equity share:
Basic			1,390,875,326				1,408,963,785				1,408,963,785				1,389,583,530				1,403,858,212				1,403,858,212
Diluted			1,413,879,800				1,424,652,106				1,424,652,106				1,399,654,328				1,419,926,002				1,419,926,002

See accompanying notes to the unaudited consolidated financial statements.

     

WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
(in millions, except share data)

										Additional												Accumulated Other								Equity Shares held by a								Total
		Equity Shares								Paid in				Deferred Stock				Comprehensive				Comprehensive				Retained				Controlled Trust								Stockholders’
		No. of Shares				Amount				Capital				Compensation				Income				Income/(loss)				Earnings				No. of Shares				Amount				Equity
Balance as of March 31, 2004			1,396,554,912			Rs.	465.52			Rs.	7,176.68			Rs.	(9.88	)						Rs.	918.64			Rs.	37,812.87				(7,887,060	)		Rs.	(0.08	)		Rs.	46,363.75
Cash dividends paid (unaudited)			—				—				—				—				—				—				(7,575.99	)			—				—				(7,575.99	)
Issuance of equity shares on exercise of options (unaudited)			7,686,950				7.46				1,866.60				—				—				—				—				—				—				1,874.06
Equity shares forfeited, net of issuance by Trust (unaudited)			—				—				—				—				—				—				—				(6,000	)			—				—
Stock split effected in the form of stock dividend (unaudited) (Note 16)			—				931.26				—				—				—				—				(931.26	)			—				—				—
Compensation related to employee stock incentive plan, net of reversals (unaudited)			—				—				3,401.45				(3,401.45	)			—				—				—				—				—				—
Amortization of compensation related to employee stock incentive plan (unaudited)			—				—				—				175.44				—				—				—				—				—				175.44
Comprehensive income
Net income (unaudited)			—				—				—				—			Rs.	11,360.15				—				11,360.15				—				—				11,360.15
Other comprehensive income / (loss)
Translation adjustments(unaudited)			—				—				—				—				19.62				—				—				—				—				—
Unrealised gain/(loss) on investment securities, net (net of tax effect) (unaudited)			—				—				—				—				27.86				—				—				—				—				—
Unrealized gain/(loss) on cashflow hedging derivatives, net (unaudited)			—				—				—				—				(733.09	)			—				—				—				—				—
Total other comprehensive income / (loss) (unaudited)			—				—				—				—				(685.61	)			(685.61	)			—				—				—				(685.61	)
Comprehensive income (unaudited)																		Rs.	10,674.54
Balance as of December 31, 2004 (unaudited)			1,404,241,862			Rs.	1,404.24			Rs.	12,444.73			Rs.	(3,235.89	)						Rs.	233.03			Rs.	40,665.77				(7,893,060	)		Rs.	(0.08	)		Rs.	51,511.80
Issuance of equity shares on exercise of options (unaudited)			2,899,182				2.90				700.17				—				—				—				—				—				—				703.07
Compensation related to employee stock incentive plan, net of reversals (unaudited)			—				—				127.67				(127.67	)			—				—				—				—				—				—
Amortization of compensation related to employee stock incentive plan (unaudited)			—				—				—				178.42				—				—				—				—				—				178.42
Comprehensive income
Net income (unaudited)			—				—				—				—			Rs.	4,472.60				—				4,472.60				—				—				4,472.60
Other comprehensive income Translation adjustments (unaudited)			—				—				—				—				10.07				—				—				—				—				—

     

										Additional												Accumulated Other								Equity Shares held by a								Total
		Equity Shares								Paid in				Deferred Stock				Comprehensive				Comprehensive				Retained				Controlled Trust								Stockholders’
		No. of Shares				Amount				Capital				Compensation				Income				Income/(loss)				Earnings				No. of Shares				Amount				Equity
Unrealized gain/(loss) on investment securities, net (net of tax effect) (unaudited)																			65.06
Unrealized gain/(loss) on cash flow hedging derivatives, net (unaudited)			—				—				—				—				(212.07	)			—				—				—				—				—
Total other comprehensive income/(loss) (unaudited)																			(136.94	)			(136.94	)			—				—				—				1,849.85
Comprehensive income (unaudited)																		Rs.	4,335.66
Balance as of March 31, 2005			1,407,141,044			Rs.	1,407.14			Rs.	13,272.57			Rs.	(3,185.14	)						Rs.	96.09			Rs.	45,138.37				(7,893,060	)		Rs.	(0.08	)		Rs.	56,728.95
Cash dividends paid (unaudited)			—				—				—				—								—				(3,997.74	)			—				—				(3,997.74	)
Issuance of equity shares on exercise of options (unaudited)			13,598,055				22.55				3,144.20				—								—				—				—				—				3,166.75
Stock split effected in the form of stock dividend (unaudited)			—				1,411.79				(1,161.75	)			—								—				(250.04	)			—				—				—
Equity shares issued by Trust, net of forfeitures (unaudited)			—				—				—				—								—				—				24,000				—				—
Reversals related to employee stock incentive plan, net of issuances (unaudited) (Note 6)			—				—				(301.32	)			272.13								—				—				—				—				(29.19	)
Amortization of compensation related to employee stock incentive plan (unaudited)			—				—				—				527.22								—				—				—				—				527.22
Income tax benefit related to employee stock incentive plan, in excess of compensation cost recognized (unaudited)			—				—				69.34				—								—				—				—				—				69.34
Comprehensive income
Net income (unaudited)			—				—				—				—			Rs.	14,295.24				—				14,295.24				—				—				14,295.24
Other comprehensive income / (loss)
Translation adjustments (unaudited)			—				—				—				—				32.50				—				—				—				—				—
Unrealised gain/(loss) on investment securities, net (net of tax effect) (unaudited)			—				—				—				—				160.20				—				—				—				—				—
Unrealized gain/(loss) on cash flow hedging derivatives, net (unaudited)			—				—				—				—				(42.02	)			—				—				—				—				—
Total other comprehensive income / (loss) (unaudited)			—				—				—				—				150.68				150.68				—				—				—				150.68
Comprehensive income (unaudited)																		Rs.	14,445.92
Balance as of December 31, 2005 (unaudited)			1,420,739,099			Rs.	2,841.48			Rs.	15,023.04			Rs.	(2,385.79	)						Rs.	246.77			Rs.	55,185.83				(7,869,060	)		Rs.	(0.08	)		Rs.	70,911.25
Balance as of December 31, 2005 (unaudited) ($)						$	63.21			$	334.22			$	(53.08	)						$	5.49			$	1,227.72							$	—			$	1,577.56

See accompanying notes to the unaudited consolidated financial statements.

WIPRO LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

		Nine months ended December 31,
		2004				2005				2005
										Convenience
										translation into
										US$
		(unaudited)				(unaudited)				(unaudited)
Cash flows from operating activities:
Net income		Rs.	11,360.15			Rs.	14,295.24			$	318.03
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of property, plant and equipment			(107.47	)			(4.48	)			(0.10	)
(Gain) on sale of liquid and short-term mutual funds			(12.37	)			(163.67	)			(3.64	)
Depreciation and amortization			1,862.92				2,291.08				50.97
Deferred tax expense/(benefit)			(152.69	)			42.09				0.94
Loss on direct issue of stock by affiliate			206.58				—				—
Amortization of deferred stock compensation			175.44				498.03				11.08
Equity in earnings of affiliates			(132.90	)			(232.99	)			(5.18	)
Minority interest			67.02				1.40				0.03
Changes in operating assets and liabilities:							—				—
Accounts receivable			(2,169.66	)			(4,073.20	)			(90.62	)
Costs and earnings in excess of billings on contracts in progress			(745.56	)			(1,500.98	)			(33.39	)
Inventories			(180.83	)			(139.73	)			(3.11	)
Other assets			521.17				(1,213.13	)			(26.99	)
Accounts payable			515.07				(559.57	)			(12.45	)
Accrued expenses and employee costs			1,991.94				2,895.16				64.41
Advances from customers			279.40				556.97				12.39
Other liabilities			929.09				1,756.93				39.09
Net cash provided by operating activities			14,407.30				14,449.15				321.45
Cash flows from investing activities:
Expenditure on property, plant and equipment			(4,925.27	)			(5,155.55	)			(114.70	)
Proceeds from sale of property, plant and equipment			298.47				108.31				2.41
Dividends received from affiliates			8.40				—				—
Purchase of investments in liquid and short-term mutual funds			(50,982.63	)			(40,924.19	)			(910.44	)
Proceeds from sale of liquid and short-term mutual funds			47,897.00				33,307.65				740.99
Purchase of intangible assets			(298.13	)			—				—
Payment for acquisitions, net of cash acquired			(597.77	)			(2,576.44	)			(57.32	)
Net cash used in investing activities			(8,599.93	)			(15,240.22	)			(339.05	)
Cash flows from financing activities:
Proceeds from issuance of equity shares			1,874.06				3,166.75				70.45
Proceeds from issuance of equity shares by a subsidiary			266.25				—				—
Proceeds from/(repayments of) short-term borrowing from banks, net			(456.25	)			230.08				5.12
Payment of cash dividends			(7,575.99	)			(3,997.74	)			(88.94	)
Net cash used in financing activities			(5,891.93	)			(600.91	)			(13.37	)
Net decrease in cash and cash equivalents during the period			(84.56	)			(1,391.98	)			(30.97	)
Effect of exchange rate changes on cash			1.99				0.70				0.02
Cash and cash equivalents at the beginning of the period			3,297.16				5,670.76				126.16
Cash and cash equivalents at the end of the period		Rs.	3,214.59			Rs.	4,279.48			$	95.21
Supplementary information:
Cash paid for interest			50.02				27.88				0.62
Cash paid for taxes			1,796.94				3,128.29				69.59

See accompanying notes to the unaudited consolidated financial statements

WIPRO LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share data and where otherwise stated)

1. Overview

     Wipro Limited (Wipro), together with its subsidiaries Wipro Inc., Wipro Holdings (Mauritius) Limited, Wipro Chandrika Limited, Wipro Travel Services Limited, Wipro Trademarks Holdings Limited, Wipro Japan KK, Wipro Infrastructure Engineering Limited (formerly known as Wipro Fluid Power Limited), Spectramind Limited, Wipro Healthcare IT Limited, Wipro Consumer Care Limited, Wipro Shanghai Limited and affiliates WeP Peripherals Limited and Wipro GE Medical Systems Limited (collectively, referred to as the Company) is a leading India based provider of IT Services and Products, including Business Process Outsourcing (BPO) services, globally. Further, Wipro has other businesses such as India and AsiaPac IT Services and Products and Consumer Care and Lighting. Wipro is headquartered in Bangalore, India.

2. Significant Accounting Policies

     The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

     Basis of preparation of financial statements. The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s annual report on Form 20-F for the year ended March 31, 2005.

     Functional currency and exchange rate translation. The functional currency of the Company and its foreign subsidiaries is predominantly the Indian rupee. For certain foreign subsidiaries, the functional currency is their local currency. The translation of the functional currency of these foreign subsidiaries into Indian rupee is performed for balance sheet accounts using the exchange rate in effect at the balance sheet date and for revenue and expense accounts using an appropriate monthly weighted-average exchange rate for the respective periods. The gains or losses resulting from such translation are reported as a separate component of stockholders’ equity.

     Foreign currency transactions are translated into the functional currency at the rates of exchange prevailing on the date of respective transactions. Monetary assets and liabilities in foreign currency are translated into functional currency at the exchange rates prevailing on the balance sheet date. The resulting exchange gains/losses are included in the statement of income.

     Convenience translation. The accompanying consolidated financial statements have been reported in Indian rupees, the national currency of India. Solely for the convenience of the readers, the financial statements as of and for the nine months ended December 31, 2005, have been translated into US dollars at the noon buying rate in New York City on December 30, 2005, for cable transfers in Indian rupees, as certified for customs purposes by the Federal Reserve Bank of New York of $1 = Rs. 44.95. No representation is made that the Indian rupee amounts have been, could have been or could be converted into United States dollars at such a rate or any other rate.

     Principles of consolidation. The consolidated financial statements include the financial statements of Wipro and all of its subsidiaries, which are more than 50% owned and controlled. All material inter-company accounts and transactions are eliminated on consolidation. The Company accounts for investments by the equity method where its investment in the voting stock gives it the ability to exercise significant influence over the investee.

     Cash equivalents. The Company considers investments in highly liquid investments with remaining maturities, at the date of purchase/investment, of three months or less to be cash equivalents.

     Revenue recognition. Revenue from services, as rendered, are recognized when persuasive evidence of an arrangement exists, the sales price is fixed or determinable and collectibility is reasonably assured. Revenues from software development services comprise revenues from time-and-material and fixed-price contracts. Revenue on time-and-material contracts is recognized as the related services are performed. Revenue from fixed-price, fixed-time frame contracts is recognized in accordance with the percentage of completion method. Guidance has been drawn from the Accounting Standards Executive Committee’s conclusion in paragraph 95 of Statement of Position (SOP) 97-2, Software Revenue Recognition, to account for revenue from fixed price arrangements for software development and related services in conformity with SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. The input (cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses on contracts-in-progress are recorded in the period in which such losses become probable based on the current contract estimates. Maintenance revenue is deferred and recognized ratably over the term of the agreement. Revenue from customer training, support and other services is recognized as the related service is performed.

     Revenue from sale of products is recognized when persuasive evidence of an arrangement exists, the product has been delivered, the sales price is fixed or determinable and collectibility is reasonably assured. Revenue from sale of products is recognized, in accordance with the sales contract, on dispatch from the factories/warehouses of the Company. Revenues from product sales are shown net of excise duty, sales tax and applicable discounts and allowances.

     The Company has elected to adopt the guidance in EITF Issue No. 00-21 for all revenue arrangements with multiple deliverables.

     Based on this guidance, the Company recognizes revenues on the delivered products or services only if:

•		The revenue recognition criteria applicable to the unit of accounting is met;
•		The delivered element has value to the customer on a standalone basis. The delivered unit will have value on a standalone basis if it is being sold separately by other vendors or the customer could resell the deliverable on a standalone basis;
•		There is objective and reliable evidence of the fair value of the undelivered item(s); and
•		If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company.

     The arrangement consideration is allocated to the units of accounting based on their fair values. The revenue recognized for the delivered items is limited to the amount that is not contingent upon the delivery or performance of the undelivered items.

     In certain cases, the application of the contingent revenue provisions of EITF Issue No. 00-21 could result in recognizing a loss on the delivered element. In such cases, the cost recognized is limited to the amount of non-contingent revenues recognized and the balance costs are recorded as an asset and are reviewed for impairment based on the estimated net cash flows to be received for future deliverables under the contract. These costs are subsequently recognized on recognition of the revenue allocable to the balance deliverables.

     Revenues from BPO Services are derived from both time-based and unit-priced contracts. Revenue is recognized as the related services are performed, in accordance with the specific terms of the contract with the customers.

     When the Company receives advance payments from customers for sale of products or provision of services, such payments are reported as advances from customers until all conditions for revenue recognition are met.

     Warranty costs. The Company accrues the estimated cost of warranties at the time when the revenue is recognized. The accruals are based on the Company’s historical experience of material usage and service delivery costs.

     Shipping and handling costs. Shipping and handling costs are included in selling and marketing expenses.

     Inventories. Inventories are stated at the lower of cost and market value. Cost is determined using the weighted-average method for all categories of inventories.

     Investment securities. The Company classifies its debt and equity securities in one of the three categories: trading, held-to-maturity or available-for-sale, at the time of purchase and re-evaluates such classifications as of each balance sheet date. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in income. Temporary unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from income and are reported as a part of other comprehensive income in stockholders’ equity until realized. Realized gains and losses from the sale of trading and available-for-sale securities are determined on a first-in-first out basis and are included in income. A decline in the fair value of any available-for-sale or held-to-maturity security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value with a charge to the income statement. Fair value for mutual fund units is based on published per unit value, which is the basis for current transactions. Non-readily marketable equity securities for which there is no readily determinable fair value are recorded at cost, subject to an impairment charge to the income statement for any other than temporary decline in value.

     Investments in affiliates. The Company’s equity in the earnings/(losses) of affiliates is included in the statement of income and the Company’s share of net assets of affiliates is included in the balance sheet.

     Shares issued by subsidiary/affiliate. The issuance of stock by a subsidiary/affiliate to third parties reduces the proportionate ownership interest in the investee. Unless the issuance of such stock is part of a broader corporate reorganization or unless realization is not assured, the Company recognizes a gain or loss, equal to the difference between the issuance price per share and the Company’s carrying amount per share. Such gain or loss is recognized in the statement of income when the transaction occurs.

     Property, plant and equipment. Property, plant and equipment are stated at cost. The Company depreciates property, plant and equipment over the estimated useful life using the straight-line method. Assets under capital lease are amortized over their estimated useful life or the lease term, as appropriate. The estimated useful lives of assets are as follows:

Buildings			30 to 60 years
Plant and machinery			2 to 20 years
Furniture, fixtures and equipment		5 years
Vehicles		4 years
Computer software		2 years

     Software for internal use is primarily acquired from third-party vendors and is in ready to use condition. Costs for acquiring this software are capitalized and subsequent costs are charged to the statement of income. The capitalized costs are amortized on a straight-line basis over the estimated useful life of the software.

     Deposits paid towards the acquisition of property, plant and equipment outstanding as of each balance sheet date and the cost of property, plant and equipment not ready for use before such date are disclosed under capital work-in-progress. The interest cost incurred for funding an asset during its construction period is capitalized based on the actual investment in the asset and the average cost of funds. The capitalized interest is included in the cost of the relevant asset and is depreciated over the estimated useful life of the asset.

     Business combinations, goodwill and intangible assets. In accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, the Company uses the purchase method of

accounting for all business combinations consummated after June 30, 2001. Intangible assets acquired in a business combination are recognized and reported apart from goodwill if they meet the criteria specified in SFAS No. 141. Any purchase price allocated to an assembled workforce is not accounted separately.

     In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, all assets and liabilities of the acquired business including goodwill are assigned to the reporting units.

     The Company does not amortize goodwill but instead tests goodwill for impairment at least annually, using a two step impairment process.

     The fair value of the reporting unit is first compared to its carrying value. The fair value of reporting units is determined using the income approach. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the implied fair value of the reporting unit’s goodwill is compared with the carrying value of the reporting unit’s goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded.

     Intangible assets acquired individually, with a group of other assets or in a business combination are carried at cost less accumulated amortization. The intangible assets are amortized over their estimated useful lives in proportion to the economic benefits consumed in each period. The estimated useful lives of the intangible assets are as follows:

Customer-related intangibles			2 to 5 years
Marketing-related intangibles			2 to 25 years
Technology-based intangibles		5 years

     Start-up costs. Cost of start-up activities including organization costs are expensed as incurred.

     Research and development. Revenue expenditure on research and development is expensed as incurred. Capital expenditure incurred on equipment and facilities that are acquired or constructed for research and development activities and having alternative future uses, is capitalized as tangible assets when acquired or constructed. Software product development costs are expensed as incurred until technological feasibility is achieved.

     Impairment or disposal of long-lived assets. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Such assets are considered to be impaired if the carrying amount of the assets is higher than the future undiscounted net cash flows expected to be generated from the assets. The impairment amount to be recognized is measured by the amount by which the carrying value of the assets exceeds its fair value.

     The Company measures long-lived assets held-for-sale, at the lower of carrying amount or fair value, less costs to sell.

     Earnings per share. In accordance with SFAS No. 128, Earnings per Share, basic earnings per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common and dilutive common equivalent shares outstanding during the period, using the treasury stock method for options and warrants, except where the results would be antidilutive.

     Income taxes. Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in

income in the period that includes the enactment date. The deferred tax asset is reduced by a valuation allowance if it is more likely than not that some portion or all of the asset will not be realized.

     The income tax provision for the interim periods is based on the best estimate of the effective tax rate expected to be applicable for the full fiscal year. Changes in interim periods to tax provisions, for changes in judgments or settlements relating to tax exposure items of earlier years, are recorded as discrete items in the interim period of change.

     Stock-based compensation. The Company uses the intrinsic value based method of APB Opinion No. 25, Accounting for Stock Issued to Employees, to account for its employee stock based compensation plans. For fixed awards that vest on a pro-rata basis, the Company recognizes compensation cost on a straight-line basis.

     The Company has adopted the pro-forma disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of SFAS No. 123.

     Had compensation cost been determined in a manner consistent with the fair value approach described in SFAS No. 123, the Company’s net income and earnings per share as reported would have been reduced to the pro-forma amounts indicated below:

		Nine months ended December 31,
		2004				2005
		((Unaudited))				(Unaudited)
Net income, as reported		Rs.	11,360.15			Rs.	14,295.24
Add: Stock-based employee compensation expense included in reported net income, net of tax effects			175.44				465.17
Less: Stock-based employee compensation expense determined under fair value based method, net of tax effects			(1,171.21	)			(938.27	)
Pro-forma net income		Rs.	10,364.38			Rs.	13,822.14
Earnings per share: Basic
As reported			8.18				10.18
Pro-forma			7.46				9.85
Earnings per share: Diluted As reported			8.12				10.07
Pro-forma			7.42				9.76

     Derivatives and hedge accounting. The Company purchases forward foreign exchange contracts/option contracts (derivatives) to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecasted cash flows denominated in certain foreign currencies. The strategy also includes purchase of series of short term forward foreign exchange contracts which are replaced with successive new contracts up to the period in which the forecasted transactions are expected to occur (roll-over hedging). The Company also designates zero-cost collars, which qualify as net purchased options, to hedge the exposure to variability in expected future foreign currency cash inflows due to exchange rate movements beyond a defined range.

     In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, the Company recognizes all derivatives as assets or liabilities measured at their fair value, regardless of the purpose or intent of holding them. In respect of derivatives designated and effective as cash flow hedges, gains or losses resulting from changes in the fair value are deferred and recorded as a component of accumulated other comprehensive income within stockholder’s equity until the hedged transaction occurs and are then recognized in the consolidated statements of income.

     The Company assesses hedge effectiveness based on overall change in fair value of derivative instrument. However, for derivatives acquired pursuant to roll over hedging strategy, the forward premium/discount points are excluded from assessing hedge effectiveness.

     Changes in fair value for derivatives not designated as hedging derivatives and ineffective portion of the hedging instruments are recognized in consolidated statements of income of each period.

     In respect of derivatives designated as hedges, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also formally assesses both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, the Company, prospectively, discontinues hedge accounting with respect to that derivative.

     Recent accounting pronouncement. In December 2004, the Financial Accounting Standard Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R), requiring companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The compensation costs arising out of such awards are required to be recognized over the period during which an employee provides service in exchange for the award.

     SFAS No. 123R is effective for fiscal years beginning after June 15, 2005. SFAS No. 123R applies to all awards granted and to awards modified, repurchased, or cancelled in the fiscal year beginning after June 15, 2005. Pursuant to the Securities and Exchange Commission Release No. 33-8568, the Company is required to adopt SFAS No. 123R from April 1, 2006. The cumulative effect of initially applying this Statement, if any, is recognized on the effective date.

     Companies that used the fair-value-based method for either recognition or disclosure under Statement 123 can apply SFAS No. 123R using a modified version of prospective application. Under this method, compensation cost is recognized for periods after the effective date, for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of those awards calculated under Statement 123.

     For periods before the required effective date, companies can also elect to apply a modified version of retrospective application, under which financial statements for prior years are adjusted on a basis consistent with the pro-forma disclosures required for those periods by Statement 123.

     If the Company had amortized the stock-based employee compensation expense determined under the fair value method, the Company’s net income as reported for the nine months ended December 31, 2004 and 2005 would have been reduced by Rs. 995.77 and Rs. 473.10, respectively as set out in the pro-forma disclosure above. On the effective date of adoption of SFAS 123R, the Company would have additional unamortized deferred stock compensation cost of Rs. 171.33 under Statement 123. This will be amortized through the income statement post the adoption of SFAS No. 123R.

     In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”) which replaces Accounting Principles Board (“APB”) Opinions No. 20 “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements—An Amendment of APB Opinion No. 28.” SFAS No. 154 applies to all voluntary changes in accounting principle and provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company is currently evaluating the impact of SFAS No. 154 on its consolidated results of operations and financial condition.

3. ACQUISITIONS

Acquisition of ownership interest in a subsidiary

     As of March 31, 2005, the Company held approximately 93% of the outstanding equity shares of Wipro BPO Solutions Limited (“Wipro BPO”). The remaining shares were held by the employee shareholders.

     During the nine months ended December 31, 2005, the Company acquired the balance 7% of the equity shares from the employee shareholders at fair value for an aggregate consideration of Rs. 852.00. The step-acquisition resulted in goodwill of Rs. 304.14.

mPower Software Services Inc. and subsidiaries

     In December 2005, the Company acquired 100% equity of mPower Software Services Inc. and subsidiaries (MPower) including the minority shareholding held by MasterCard International in MPact India, a joint venture between MasterCard International and mPower Inc, for an aggregate cash consideration of Rs.1,274.57. mPower Software Services Inc. is a US based Company engaged in providing IT services in the payments space.

     As a part of this acquisition, Wipro aims to provide MasterCard a wide range of services including application development and maintenance, infrastructure services, package implementation, BPO and testing. Wipro believes that through this acquisition, it will be able to expand its domain expertise in the payments space and increase the addressable market for IT services.

     The total purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:

Description		Fair value
Net tangible assets		Rs.	185.39
Purchase price pending allocation			1,089.18
Total		Rs.	1,274.57

     The purchase consideration has been allocated on a preliminary basis based on management’s estimates. The Company is in the process of making a final determination of the carrying value of assets and liabilities, which may result in changes in the carrying value of net assets recorded. Finalization of the purchase price allocation, which is expected to be completed by April 2006, may result in certain adjustments to the above allocation.

BVPENTE Beteiligungsverwaltung GmbH and subsidiaries

     On December 28, 2005, the Company acquired 100% equity of BVPENTE Beteiligungsverwaltung GmbH and subsidiaries (New Logic). New Logic is a European system-on-chip design company. The consideration includes cash payment of Rs. 1,156.54 and an earn-out of Euro 26.00 million to be determined and paid in the future based on financial targets being achieved over a 3 year period. The Company has determined that a portion of this earn-out, up to a maximum of Euro 2.50 million that is linked to the continuing employment of one of the selling shareholders. The balance earn-out will be recorded as additional purchase price when the contingency is resolved.

     Wipro believes that through this acquisition, it has acquired strong domain expertise in semiconductor Intellectual Property (IP) cores and complete system-on-chip solutions with digital, analog mixed signal and Radio Frequency (RF) design services. The acquisition also enables the Company to access over 20 customers in the product engineering space.

     The purchase price paid has been preliminarily allocated to the acquired assets and liabilities as follows:

Description		Fair value
Net tangible assets		Rs.	316.44
Purchase price pending allocation			840.10
Total		Rs.	1,156.54

     The purchase consideration has been allocated on a preliminary basis based on management’s estimates. The Company is in the process of making a final determination of the carrying value of assets and liabilities

which may result in changes in the carrying value of net assets recorded. Finalization of the purchase price allocation, which is expected to be completed by April 2006, may result in certain adjustments to the above allocation.

4. Cash and Cash Equivalents

     Cash and cash equivalents as of December 31, 2004 and 2005 comprise of cash, cash on deposit with banks and highly liquid investments.

5. Accounts Receivable

     Accounts receivable as of December 31, 2004, and 2005 are stated net of allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts based on present and prospective financial condition of its customers and aging of the accounts receivable. Accounts receivable are generally not collateralized. The activity in the allowance for doubtful accounts receivable is given below:

										Year ended
		Nine months ended December 31,								March 31,
										2005
		2004				2005				2005
		((Unaudited))				(Unaudited)
Balance at the beginning of the period		Rs.	720.02			Rs.	846.54			Rs.	720.02
Additional provision during the period, net of collections			168.61				328.47				151.89
Bad debts charged to provision			—				(4.97	)			(25.37	)
Balance at the end of the period		Rs.	868.63			Rs.	1,170.04			Rs.	846.54

6. Inventories

     Inventories consist of the following:

		As of December 31,								As of March 31,
		2004				2005				2005
		(Unaudited)				(Unaudited)
Stores and spare parts		Rs.	37.16			Rs.	56.64			Rs.	38.41
Raw materials and components			669.18				824.23				829.77
Work-in-process			259.16				322.91				212.51
Finished goods			653.52				705.11				688.47
		Rs.	1,619.02			Rs.	1,908.89			Rs.	1,769.16

7. Other Assets

     Other assets consist of the following:

		As of December 31,								As of March 31,
		2004				2005				2005
		(Unaudited)				(Unaudited)
Prepaid expenses		Rs.	779.72			Rs.	1,002.49			Rs.	790.13
Prepaid rentals for leasehold land			62.20				458.89				61.67
Due from officers and employees			919.80				701.94				603.44
Advances to suppliers			265.11				432.78				227.10
Balances with statutory authorities			20.73				108.62				20.20
Deposits			843.18				978.61				888.62
Advance income taxes			226.38				919.96				166.76
Derivative asset			775.09				96.35				379.69
Others			395.94				928.35				593.89
			4,288.15				5,627.99				3,731.50
Less: Current assets			(3,625.61	)			(4,459.90	)			(2,950.58	)
		Rs.	662.54			Rs.	1,168.09			Rs.	780.92

8. Investment Securities

     Investment securities consist of the following:

As of December 31, 2004

As of December 31, 2005

(Unaudited)

(Unaudited)

Gross Unrealized

Gross Unrealized

Carrying Value

Holding Gains

Fair Value

Carrying Value

Holding Gains

Fair Value

Available-for-sale:

Investments in liquid and short-term mutual funds

Rs.

21,562.58

Rs.

42.47

Rs.

21,605.05

Rs.

30,707.26

Rs.

415.71

Rs.

31,122.97

As of March 31, 2005

Gross Unrealized

Carrying Value

Holding Gains

Fair Value

Available-for-sale:

Investments in liquid and short-term mutual funds

Rs.

22,794.72

Rs.

162.87

Rs.

22,957.59