World Bank bars deals with two more Indian firms

January 12, 2009

, MUMBAI, January 12 – Two Indian companies have been barred from dealing with the World Bank over allegations of improper payments, the Bank said, in the latest revelations to hit the country\’s IT sector.

The companies involved are India\’s third-largest software firm, Wipro Technologies, and a subsidiary of technology outfit Megasoft India, the global financial body said in a statement on its website Sunday.

Wipro is accused of "providing improper benefits to (World) Bank staff" while Megasoft is said to have been involved in "a joint venture with Bank staff while also conducting business with the Bank."

In response, Wipro said the ban would not adversely affect its business as its revenues from the World Bank were "insignificant."

The sanction related to its listing in 2000, when it issued American depositary shares to family members and friends of World Bank employees, the company told the Mumbai stock exchange.

"They purchased 1,750 shares for 72,000 dollars and signed a statement that their purchase did not violate any ethics or conflict of interest policies of their company," it added.

The shares were offered through a "commonly utilised" programme approved by the US regulator.

Despite the denial of any conflict of interest or wrongdoing, the market reacted badly to the announcement, with Wipro shares falling 23.3 rupees or 9.3 percent to close at 227.35 on India\’s benchmark 30-share Sensex index.

For its part, Megasoft said there would be "no material effect on us due to the debarment," managing director and chief executive G.V. Kumar said in a statement.

The Hyderabad-based technology firm, which has over 100 clients worldwide, has operations in Britain, Germany and Singapore.

"When the World Bank sought details on our China centre in 2007, we told them we had discontinued the operations. We were debarred from setting up a joint venture with one of the bank\’s former employees," Kumar said.

The bans came as India\’s IT sector reeled from revelations of a massive false accounting scandal at the country\’s fourth-largest software exporter, Satyam Computers, which has seen its chairman arrested.

"We decided to disclose these names, as after the whole Satyam fiasco, transparency relating to global firms would benefit," a World Bank spokesman in New Delhi told AFP by telephone.

In December, the World Bank barred Satyam from doing business with it for eight years over "improper benefits" paid to World Bank staff.

"Satyam also failed to maintain documentation to support fees charged for its subcontractors," it added.

Both Wipro and Megasoft were barred for four years. The spokesman did not elaborate on the exact nature of the allegations.

The World Bank also said that, in future, it would publicise the names of all companies which it bars from corporate procurement, besides those debarred from bank-finance projects.

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