TCS, Mitsubishi to form software services company

MUMBAI, India - April 23, 2014 - PRLog -- The giant IT company Tata Consultancy Services (TCS) is consolidating its operations in Japan, the world's second largest software services market, with local conglomerate Mitsubishi. Both are bringing their IT services operations under a single unit, creating a $600-million enterprise in which TCS will have a controlling interest says Sachin karpe.

TCS will hold 51 percent while Mitsubishi will hold the remaining 49 percent of the entity, which will be operational from July 2014. TCS entered Japan in 1987, paving the way for the Tata group to build a host of other businesses, including automobiles. The deal involves TCS Japan, Nippon TCS Solution Center - a 60:40 joint venture between TCS and Mitsubishi - and IT Frontier Corporation, a 100% arm of the Japanese financial services-to-foods giant, which will be folded under a single umbrella. TCS will hold 51% while Mitsubishi will hold the remaining in the combined entity. Indian players have struggled to gain a foothold in Japan. The move of TCS opens up the region favorably for the company - an additional source of revenue over the long term says Sachin Karpe.

The deal involves both equity and cash. TCS' share in the new company is in lieu of the worth of TCS Japan, its interest in Nippon TCS and a cash of $50 million. TCS has the option to increase its holding to 66% in the near future and then increase it further. Mitsubishi will be the largest client of TCS, which counts Nissan and Sony among its 60 Japanese clients. The new unit, expected to be operational from July, will boost TCS' revenues six fold in one go, increase its employees to 2,400 and ramp up its operations in the $100-billion Japanese market, which is dominated by local and Chinese outsourcing firms.

Mitsubishi will be a large strategic client for TCS, contributing about $250 million to the Japan unit says Sachin Karpe. The company will also add Mitsubishi's clients from verticals like manufacturing, hi-tech and retail. TCS has a first mover advantage right now but industry experts expect more such deals to follow. While Japanese firms have been actively scouting for deals in the Indian IT space, few Indian players have sought to return the favor. Over 1,600 TCS consultants are currently engaged in providing IT, engineering and infrastructure support and services to Japanese corporations globally. Around 30 per cent of TCS' onsite associates in Japan are locals.

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