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TCS, Mitsubishi to form $600 million joint venture [India Business] [Times of India](Times of India Via Acquire Media NewsEdge) MUMBAI: Top Indian IT outsourcer 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. TCS entered Japan in 1987, paving the way for the Tata group to build a host of other businesses, including automobiles, in the country. 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, the pair said in a statement. 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. "TCS will now have the scale, strong local presence and our full range of global capabilities to serve Japanese corporations effectively and accelerate our growth in Japan market," said N Chandrasekaran, CEO & MD, TCS. Its standalone revenue from Japan was not disclosed but TCS' Asia-Pacific business contributed about 7% to its $13-billion revenue in FY14. "Indian players have struggled to gain a foothold in Japan. In that regard, TCS' move opens up the region favorably for the company - an additional source of revenue over the long term," said Ashish Chopra, analyst, Motilal Oswal Securities. 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. Chandrasekaran added that 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. (c) 2014 Bennett, Coleman & Company Limited |