TCS sees short-term credit crunch impact
SOURCE: Reuters
DATE: May 29th, 2008
MOHIT SOAPBOX:
41% of business for TCS comes from financial services. I wonder if TCS is willing to make large acquisitions to grow in organically. TCS has been through a couple of management restructuring not different from some of it’s peers.
ARTICLE
India’s top software services exporter, Tata Consultancy Services Ltd (TCS), expects a short-term impact on its business from the global credit crunch, a top company official said on Wednesday.
A.S. Lakshminarayananan, country manager for UK and Ireland told Reuters at the sidelines of a business summit, that the company had not yet felt any impact, however.
“It’s coming. I think it’s bound to come because people are cautious,” Lakshminarayananan said. “To me it seems a lot of talking down happening. There is a cautious approach,” he said.
TCS, along with rivals such as Infosys Technologies Ltd and Wipro Technologies Ltd, has won large outsourcing deals from overseas clients looking to cut costs.
The financial services industry accounted for about 41 percent of TCS’s worldwide revenues in the fiscal year 2007, while the UK accounted for about a fifth of global revenues.
With many banks announcing huge asset writedowns and losses, software companies could potentially experience delays in fresh orders, specially from financial clients.
“In the short run it’s going to be an issue; people are unsettled, management changes are happening … That will have a short-term impact,” he added.
TCS employs about 4,000 people in Britain, and Lakshminarayananan said the headcount was expected to grow despite the short-term uncertainties
“But once the dust settles, companies are going to invest for revenue growth and look at ways to take costs out,” he said.
TCS counts Lloyds TSB Group, Morgan Stanley and French insurer AXA SA among its clients.
“There are some good contracts that we have won recently, and those are ramping up,” he added.
Earlier this week, TCS announced a five-year $100 million deal with privately held European chipmaker NXP Semiconductors.
“Even companies that are in a healthy state are worried because of the uncertainty,” he said.
TCS shares gained 4.5 percent to 1,009.70 rupees on Wednesday, outpacing a 1.5 percent rise in the benchmark Indian share index. The shares are down 6.8 percent in 2008.
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