Tata Consultancy Services will have to settle for less revenue than previously estimated from its proposed joint venture with a unit of Japan’s Mitsubishi Corporation.
In April, TCS had announced its intent to merge two of its units in Japan with IT Frontier Corp (ITF), a $500-million subsidiary of Tokyo-based Mitsubishi. After the deal was concluded, the Indian company estimated it would add $375 million in incremental revenue to its topline.
The penny dropsHowever, N Chandrasekaran, Chief Executive Officer and Managing Director, said: “Incremental revenues from the joint venture may be less as the yen has moved significantly against the dollar. Moreover, we now have significant knowledge of all of ITF’s existing contracts.”
The company is in the process of working out the actual revenue that will accrue to TCS, Chandrasekaran said, without disclosing details. Recently, the Competition Commission of India cleared the proposed joint venture.
The new firm, to be christened TCS Japan, will help the Tata group company build scale and acquire new clients in that country. Before the merger, TCS’ Japan revenues amounted to $100 million. The Japanese IT services market is worth $100 billion but accounts for less than 2 per cent of India’s software exports. None of the home-bred IT firms had crossed the $150-million revenue threshold in Japan, analysts said.
Separately, TCS said that its wholly-owned subsidiary, WTI Advanced Technology Ltd will merge with itself.
TCS, which announced its first-quarter earnings on Thursday, said it is chasing eight large deals across sectors.
“We are seeing client spends in three major areas, namely push towards simplification, digital and governance,” said Chandrasekaran.
The company ended the quarter with a headcount of 305,431, on a consolidated basis.
Employee utilisation was at an all-time high of 85.3 per cent, excluding trainees.