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Tata Consultancy Services, the country’s largest software exporter, has approved the merger of its subsidiary CMC Ltd with itself, subject to regulatory and shareholder approvals.
“It makes sense to merge as CMC compliments the work done by TCS. It’s also a good time to consolidate our Indian operations,” TCS Chief Executive Officer and Managing Director N Chandrasekaran said at a press conference.
TCS is already doing “significant” amount of work with CMC, while CMC on its part is doing a lot of work in the domestic market, he said, adding that the combined firm expects to win “bigger deals”.
Following the merger, TCS will consolidate CMC’s operations in a single company with a rationalised structure, enhanced reach, greater financial strength and flexibility.
Holding 51.12% stakeTCS holds a 51.12 per cent stake in CMC, which is into engaged in the design, development and implementation of software technologies.
The company is also into IT infrastructure, training services and embedded systems.
As per the deal, CMC shareholders will get 79 equity shares of ₹1 each of TCS for every 100 equity shares of ₹10 each of CMC. The swap ratio is based on a valuation by BSR & Associates.
“It (the merger) can be done in the next six months, if we get the approvals,” Chandrasekaran said.
According to a BSE statement, the company said the appointed date for the merger is April 1, 2015.
CMC, formerly Computer Maintenance Corporation, began as a State-run IT services firm in 1975 and has had a transformational journey since then. TCS had acquired the company in 2001, following which it was rechristened CMC. Later in 2004, CMC became a fully-privatised company.
According to CMC Chief Financial Officer JK Gupta, CMC will continue to provide services as it has been doing today till the companies get approvals for the merger.
“There will be no disruptions on the client front or on the employee front,” he said, adding that CMC currently employs about 11,000 personnel.
In a separate release, CMC said Chandrasekaran has been inducted as Director and Chairman of the company.
Net profit up 13%CMC has posted a 13.43 per cent rise in net profit on a consolidated basis at ₹76 crore for the second quarter ended September 30, compared with ₹67 crore in the same period a year ago. Its total income rose to ₹619 crore from ₹563 crore in the same period a year ago.
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