Info-tech

Profitability may continue to elude TCS in China

Adith Charlie Mumbai | Updated on March 12, 2018 Published on July 22, 2014




Tata Consultancy Services’ China operations may continue to be loss making in the near term as it struggles to scale up in a traditionally conservative market for IT services.

However, TCS does not have any plans to wind up operations and is experimenting with novel ways to make the business profitable, said Rajesh Gopinathan, Chief Financial Officer, TCS.

“While TCS is distributed across six locations in China, we are yet to find the sweet spot. We need to ramp up with customers and at different locations, without which profitability will be a challenge,” Gopinathan said.

Three units in China

TCS has three units in China — Tata Information Technology Shanghai Company Ltd (TITSC), TCS (China) and TCS Financial Solutions Beijing Co.

According to the TCS annual report for 2013-14, TCS China and TITSC recorded net losses of ₹18.7 crore and ₹0.53 crore respectively. TCS Financial Solutions Beijing reported a marginal profit of ₹1.23 crore. TCS operates delivery centres in Beijing, Hangzhou, Tianjin, Shanghai, Shenzhen, and Dalian

Key factors

Indian companies eye China for the ability to service operations of multinationals operating in that market; use China as a delivery base for Japan; and tap the growing demand from Chinese firms for IT services.

TCS, which has presence in China since 2002, has been leveraging its units from all three perspectives, albeit with limited success. In fact, the centre in Shenzhen was established with an eye on servicing clients from Hong Kong. However, the projects have not ramped up as expected, said Gopinathan.

“China continues to be a challenging market for us as the market IT outsourcing is still evolving. Most local companies either have in-house IT teams or engage with shared services firms. We are trying to experiment with our positioning and delivery strategy in the market,” said Gopinathan.

Published on July 22, 2014

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