After two years at second place, the Giant is up and roaring again. Riding
the back of the Tata Consultancy Services wave, the Tatas return with a bang as
India’s top IT group, and way ahead of the other Giants in the DQ listings.
The group has always been the cynosure of all eyes–for it has Asia’s largest
IT services company, TCS, in its lineup. And TCS holds the key to Tata Sons’
IT initiatives, apart from making up the backbone from another strategic
perspective–the acquisition charge. It was TCS that was the vehicle used by
the Tatas for the CMC takeover. Add to this the Rs 1,200-crore acquisition of a
stake in VSNL and the move to tighten Tata Teleservices’ hold on the cellular
market and chairman Ratan Tata’s vision of "taking India beyond being a
factory for the world" is well on its way to being ratified.
The Tata Group’s IT sector revenues (excluding communications) for fiscal
2001-02 touched Rs 5,523 crore, making it the first Indian IT company to cross
the $1-billion mark. This represents nearly 12% of the group’s overall
business–more interestingly, they represents nearly 10% of the overall
revenues of the Indian IT industry. Within the group, the sectoral contribution
of communication and information systems combined would be significantly higher.
More importantly, IT’s profit contribution is more than a third of the overall
Tata Group profits.
Clearly, the IT sector has been at the forefront as far as generation of cash
for new Tata projects is concerned. Over the next seven years, Tata Sons would
be reportedly spending Rs 10,000 crore on new investments. A significant portion
of this is expected to come from the TCS initial public offer, the schedule for
which is yet to be finalized. Another means of generating cash could be by
divesting stake in smaller companies, or in joint ventures–as has been done in
the past with Tata Liebert and Tata-IBM (the group raised Rs 402 crore from
these selloffs alone). The group has a widespread presence in the IT sector,
with most of the revenues and profits coming from IT services in both the global
and domestic markets. IT services, incidentally, are also the largest forex
earner for the group.
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Therein comes the central importance in the group for TCS–with revenues of
Rs 4,187 crore for fiscal 2001-02, TCS has been rated among the top 25 IT
consulting organizations in the world. Custodian to over 1,000 clients, the
company handles projects in 55 countries through its domain and technology
expertise. The past year has been an eventful one for the company–against the
backdrop of the global IT slowdown, TCS announced mega-deals–the $100-million
GE Medical Systems deal, the £30-million United Utilities Water Plc deal and
the $15-million Racal Instruments contract, apart from multi-year outsourcing
and offshore development contracts from Tata Chemicals, Ericsson and Bank of
America. TCS also moved fast in a tough year to spread out its geographical
reach–entering new marketplaces like Spain, Brazil, Argentina and Mexico.
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In June 2002, a subsidiary–Tata Information Technology (Shanghai)–was set
up in China to handle projects in that country.
In a bid to strengthen its foothold in the domestic market, TCS acquired a
51% controlling stake in CMC, the leading infrastructure management, networking
and maintenance company. Three new practice areas got added–government,
quality consulting and embedded/real-time systems. The year also saw two
inveterate TCS-ers getting high honors–former deputy chairman FC Kohli was
awarded the Padma Bhushan while chief executive officer S Ramadorai was named
among the ‘Top 25 Most Influential Consultants in the World’.
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Tata Infotech, the second-largest IT company in the Tata fold (apart from CMC
which is now part of TCS), however, had a rough ride in 2001-02. Revenues fell
by Rs 40 crore–slipping to Rs 483.78 crore–while net profit was Rs 20.5
crore. The company’s focus on the domestic market has been steadily increasing
over the years, but in the year under review, it recorded flat growth in this
space. The fall in overall revenues came in almost entirely due to the exports
business. For TIL, the domestic market has been relatively better, and it is the
global business that needs revving up. After its disassociation with Unisys, TIL
has taken far too long to get its global act together. While there have been
many achievements, the depressed performance of the company has overshadowed
them.
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The Rs 132-crore Tata Elxsi continues to be uniquely positioned in the
scientific computing, visual computing and design engineering space. This year,
Tata Elxsi added bio-infor—matics and media services to its capabilities and
increased its range of offerings to the digital content creation industry.
Carved out of Tata Engineering, Tata Technologies is estimated to have
notched up Rs 100 crore in revenues this year, 30% of which came from Tata
Engineering. The company is expected to launch a massive expansion drive
shortly. A development center with an investment of Rs 17 crore is also expected
to be up by August 2002, while plans to acquire a technology company are also
on.
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Tata Interactive Systems (TIS) is into designing custom e-learning solutions,
learning portals, simulation, courseware conversion, apart from edutainment
content creation. The company has executed over 500 education projects worldwide
and boasts of the world’s largest e-learning development team.
TIS is estimated to have revenues of around Rs 40 crore. The smallest group
company in terms of revenues is Nelito Systems, a joint venture based out of
Japan–the company is a systems integrator for the banking segment and is
estimated to have done Rs 25 crore worth of business. All these entities put
together make up the Rs 5,523-crore IT business for the Tatas.
Recasting the companies in the group will definitely bring about greater
synergies and efficiencies. But for now, the focus is on TCS. Its vision
statement–to be a ‘Top 10 Global Consultant by 2010’. The revenue goal: $6
billion by 2010. To achieve this, the company needs to grow at a sustained CAGR
of 27.5% till 2010.