Bloomberg News

Tata Consultancy Seeks Purchases in Germany, France, Japan, U.S.

September 26, 2011

Sept. 26 (Bloomberg) -- Tata Consultancy Services Ltd. is weighing acquisitions in France, Germany, Japan and the U.S. as Asia’s biggest computer services provider by market value sees further rising demand despite global economic woes.

“Acquisitions are necessary because all the capabilities cannot be built organically,” N. Chandrasekaran, chief executive officer of Mumbai-based Tata Consultancy, said in an interview in London. For example, the company’s life and pensions business couldn’t have been built “organically, there’s no way, because it’s a highly regulated environment.”

Tata Consultancy and rivals such as Accenture Plc have benefitted from rising corporate spending on computer services and consulting. Despite the current global uncertainty, the company sees good demand from retail, manufacturing and consumer product companies, Chandrasekaran said. There’s also a “lot of compliance work” in the financial services industry, he said.

Tata Consultancy, with a workforce of almost 200,000 and clients such as Microsoft Corp., Deutsche Bank AG and Sony Corp., said in July that fiscal first-quarter sales surged 34 percent to $2.4 billion while net income gained 31 percent to $532 million.

Chandrasekaran declined to comment on a Sept. 7 report by Financial Times Deutschland that Tata Consultancy may learn the outcome of a bid for a majority share in the information technology arm of Deutsche Lufthansa AG after a Sept. 29 board meeting of the German airline.

Asked about the current global economic problems, Chandrasekaran said he’s neither “extra confident nor pessimistic.” There are “opportunities” for Tata Consultancy and “many companies are profitable” and “doing well.”

U.S. Healthcare Services

JPMorgan Chase & Co. analyst Viju K George says Tata Consultancy is probably interested in expanding U.S. healthcare IT services and adding offerings for the manufacturing and automobile industries in Western Europe.

“In the U.S., healthcare is where the company really doesn’t have penetration and it’ll want to build capabilities,” George said in an interview. “It’s seeking opportunities in France and Germany to try and consolidate in Western Europe.”

Worldwide spending on information technology services is forecast to rise 6.6 percent to $846 billion this year, after growing 3.1 percent last year, Stamford, Connecticut-based researcher Gartner Inc. said in June.

Tata Consultancy doesn’t have any deadlines for potential acquisitions and is under no pressure, according to the CEO. “We look at companies for their market presence, sometimes for domain knowledge, sometimes for technology platform.”

Visa Costs

In the U.S., Tata Consultancy is tackling increased cost and delay of business visas with more thorough planning in staff deployment, Chandrasekaran said. The company got the majority of its sales from Northern American clients in the year ended March 31.

Along with competitors Infosys Ltd. and Wipro Ltd., Tata Consultancy needs U.S. visas as some customers ask for on-site staff to provide technical support. Rejection of visa applications by the U.S. government had definitely increased, the company said in July.

“ We are spending excessively more time on that now than before,” Chandrasekaran said. “It may result in getting visas, it may result in hiring people locally, it may result in using tools like video conferencing a lot more than before.”

Tata Consultancy, which is India’s largest software exporter, is not “happy” about the decline of the Indian rupee, the CEO said, adding that “I would rather have a stable currency than having to deal with the volatility” to “really focus on the business.”

--Editors: Simon Thiel, Kenneth Wong.

To contact the reporter on this story: Katie Linsell in London at Klinsell@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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