TCS signs pact with Mitsubishi to merge its Japan operations

TCS signs pact with Mitsubishi to merge its Japan operations

TCS is one of the largest Indian IT services exporters in the country. It has achieved yet another landmark in its progress as one of the leading IT groups in the world. TCS has signed a pact with Mitsubishi in Japan to merge its Japan operations with them. TCS Japan will now merge with Nippon TCS Solution Centre and IT Frontier Corporation, a wholly owned unit of Mitsubishi to be a single corporate entity.

TCS will have 51% holding rights while 49% of the entity will be held by Mitsubishi. This company will be operational from July 2014. YCS Japan Limited and ITF along with Nippon TCS Solution will now be collaborating in this merger. The merged entity will have a strong IT services unit. It will have over 2400 associates in Japan. Revenue of over $600 million per annum will be possessed by this merged entity. TCS will now be able to provide services to a number of leading Japanese companies.

Tata Consultancy Services specializes in IT, consulting and business solutions. It is one of the most well established IT software companies in India. This definitive agreement with Mitsubishi Corporation is sure to boost its profits further. Mitsubishi is one of the largest integrated business companies in Japan. It also has great brand value in the world.

TCS has indicated its strong commitment to the Japanese market through this agreement. The strong local presence of this new merged entity will establish a greater presence for the TATA group in the Asian market. As the brand value of Mitsubishi is strong in global markets as well, this can impact the status of TCS on a worldwide scale.

The collaboration has the capacity to accelerate the growth of the TATA group in the Japanese market. The partnership between the two companies will capitalize on the individual strengths and capabilities of both the corporate groups. This transaction would be of great value to any IT services company. The talented workforce and amazing capabilities of ITF will have a vast range of benefits for the TCS Japan operations.

TCS will merge its Japan unit with Tokyo’s Mitsubishi Corporation. It is one of the largest software service providers in Asia. Market reactions to this agreement have been positive as well. Shares of TCS have experienced a surge in recent times. Software services will also receive a boost from this agreement. Shares of the company have jumped by as much as 1.10% on the BSE as a result of this agreement.

The new merged entity will be valued at $300 million. TCS will pay $50 million to Mitsubishi for this merger. This deal gives TCS the ability to gain the desired size and scale for capturing a king’s share of the market. It will also boost the merged entity’s fortunes. The merged company’s revenue of $600 million will comprise $100 million provided by TCS Japan and $500 million by ITF. Its huge number of associates also point to its potential for rapid growth. Prior to this merger, TCS had approximately 1000 people in Japan for its working operations.

If TCS was looking to establish a local connect in Japan and Asian markets, this is one of the best ways to accomplish this. Japan’s markets have been tough to break into. This is because this nation has a host of companies which have advanced technology and strong local connect. It is also the second largest IT market in the world. Any Indian firm that can tap into such a rapidly growing market will rake in millions as revenue.

China and Japan have always been very competitive markets for Indian IT services providers. At present, the Japanese IT market is valued at over $110 billion. Less than 2% contribution of revenue from Japanese market to the Indian IT industry points to the under-utilization of this market for India’s IT companies. TCS may be aiming to bridge the gap through its ambitious merger.

This new entity will also enable TCS to access clients in banking, financial and insurance as well as manufacturing and retail industry. There are abundant opportunities for client mining and off shoring following this merger. Japan is a very critical market for any Indian IT services provider that wants to forge ahead. TCS has always attracted top talent because of its stellar reputation. The IT software services giant has just achieved another important milestone through this merger.