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Tatas
plan to consolidate IT firms: Ratan
Business Standard —
October 3, 2002
The Tata group is planning on
consolidating its information technology companies.
This is part of the group’s plan
to clean up the investment holding structure in the
information technology (IT) and telecommunications businesses.
"In the IT area, we today
have one significant company. We will probably do something
to consolidate Tata Consultancy Services (TCS) and our
other activities, maybe in a few months. The issue is
whether we do it before an initial public offering (IPO)
or after. That’s a decision we need to take but you
will eventually see a cleaner IT structure," group
chairman Ratan Tata told Business Standard in
an interview last week.
But the group has not set itself
a deadline for this. "We are debating just now
whether the chicken or the egg comes first," he
said.
The Tata group has five IT companies:
Tata Infotech, CMC, Tata Technologies, Tata Elxsi and
Tata Telecom (a joint venture with the US-based Avaya
Inc), apart from TCS.
Other group companies like Nelco
and Tata Steel, of course, have large IT divisions.
Several of these IT companies
specialise in similar domains and have occasionally
ended up bidding against one another for the same clients,
leading to a duplication of effort.
About two years ago, the group's
IT companies started the process of consulting one another
when they went out to pitch for large orders.
Also, there was some amount of
collaboration between the companies as each had built
up expertise in specific areas, and some had common
directors.
Tata Group sources said the Tata
Strategic Management Group, the group's strategic planning
arm, had already begun helping the Group Executive Office,
which oversees all restructuring activities, on the
consolidation exercise.
They added it was unlikely that
the group would have one consolidated infotech behemoth,
but was more likely to have one flagship in the form
of TCS and perhaps one or two more niche software companies.
If the Tatas eventually decide
to merge all the main IT companies, the new entity will
be an IT powerhouse with a turnover of over Rs 6,250
crore and a net profit of over Rs 1,250 crore.
That will make it the fourth
largest group company after Tata Engineering, Tata Steel
and Videsh Sanchar Nigam Ltd (VSNL), and the second
largest in terms of net profit after VSNL.
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