Swiss buy may not add to TCS earnings: Analysts
Tata Consultancy Services' proposed acquisition of Switzerland based TKS-Teknosoft is not likely to have any major impact on its earnings, analysts believe.
By PTI |
NEW DELHI: Tata Consultancy Services' proposed acquisition of Switzerland based TKS-Teknosoft is likely to expand the domestic IT major's banking software portfolio, but would not have any major impact on its earnings, analysts believe.
The company's largest software exporter has reached an agreement to acquire 75 per cent stake in the Swiss firm for about 80 million dollars (over Rs 360 crore), while it plans to acquire the remaining 25 per cent stake over a period of time.
Global financial services major Citigroup's India based IT sector analyst Surendra Goyal said that the deal is reasonably valued and the integration process should be smooth as the two companies have been working together.
However, the acquisition is likely to have "little impact" on TCS' earnings with revenue and net profit contribution of about 2 per cent and 1 per cent respectively, Goyal wrote in a research note.
The acquisition would, however, further expand TCS' product portfolio, particularly in the banking and financial services IT space after the company's FNS acquisition in Australia last year, he said.
TKS has 115 employees working primarily in product engineering and sales, while it had recorded revenue of 57 million dollars and net profit of 6.6 million dollars in 2005.
The two companies have been working in joint promotion of offshore services to clients in Switzerland and France, while TKS also holds marketing and distribution rights for TCS's wholesale banking product Quartz in the European region.
TKS has partnered with TCS in Quartz implementation for several European financial institutions including SocGen and Skandia Bank.
Goyal said that TCS is well positioned to benefit from the growing demand for offshore IT services.
TCS' margins in its international IT services business are likely to move down over the next few years, he added.
However, the decline is likely to be relatively modest, as the potential positive leverage from better onsite-offshore mix, higher fresher hiring, and improved utilization with strong demand outlook is liely to to offset the margin pressure from wage inflation, Citigroup said.
The company's largest software exporter has reached an agreement to acquire 75 per cent stake in the Swiss firm for about 80 million dollars (over Rs 360 crore), while it plans to acquire the remaining 25 per cent stake over a period of time.
Global financial services major Citigroup's India based IT sector analyst Surendra Goyal said that the deal is reasonably valued and the integration process should be smooth as the two companies have been working together.
However, the acquisition is likely to have "little impact" on TCS' earnings with revenue and net profit contribution of about 2 per cent and 1 per cent respectively, Goyal wrote in a research note.
The acquisition would, however, further expand TCS' product portfolio, particularly in the banking and financial services IT space after the company's FNS acquisition in Australia last year, he said.
TKS has 115 employees working primarily in product engineering and sales, while it had recorded revenue of 57 million dollars and net profit of 6.6 million dollars in 2005.
ADVERTISEMENT
The two companies have been working in joint promotion of offshore services to clients in Switzerland and France, while TKS also holds marketing and distribution rights for TCS's wholesale banking product Quartz in the European region.
TKS has partnered with TCS in Quartz implementation for several European financial institutions including SocGen and Skandia Bank.
Goyal said that TCS is well positioned to benefit from the growing demand for offshore IT services.
TCS' margins in its international IT services business are likely to move down over the next few years, he added.
ADVERTISEMENT
However, the decline is likely to be relatively modest, as the potential positive leverage from better onsite-offshore mix, higher fresher hiring, and improved utilization with strong demand outlook is liely to to offset the margin pressure from wage inflation, Citigroup said.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
