TCS to make India's biggest buy abroad

MUMBAI: Over the last five years, heavyweights in the Indian IT industry spoke of big ticket acquisitions. But until now, nothing of consequence came through except a few small and medium deals.

The wait may finally be over. Sources close to Tata Consultancy Services told TOI that the company is planning to buy UK-based Vertex for anything in the region of $800 million-$1 billion. If the deal comes through, it could be the largest ever by an Indian business house.

Vertex is the outsourcing division of United Utilities, which is listed on both the London and New York stock exchanges. A TCS spokesperson declined to comment. ‘‘As a policy, TCS does not comment on market speculation.’’

Why does United Utilities, a 2.38 billion pound firm, want to offload Vertex? Those in the know say that it perceives Vertex — with interests in back office functions like customer services, procurement and accounting — as a non-core business.

For TCS, acquisition of Vertex will help in two ways. It helps TCS derisk its business by reducing dependencies on revenues from North America, from where it currently gets almost 60% of its revenues. Also, it consolidates its position as a strong services provider in the region.

The acquisition also fits in with TCS’ stated ambition of breaking into the Top 10 software services companies in the world by 2010. Its CEO S Ramadorai has stated often that the company would hike revenues through acquisitions. Merrill Lynch has been appointed as investment bankers to the deal.

Vertex has about 9,000 employees across UK, Ireland, Switzerland, US, Canada and India. Vertex reported a turnover of £405 million in 2005-06 and a profit of £21 million. Energy and utility segment contribute 53% to its turnover, while the public sector contributes to 28%. Very recently, the company won a £40 million contract from Deutsche Bank’s mortgage division.

In India, Vertex established its operations in 2002 and has two 750-seat centres in Gurgaon and employs over 1,800 people. TCS already has an existing relationship with United Utilities — the latter has signed a multi-year IT maintenance contract.