Source: www.business-standard.com

As India collectively regains its lost confidence, Indian firms storm the bastions of the West, buying out western and Far Eastern firms, setting up of offices and centres, while doing business on an equal footing. And, none more so than Indian IT services provider - Tata Consultancy Services (TCS), who has made it a habit to better its performance every alternate year. It was in 2003 that TCS became the first Indian IT firm to cross the $1-billion revenue mark, in 2005 it went on to cross the $2-billion mark, and now in 2007, it has topped the $4 billion mark.

Who and where are the bulk of TCS’ clients located? Well, North America continues to account for over 50% of its revenues (52.3% in FY07), next comes UK at 20.3%, followed by India and continental Europe at 9% and 8.2%, respectively. As revenues from TCS North America cross the $2 billion mark, those of TCS Europe are scaling the $1-billion mark.

As for TCS verticals, its banking, finance and insurance (BFSI) segment continue to dominate the company’s services portfolio, contributing 42.2% of the revenues in FY07. Telecom comes next at 17%, while manufacturing stands at 15.3%.

New service lines such as infrastructure, global consulting, business process outsourcing (BPO) and assurance services now comprise 18% of TCS revenues compared with 10% in 2005-06.

Of 12-deals over $50-million (three of them over $100-million) were closed in 2006-07, of which five deals involved full services play, with customers using more than one of the services offered by the company.

Of its total revenues in 2006-07, TCS’ top clients contributed 6.6%, with the it’s top-five contributing 18.5%, while its top-10 clients accounted for 28.4% of the total revenues.

A look at TCS’ client roster and one finds it has 297 $1-million clients, 119 $5-million clients, 75 $10-million clients, 39 $20-million clients and 14 $50-million clients. Of its active 920 clients, 218 clients were additions made in the last financial year. The exemplary performance of this Indian IT services provider ensures that 96.8% of its revenue is from repeat business clients, with its offshore business accounting for 40.5% of the company revenue, while onsite stands at 55.7%, with the remaining coming from global delivery centres.

On the employee count, its headcount continues to grow along with its business and revenue intake, showing a gross addition of 32,462 (net 22,750) employees during the 2006-07 financial year and 8,613 (net 5,827) in Q4. The end of the fourth quarter saw TCS’ total employee strength standing at 89,419 professionals. And, at 11.3% TCS maintains the lowest attrition rate in the industry, however, last year, the figure stood lower at 10.6.

TCS also counts foreign recruits amongst it’s employees, with overseas nationals from 67-countries accounting for 9.6% of its total employee base, and it has around 26% of its employees belonging to the fairer sex i.e. women.

In a bid to further strengthen its global market position and communicate its strengths to customers, TCS in Q4 launched the first-ever global branding and marketing campaign by any Indian corporation called ‘Experience Certainty’.

As do, Infosys, Wipro, et al, TCS does India proud, while certainly sending a strong message around the globe: ‘The Indians are coming!’ Most certainly they are, as Indian Tigers go on the prowl! Not to make the West shiver with blood-curdling roars, only to take over the world, albeit in an ethical way! Let’s hear it for the Indian Tigers! Louder, none deserves it more than they!

Source:www.Hindu.com

It could be just vaulting ambition. Or it may be announcing to the world that it has arrived. Whatever it is, India Inc is setting a scorching pace in acquiring businesses abroad.

Grant Thornton, a global consulting firm, in its annual publication of corporate deals, has reported a 46 per cent rise for Indian entities in the merger and acquisition (M&A) deal values for 2005 over the previous year and has, in the process, touched a figure of $16 billion in such acquisitions. The trend has only accelerated in the first quarter of 2006. So where is Corporate India putting its money and why? Here is a brief look.

Trend snapshot

From the M&A activity of the past 15 months, the themes that emerge are:

Sector trends: Telecom clearly dominated the M&A landscape in terms of value. Since Idea’s acquisition of Escotel in June 2004, telecom deal-making went into switch-off mode. A couple of high-profile deals — Hutch-Aircel and Idea’s stake sale to Singapore Telemedia/Telekom Malaysia — were called off on account of regulatory hurdles. All this changed in July 2005, when Hutchison Essar decided to buy out BPL Mobile, and opened the floodgates to cellular consolidation (see infographic).

Some of the other sectors where there was an increase in the number of deals and deal value were pharma and software/IT-enabled services. In software, the number of deals soared, but the value remained subdued because companies continued to swear by the string of pearls (or several small deals) strategy for growth. In pharma, the pace picked up only in the latest, January to March, quarter, with Dr Reddy’s and Ranbaxy setting the tone with some big acquisitions.

Given the broad-based economic upturn, sectors such as steel, automotive, FMCG and chemicals were not too far behind in the overall tally.

Disclosure and valuation: The disclosure in most deals, including some high-profile ones, has been sketchy. Since no standardised format has been set for disclosure requirements for M&As, companies have managed to get away revealing the minimum. Investment decisions, in such cases, become a blind call on the management’s ability to deliver.

For instance, Tata Chemicals, in its acquisition of Brunner Mond Group, UK, not only provided the broad details of the deal, valuation and synergies/growth prospects in its existing line of business, it also held a conference call with analysts to provide additional information. Contrast this to Suzlon’s high-value $565-million acquisition of Hansen Transmissions, the European wind turbine gearbox manufacturer. In this case, except for the deal value and revenues, not much information was available on margins, growth potential or fair value to reach any concrete conclusion about the prospects from this deal.

In the post-acquisition phase, companies should be mandated to provide separate financials for the acquired entity for at least two to three quarters. Otherwise, drawing inferences of contribution from organic and inorganic business becomes quite difficult, especially in big deals.

Gazing into the future

A closer examination of the M&A deals put through over the past 15 months reveals some key trends for the future, such as:

Dominance of cross-border deals: One key underlying theme is the sharp acceleration in the number of inbound (foreign companies buying out Indian companies) and outbound (Indian companies buying out overseas companies) deals over the past year. According to a recent CII-Boston Consulting Group study, in 2005, there was a three-fold rise in overseas buyouts by Indian companies to $4.5 billion from $1.7 billion in 2004.

The factors poised to provide thrust over the next couple of years will be:

Competitive pressures: High growth sectors such as pharma, IT or auto ancillaries are poised at an inflection point. The pharma sector, in particular, has witnessed an unprecedented rise in cross-border deal activity.

As Mr Malvinder Mohan Singh, CEO and Managing Director, Ranbaxy, said in a recent interview to a business magazine: ” … M&A is happening, primarily driven by the fact that the market dynamics have changed. You have Teva and Sandoz at No. 1 and No. 2 at one end of the spectrum (in the generics space) and there is a huge gap between No. 3 and No. 10 company. So the game has now changed. You have to align your strategy with the market realities.”

Both Ranbaxy Labs and Dr Reddy’s have reacted with a flurry of acquisitions in the latest January-March quarter. Over the past ten days, Ranbaxy Laboratories has put through three acquisitions across Europe — of Belgium-based Ethimed, Terapia in Romania and unbranded generic business of GlaxoSmithkline in Italy.

This matches Dr Reddy’s acquisition of German-based Betapharm for $570 million earlier this year, for which Ranbaxy was also in the fray. However, the valuation of these bold acquisitions of Terapia and Betapharm has been pricey. In software services too, if EDS, the world’s second largest IT services company, succeeds in acquiring 52 per cent equity in MphasiS, it will change the scale equations and lead to further churn in the mid-cap software space. With IBM, EDS and Accenture jostling with TCS, Infosys and Wipro, scale and size are likely to play a bigger role in sector consolidation.

In auto ancillaries, Bharat Forge, Sundram Fasteners or Amtek Auto, which have dabbled in the global arena through acquisitions, will start thinking big at some stage. The buckling ancillary industry in the US on account of the financial troubles facing GM or Ford is likely to widen the acquisition opportunities for India-based players.

Rapidly consolidating sectors: In mature sectors such as steel, metals, auto, chemicals, textiles, oil and gas, Indian players are stepping onto global turf with confidence. Various Tata group companies have been at the forefront of the globalisation initiative.

Tata Steel, for instance, recently acquired equity stake in Millennium Steel which, together with its earlier acquisition of NatSteel, Singapore’s steel business, is expected to strengthen its position in South-East Asia. In metals, Hindalco and Sterlite Industries have already gone global, with Sterlite’s parent, Vedanta Resources, listed in London. Hindalco is now planning to list its wholly-owned subsidiary Aditya Birla Minerals on the Australian stock exchange.

In oil and gas, ONGC Videsh has been actively scouting for global oilfields for the past few years. As the execution record improves for Corporate India, deal sizes will only get bigger.

Inbound deals and rise of private equity: Swiss cement giant Holcim’s deal with ACC and Gujarat Ambuja is the kind of inbound deal that may be replicated in other sectors. Vodafone’s entry into India through a 10 per cent effective stake in Bharti Tele-Ventures may usher in a similar trend in telecom.

Retailing, textiles or construction may be other sectors where a similar trend will unfold in the coming years.

Clearly, the rise of the high-profile private equity firms such as Blackstone, Carlyle, Temasek, Warburg Pincus, Temasek or WestBridge Capital is bound to hasten this trend. Private equity with relatively small stakes has the ability to transform under-performing businesses with medium-term workable targets.

Though M&As present substantial upside to shareholder returns, they will have to brace for downsides as well. With the sharp rise in global and domestic M&As, the probability of deals coming unstuck, such as the merger of VisualSoft-AppLabs, Matrix-Strides Acrolab or Federal Bank-Lord Krishna Bank, are that much greater — just as much as the challenges of integration can affect financial performance of companies involved in acquisitions.