Tata Infotech, TCS to merge

Tata group officials had earlier said before a US listing, the group will have to re-examine whether it needs to merge other group IT companies like Tata Elxsi and Tata Infotech and possibly merge them with TCS.

TCS shares closed up at Rs 1,248.20 on Friday compared with Thursday’s closing of Rs 1,225 in a bullish stock market. Tata Infotech, on the other hand, closed down at Rs 610.70 as against Thursday’s close of Rs 616.95.

The announcement came after the stock markets closed for business on Friday.

The merger ratio was arrived at by BSR & Co and Bansi S. Mehta and Co Post-merger, the paid up capital of TCS will increase from Rs 48.01 crore to Rs 48.93 crore.

The consolidated income of TCS for fiscal 2005 was Rs 9,824 crore with a PAT of Rs 1,976 crore while Tata Infotech recorded an income of Rs 966.6 crore with a PAT of Rs 79 crore.

Tata Sons holds 80.6 per cent stake in TCS and 74.18 per cent in TIL. Post, merger, Tata Sons’ stake will be 80.52 per cent.

Addressing a news conference here today, TCS Managing Director and CEO S. Ramadorai said: ‘‘The merger is expected to lead to more efficient operations particularly in the marketing services.’’

Meanwhile, TCS said its net profit grew 33.02 per cent for the first quarter ended June 2005 at Rs 630.62.

Total income during the reporting quarter rose by 24.56 per cent to Rs 2,721.02. Earlier this week, Infosys had reported a 36.97 per cent jump in its net profit at Rs 531.92 crore for the first quarter.

Ramadorai is trying to boost sales in Europe and the Asia-Pacific as orders slowed in the preceding quarter from customers such as General Electric Co and the UK’s National Health Service. General Electric is TCS’ biggest customer, accounting for about 14 per cent of overseas sales last year.

TCS added 68 clients and 2,690 employees in the quarter.

The company had said on April 19 that its fourth-quarter earnings were reduced due to delayed orders from the National Health Service. The company won an £896-million ($1.6 billion), nine-year order as part of an alliance with partners, including Fujitsu Ltd.

Shares of Infosys Technologies had their biggest drop in about three months on July 12 after the company forecast lower annual profit than analysts expected. First-quarter profit also fell short of analysts’ estimates.

In the quarter ended March 31, TCS posted an unexpected drop in profit as it boosted staff bonuses and a weaker dollar curbed US sales growth. The company, which had set aside Rs 102 crore for employee incentives, said on April 19 it will increase salaries, without elaborating.