Tatas May Weigh Cmc Merger After Tcs Float

The Tatas will consider merging CMC with Tata Consultancy Services (TCS) after the initial public offering of TCS.

R Ramanan, deputy managing director and chief operating officer, CMC, said "Valuations of both the entities involved would be more market-driven, and hence comparable, which is a pre-requisite to any merger."

A TCS spokesperson said, "Since a reverse merger is not on the cards at the moment and CMC being listed, the issue of a formal merger can only be taken up after TCS' public issue."

Talks of a formal merger have been gaining ground since integration between the two companies has begun at the operational level.

A working group has been appointed by TCS to evaluate synergies to facilitate a joint front at the customer level. The integration is also aimed at avoiding duplication of operations.

The employees of CMC will also benefit as their salaries, being lower than that at TCS, will possibly see a significant increase. On the impact of the wage bill on CMC's bottomline, Ramanan said despite the inevitable increase, revenues and profitability would grow as TCS will exploit CMC's expertise.

CMC's subsidiary in the US, Baton Rouge International, will now work closely with the Tata software major to expand CMC's offerings overseas.

"It is one of the best strategic moves as certain unique capabilities and assets of CMC is largely unknown. These would now be marketed by TCS to other countries covering a much wider market," said Ramanan.