TCS ready to spend $500 mn on acquisitions

Tata Consultancy Services (TCS), the country’s largest information technology services provider, is eyeing acquisitions to expand its geographic footprint and presence in niche verticals. It is ready to spend more than $500 million (around Rs 2,250 crore) for this.

“We have enough cash on books. If we find the right strategic fit, we can invest more than $500 million for the same. We are not looking at acquisitions as a mean for new revenue growth. But these acquisitions will be for driving strategic initiatives in the company. So, any capability that we can get will be from the market point of view,” said N Chandrasekaran, chief executive officer and managing director, TCS.

“We would like to expand in geographies like Germany and look at verticals like healthcare. The size certainly does not matter.” He said Japan was also an attractive target for acquisition.

TCS made its last large acquisition in 2008. It had acquired Citigroup’s captive business process outsourcing unit, Citigroup Global Services, for $505 million.

He said, overall, it had been a good year in terms of increased customer engagements. He was positive about the client budget increasing by about two to four per cent in 2010-11.

“Provided the continuous pressure on employee attrition and increase in demand, prices might look up,” he added.

When asked about his budget wish list, Chandrasekaran said there was nothing specific. However, he said it would be good to see policy changes which will curb inflation. He said in a country like India, any policy change to accelerate infrastructure will be welcomed.

“The budgets are up based on our dialogue with customers. There is an increase in IT spend this year, compared to last year. Also, spending on discretionary budgets is on the increase. Also, we have a much better and clear visibility of the spend this year, compared to the same time last year,” he said.