Tata merges TCS with Tata Infotech

The Tata group has announced the merger of its two information technology-enabled services businesses. It is now going to consolidate Tata Infotech Ltd (TIL) with Tata Consultancy Services (TCS). The merged entity is supposed to be effective from the beginning of the current financial year. The shareholders of TIL will receive one equity share of TCS for every two shares held.

The face value of the share of TCS shares is Rs. 1 while TIL share has a face value of Rs 10. After the merger, the paid-up share capital of TCS will increase from Rs 40.01 crore to Rs 48.92 crore. TCS Chief Executive S Ramadorai suggested that they took advice from independent party valuers to come to this formula of merging the two entities.

The merger is expected to bring two leading IT organizations in India together. It would result in an improved efficiency of the various departments now that they would get the support from each other. Ramadorai said highlighted the fact that: “TCS has been and will remain the strongest IT brand in the country”.

The merger would give the TCS an expanded customer base and deeper penetration in key geographies. TCIL would get advantage of the experience of TCS in the fields they are already deeply involved in. An overall win win situation for the Tata and the shareholders. The merger also means that the combined entity would be the first IT company in India with sales of over Rs 10,000 crore. They would overtake Wipro, with net sales of Rs 8,160 crore in 2004-05. Infosys would be third.