News: Tatas eye stake in German IT firm

(HT 22/03/2007) Mumbai - With Corus in the bag, the Tata group is already looking at fresh pastures. Tata Consultancy Services (TCS), a Tata group company and India’s largest IT firm, is in talks to pick up a stake in German IT major T-Systems. T-Systems is a division of Deutsche Telekom.

International news agencies on Thursday quoted a German magazine as saying that the Tata group is evaluating options to acquire stake in T-Systems. Sources close to the Tata group said TCS may pick up not less than 25 per cent in the German firm. If it manages to acquire 25 per cent stake, the valuations will be close to Rs 20,000 crore ($4 billion). The company’s total turnover is about Rs 73,609 crore. T-Systems employs about 56,000 people in over 20 countries.

Sources said the Tata group’s M&A team has commenced due diligence at T-Systems’ office. A TCS spokesperson said the company does not want to comment on market speculations. “The proposed deal is beneficial for T-Systems as TCS can develop more software for the German company at reduced costs,” said an analyst in a Mumbai-based brokerage firm.

"TCS can get a huge foothold in consulting in the automotive sector since T-Systems does a lot of IT-related work for DaimlerChrysler," said the MD of a Mumbai-based software company. As a service provider, it offers the entire range of information and communication technology from a single source in a way that distinguishes it from the other businesses in its sector.