TCS expands Prudential arm deal, eyes $1.36bn
MEGA PACT Firm to get $668 mn more business from earlier $690 mn contract
BENGALURU: Tata Consultancy Services Ltd (TCS) expects to generate $1.36 billion in revenue over 10 years from its partnership with a unit of British insurer Prudential Plc.
India’s largest information technology (IT) outsourcing company said on Tuesday that it will get $668 million in business from the Prudential unit in addition to the $690 million order it got from the UK insurer in January.
The 10-year contract TCS has with M&G Prudential, the UK and European savings and investments business of Prudential, marks the third mega deal (more than $1 billion) bagged by the Mumbai-based company since December last year.
TCS extended its partnership with television ratings measurement company Nielsen in December when it won a $2.25 billion, eight-year contract.
This was followed by a more than $2 billion, 10-year contract with a unit of Dutch insurer Aegon NV in January.
These developments imply that TCS will surely report its fastest revenue growth in three years in 2018-19. The developments also explain why the company’s market value has surpassed the $100 billion mark in April.
The ability of TCS to win large deals (the three deals assure TCS of $5.6 billion over the coming years) is one reason behind the ever-widening gap between the company and its smaller rivals. Sample this: TCS revenue in the January-March period totalled $4.97 billion, more than the annual $4.77 billion sales of India’s fifth largest IT firm, Tech Mahindra Ltd, in 2017-18.
Although TCS does not provide a growth outlook, the company is expected to exceed 10% growth in the current fiscal year.
The company reported an 8.6% growth to end with $19.1 billion in revenue last year when it
added $1.51 billion in incremental revenue.
In the current fiscal, TCS needs to add $1.91 billion in new business to report a 10% growth.
This means TCS needs to improve upon last year’s growth by $400 million, not a tough ask for Rajesh Gopinathan, who took over as chief executive in February last year after his predecessor N Chandrasekaran was named the chairman of Tata Sons Ltd, the group’s holding company.
The improved performance of TCS contrasts with the struggles at its smaller rivals, including Infosys Ltd and Wipro Ltd.
Infosys expects a 7-9% dollar revenue growth in the current year while Wipro, which does not give a yearly growth outlook, expects at best no growth in the current April-June period.
“Earlier this year, we embarked on a journey to digitally transform and provide an enhanced service for M&G Prudential customers. We are delighted to have expanded this partnership which will help accelerate the growth agenda for M&G Prudential,” said Suresh Muthuswami, who was earlier appointed as president and global head, banking, financial services and insurance platform.