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TCS announces over $1-billion capex plans news
02 July 2008

Ratan TataMumbai: Despite a slowdown in exports, Tata Consultancy Services, India's largest software exporter, is going ahead with capex plans of over a billion dollars this fiscal.

TCS chairman Ratan Tata told shareholders at the company's 40th annual meeting here on Tuesday, "This year we plan to invest Rs1,467 crore in equipment and another Rs3,000 crore in land and facilities.'' He said that the investment would be done by Tata Realty on the behalf of TCS.

The company has declared a final dividend of Rs 5 per share which along with the interim dividends, works out to Rs 14 per share for 2007-08 against Rs13 per share in the previous year. As on March 31, 2008, the company had 1.11 lakh employees and the lowest attrition rate in the industry at 12.6 per cent as also the highest retention rate.

According to Tata, North America, which accounted for 40 per cent of the global IT industry and about 50 per cent of the company's business, was seeing margin pressures with the sub-prime crisis and the oil and commodity price escalation. He said to mitigate its risks TCS had increased diversification by increasing activities geographically. It has also enlarged the basket of offerings and was focused on enlarging global presence by strengthening global development centres.

Tata said TCS needed to differentiate itself by creating deeper domain knowledge, retain talent, expand its portfolio of products and services, leverage its network of global network delivery centres, and provide end-to-end solutions he said.

Tata said if the rupee appreciated by one per cent against the US dollar it impacted the margins of TCS by 35 basis points. The company has also used various types of foreign currency forward and options contracts to hedge the risks associated with fluctuations in currency.

Tata said, ''The banking, financial services and insurance (BFSI) sectors are also cutting down operations and costs which is a challenge for the company. He added that IT contracts, outsourcing and off-shoring momentum will continue and will help organisations become cost-efficient.

The company, which is expanding its SEZs to avail of tax benefits, sees tax rates rising by three percentage points when the current STPI scheme ends in 2010, from about 9-10 per cent at present.

TCS, ranked No 11 according to revenue among global IT firms, would be among the top 10 IT companies globally by the turn of the century said Tata. The company plans to increase visibility and will be spending close to $11 million (about Rs 47 crore) in its branding initiatives-Experience Certainty. Of this 10 per cent will be spent in India.

Asked of a possible merger between TCS with Tata Communications, Tata replied in the negative and also ruled out any overseas listing. This was since regulations linked to overseas listing would be a burden for a company having the bulk of its operations in India.

The company is on its way to expanding capacity in Chennai and also setting up other big centres in India. TCS' Chennai centre at Siruseri employs 3,000 people and by the end of August the company plans to further add 3,000 people and reach its full capacity of 22,000 by 2010.

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TCS announces over $1-billion capex plans