TCS in race for Lufthansa IT subsidiary

IT services major Tata Consultancy Services is in the lead in the race for acquisition of the IT subsidiary of the German airline Lufthansa which is looking to divest 51 per cent stake.

According to a report in a German magazine, IBM too was in the fray. Lufthansa Systems which has customers including British Airways, offers IT solutions for companies across a range of sectors including aviation sector, media and healthcare.

The bulk of its customers though are from the aviation industry. The company posted revenues of around $850 million in 2010 which have been falling over the last three years and after going through profitability problems last year is in the process of restructuring and cost-cutting.

The Germany-headquartered company has offices across 16 other countries and has a workforce 3,000 strong. The company is into IT services solutions for Lufthansa group companies as also for external customers. The magazine reports that the talks are nearing finalisation.

"The decision will fall between the two remaining interested parties , the American IT giant IBM and Indian conglomerate Tatas. The Asians have, according to informed sources, better chances of winning the contract," the report said.
Though it is not known how much TCS would be willing to pay for the acquisition analysts say the company could fund it with internal cash.

According to analysts an acquisition like this would be challenging for TCS to turn around as Lufthansa Systems worked on extremely low profitability and to increase profitability, radical changes would be required. They say there were many more attractive acquisition options for Indian companies.

In addition to increased revenues, the acquisition is seen to  give TCS access to newer markets, new domain skills and additional clients.