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TCS hikes stake in Japanese JV to 66% with $32.6 million investment

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TCS hikes stake in Japanese JV to 66% with $32.6 million investment

The increased equity is the latest in a series of investments that TCS has made in recent years to cater to the specific needs of Japanese corporations

Global IT company Tata Consultancy Services (TCS) on Monday announced a 15 per cent increase in its stake in TCS Japan, its joint venture (JV) with Mitsubishi Corporation (MC), with an investment of JPY3.5 billion ($32.6 million). The JV was established between Mitsubishi and TCS APAC in 2014.

Following the stake hike, TCS will hold 66 per cent equity in TCS Japan, up from 51 per cent, and Mitsubishi will hold 34 per cent. Both reiterated their commitment to the market and to the success of the joint venture. Current governance of operations and management will remain unchanged by the share acquisition.

“We are pleased to note that Mitsubishi Corporation is now more assured of the partnership, having experienced TCS’ services as a customer over the past five years, and that both companies continue their strong collaboration to grow the business together,” said Amur S Lakshminarayanan, president and CEO, representative director, TCS Japan.

The increased equity is the latest in a series of investments that TCS has made in recent years to cater to the specific needs of Japanese corporations. To augment the local workforce and gain scale, a Japan-centric Delivery Center (JDC), with enhanced language support and heavy localisation of global business practices, was set up in 2015 within TCS Sahyadri Park in Pune. More recently, TCS chose Tokyo to set up its first Pace Port, a creative hub to catalyse technology-led business innovation for Japanese customers.

Leveraging a unique hybrid model combining deep domain knowledge, technology expertise, and strong global and local execution, TCS Japan has achieved double-digit revenue growth in constant currency terms in each of the past two years, making it one of the fastest-growing IT services firms in its class in Japan.

In a recent JP Morgan report, analyst Viju K George had noted that TCS has maintained a very lean corporate, and has been steadily devolving executive decision-making powers to lower and lower levels. Today, TCS has over 150 operating business units on the ground, each with its own P&L. units. “TCS will continue to create such decentralisation (increasing the size of these autonomous, self-organising units) as it expands in scale.”

While TCS America’s revenue was deliberately brought down by 93 per cent in FY19 to offset rising taxes, TCS Japan grew about 6 per cent (slightly lower than their European markets). TCS Japan is among the seven subsidiaries where the parent does not have 100 per cent holding. TCS has 93.2 per cent in TCS China and 76 per cent stake in TCS Saudi Arabia.

During the recent annual general meeting, the management had reiterated the need to reduce complexity in the business model by reducing subsidiaries wherever possible.

“TCS’ enhanced stake is a reflection of our commitment to our customers and our associates in Japan, and our longer term vision for the market. As our JV continues to grow in scale and sophistication, we look forward to playing a bigger role in our customers’ transformation journeys to become Business 4.0 ready,” he said.

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