TCS-CMC merger

Tata Consultancy Services (TCS), the flagship software unit of the Tata Group, is merging the listed CMC with itself as part of the group's renewed efforts to consolidate its IT businesses under a single entity. This will be the outsourcing giant's biggest merger deal after it amalgamated Tata Infotech with itself in 2005, the first sign of the group's attempt to combine its software services businesses housed under different entities. The other IT companies within the group are the listed Tata Elxsi, in which the group holds 45%, and the closely held Tata Technologies.
The Tata Group acquired CMC through the government's divestment programme in 2001, when TCS was a division of Tata Sons, the main holding company of the conglomerate. TCS became a standalone company just before it went public in 2004 and at that time the group's holding in CMC was transferred to TCS. Since then the two companies, although in similar businesses, have remained as separate entities. At present, CMC has revenues of over Rs.2,000 crore and employs about 6,000 people. Over the years, there have been whispers of CMC merger but TCS dismissed them as market speculation. On Thursday , the $13-billion IT major announced it is consolidating CMC's operations in a single company with a swap ratio of 79 TCS shares for 100 CMC shares. TCS holds 51% in CMC, which has a market capitalization of Rs.6,628 crore and the merger, subject to regulatory approvals, will see Tata Sons' stake in TCS go down marginally to 73.4% from 73.9% now . The valuation for the deal was done by BSR & Associates, a unit of KPMG.
N Chandrasekaran, CEO & MD of TCS, said TCS does significant work with CMC and the merger will boost its domestic presence. In terms of numbers there won't be any change as CMC's earnings are reflected in TCS' consolidated figures.The new role for R Ramanan, CEO & MD, CMC, will be known in the coming months.
TCS' September quarter dollar revenue grew sequentially by 6.4% to $3.93 billion and 17.7% compared to the year-ago quarter driven by strong volume growth. In rupee terms, its revenue grew 7.7% sequentially.

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