Tuesday, 14 October 2008

Motilal Oswal maintains 'buy' on TCS for Rs 547

Motilal Oswal Securities has maintained 'buy' on Tata Consultancy Services for a target price of Rs 547. The brokerage believes that the C

itigroup Global Services deal offers TCS long term revenue visibility with an opportunity to enhance margins and build platformbased services for small and mid-sized banks, offering much needed non-linearity to its BPO business. Maintain Buy.

TCS recently announced the acquisition of Citi's stake (96%) in Citigroup Global Services, the India based captive BPO arm of Citibank for an all cash consideration of $505 million including goodwill of $350 million. The agreement includes a contract worth $2.5 billion (take or pay basis) with TCS for providing IT services to Citi over 9.5 years.

The deal is expected to make TCS a strategic vendor for Citi. This will enable additional volumes from Citigroup as well as from any acquired companies in case of a vendor consolidation exercise. Citibank is currently a $150 million plus account for TCS and will increase to $450 million by FY10 post-acquisition.

Source: EconomicTimes

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