India's largest IT services exporter Tata Consultancy Services has signed a pact with Mitsubishi Corp to create an IT services unit, which it says will help scale up its Japanese presence.
Tata Consultancy Services Japan Ltd, Nippon TCS Solution Center Ltd and IT Frontier Corporation - a wholly owned unit of Mitsubishi - will be merged together to form a single entity.
TCS will hold 51 per cent while Mitsubishi will hold the remaining 49 per cent of the entity.
TCS CEO and Managing Director N Chandrasekaran in a press briefing said he expects the deal closure to happen by this June end. Mr Chandrasekaran added that TCS has the option of increasing the stake in the entity, initially to 66 per cent and higher thereafter.
He says that TCS Japan has annual revenues of nearly $100 million while IT Frontier, the Mitsubishi entity, around $500 million. If the deal closes by June end, the revenues could flow to the joint entity by July this year.
Mr Chandrasekaran says Japan is the second-biggest IT services market in the world and the Mitsubishi deal will help TCS expand its footprint there. TCS gets access to IT Frontier's Japanese MNC clients and the venture will help the Indian software major gain necessary scale there, he added.
The transaction will add 2,400 professionals from IT Frontier Corporation, he said.
Explaining the structure of the deal, Mr Chandrasekaran said TCS Japan will be folded into the new entity and TCS would also pay $50 million in cash to Mitsubishi. This deal values the combined entity at $300 million, he added.
The new entity would be called TCS Japan.
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