Swiss buy to have little impact on TCS earnings

Tata Consultancy Services' proposed acquisition of Switzerland based TKS-Teknosoft is likely to expand the domestic IT major's banking software portfolio, but would not have any major impact on its earnings, analysts believe.

The company's largest software exporter has reached an agreement to acquire 75 per cent stake in the Swiss firm for about $80 million (over Rs 360 crore), while it plans to acquire the remaining 25 per cent stake over a period of time. Global financial services major Citigroup's India based IT sector analyst Surendra Goyal said that the deal is reasonably valued and the integration process should be smooth as the two companies have been working together.

However, the acquisition is likely to have "little impact" on TCS' earnings with revenue and net profit contribution of about 2 per cent and 1 per cent respectively, Goyal wrote in a research note.

The acquisition would, however, further expand TCS' product portfolio, particularly in the banking and financial services IT space after the company's FNS acquisition in Australia last year, he said.

TKS has 115 employees working primarily in product engineering and sales, while it had recorded revenue of $57 million and net profit of $6.6 million in 2005.

The two companies have been working in joint promotion of offshore services to clients in Switzerland and France, while TKS also holds marketing and distribution rights for TCS's wholesale banking product Quartz in the European region.