TCS gets investment grade, BBB rating from S&P

Tata Consultancy Services (TCS), a leading IT services, business solutions and outsourcing organization, announced that Standard & Poor's Ratings Services had assigned the company a corporate credit rating of 'BBB' with a positive outlook.

"The rating on TCS reflects the company's conservative financial policy and profile, its superior and improving cost efficiency, and improving business and customer diversity," said Standard & Poor's credit analyst Wee Lee Cheng.

TCS had strong liquidity, with cash and bank deposits of Rs 12.3 billion, or about 9.4% of total assets at March 31, 2007. In addition, the company has investments in mutual funds, equity, and debt instruments of Rs 12.7 billion. Standard & Poor's expects TCS' liquidity to remain strong and more than sufficient to cover its short-term debt.

"Although the rating on TCS is above that on India (BBB-/Stable/A-3), it is constrained at the current level as a large proportion of the company's operations, which are based in India, remain affected by the country's economic and social conditions," Mr. Cheng noted. "The rating on TCS is likely to be raised if there is significant diversity in geographic, customer, industry, or product services offerings while maintaining operating margins above 25%-30% with modest financial risk profile and high liquidity position.

"The investment grade rating of BBB, which is higher than India's country rating, highlights the financial robustness of our business model and operating strengths of TCS," said S. Mahalingam, Chief Financial Officer and Executive Director. "The S&P rating also reflects our conservative financial policy that restricts the use of debt and ensures adequate liquidity. This rating is the highest issued for any company in India."