TCS inks pact for software JV with Chinese firms

Tata Consultancy Services (TCS) will invest $14.7 million to float a joint venture initiative in China. The IT major has signed a shareholders' agreement with three Chinese firms and software major Microsoft Corporation. TCS has also signed a $33 million customer relationship management (CRM) deal with Saudi Telecom Company, which is to be executed over an 18-month period.

"This venture is a significant business opportunity, which is China-centric from a resource perspective, has global appeal in terms of customer offerings and is capable of creating a Chinese domestic business of increasing scale," S Ramadorai, CEO & MD of TCS, said.

The Chinese firms in the JV are Beijing Zhongguancun Software Park Development Company, Uniware Company and Tianjin Huayuan Software Area Construction and Development Company. The JV will set up China's first industrial scale software company, which will be located at Beijing's Zhongguancn Software Park, he said.

TCS will be conducting its Chinese foray through its subsidiary, TCS Asia Pacific, which will commence operations by September this year. TCS, which already has a presence in that country, will merge it existing operations (mainly sales) with the JV at a later stage.

The company will make an initial investment of $12.6 million, which will be scaled upto $14.7 million over a period of time, Ramadorai said.

The company will also increase its headcount to 5,000 in the next four year period, from the present 500.

At present, TCS will hold 72.22% in the venture, while the Chinese firms holds a 27.28% stake. Later, Microsoft will be offered a 10% stake by the partners, after which TCS' stake will fall to 65% and that of Chinese partners by 25%.

Meanwhile, TCS has also signed a $35 million CRM installation deal with Saudi Telecom Company that is to be executed over over an 18-month period. Further details of the deal were not divulged.