TCS to merge subsidiary CMC with itself

Tata Consultancy Services (TCS) will merge its subsidiary CMC Ltd with itself, a move that will enable the combined entity to jointly bid for bigger deals. Both the companies' boards approved the merger, which is subject to regulatory and shareholder approvals.

''TCS is already doing significant amount of work with CMC. CMC is doing a lot of work in the domestic market, and it makes sense to merge as CMC compliments the work done by TCS,'' TCS Chief Executive Officer and Managing Director N Chandrasekaran said.

The merger will enable the combined firm win ''bigger deals'', he added.

Computer Maintenance Corporation, which later changed its name to CMC began as a state-run IT services firm in 1975. TCS had acquired the company in 2001, following the government's decision to divest the company, and later in 2004, it became a fully-privatised company. The two companies – diverse in their businesses – had remained as two different entities, complimenting each other.

Following the merger, TCS will consolidate CMC's operations in a single company with a rationalised structure, enhanced reach, greater financial strength and flexibility.

CMC yesterday announced consolidated operating revenue of Rs616.69 crore in quarter ending September 30, 2014.

TCS holds a 51.12-per cent stake in CMC. According to the agreement, CMC shareholders will get 79 shares of Re1 each of TCS for every 100 shares of Rs10 each of CMC. The swap ratio is based on a valuation by BSR & Associates.

The companies expect the merger to be completed in the next months, provided they get the approvals.

TCS will also absorb all the CMC employees, N Chandrasekaran said. CMC has over 11,000 employees.