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TCS-CMC MERGER: Gunning for the Government Market

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VoicenData Bureau
New Update

Recently, the government has divested 51 percent stake in CMC to Tata Sons

for Rs 152 crore. It seems CMC, is the first listed company which the government

has divested in its disinvestment drive.

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"CMC has a great deal of competency", says Ratan Tata, chairman,

Tata Group. It is this competency which urged Tata Sons to buy CMC even though

Tata Group has Tata Infotech, which directly competes with CMC in network

integration as well as the training market. Though Tata Infotech and CMC compete

in vertical markets of finance and banking, CMC has an edge over it, as it has

the domain expertise in embedded systems, security, railways and ports. CMC also

has an advantage, as around 50 percent of its revenue comes from public sector

and defense units where most of the private companies have to struggle hard to

make their mark. Tata can leverage on this opportunity, as CMC will open up new

avenues for the company in the public sector arena.

With a strong focus in financial software, TCS, with the buying of CMC, has

the capability to provide a complete solution to financial companies, as 30

percent of CMC’s revenue comes from the banking and financial sector. This

will help TCS to increase its market share in this sector.

Though TCS might have to live with an extra baggage of the public sector and

its large base of employees, it would not be easy to restructure the

organization as Ratan Tata feels that the baggage is with the system and not

with the people. So it will depend on Tata how fast does it puts the system in

place, so that it can reap the benefits which will help in building up of a

world-class competitive workforce in the domestic and international market, with

the coming up of CMC under its fold.

Pravin Prashant

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