Eyeing $500m revenues from Japan in 3-5 years: TCS

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Eyeing $500m revenues from Japan in 3-5 years: TCS

By means of its joint venture with Mitsubishi Corporation, TCS aims to accelerate revenues from Japan to USD 500 million within three-five years.

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By means of its joint venture with Mitsubishi Corporation, TCS aims to accelerate revenues from Japan to USD 500 million within three-five years, says managing director and chief executive N Chandrasekaran. "We have no revenue sharing agreement as of yet, but with this JV and establishing relationships we have, we hope to scale up our revenue growth at a much higher pace than the company's current average," he said in an exclusive interview to CNBC-TV18.

TCS, one of the leading Indian IT firms, today announced that it had entered into a partnership with Mitsubishi to offer a wide range of IT services in Japan. "With Mitsubishi's brand reputation and the local know how, we think we will be able to address the Japanese market and the customers in a significant way," said Chandrasekaran.

TCS holds majority stake in the JV with 60% and Mitsubishi holds the remaining 40%. The initial investment is likely to be close to USD 5 million, but Chandrasekaran says that if more is needed they will not hesitate to bring it to the table.

Below is an edited transcript of his interview with Krithika Saxena. Also watch the accompanying video.

Q: Why the need for creating a joint venture to go ahead with this particular agreement with Mitsubishi?

A: Japan is a very large IT services market. In fact it is the second largest IT services market and we have been there for quite some time, but this market has its unique characteristics. So we have been actually mentioning that we will be making some strategic moves in this market and are evaluating different options.

We got an excellent opportunity to form this partnership with Mitsubishi. We think by combining our strengths, which is TCS' core capability in terms of IT services, the global delivery model , the best practices, processes, tools and skill sets, and Mitsubishi's brand reputation and the local know how relationships, we think we will be able to address the Japanese market and the customers in a significant way.

Q: Give me a sense about the revenue sharing agreement that you have with Mitsubishi currently and what exactly will they bring onto the table in terms of investment, in terms of the kind of employees that will be hired?

A: This joint venture is nearshore delivery center in Japan, which is 60% owned by TCS and 40% by Mitsubishi. In terms of Mitsubishi's role in the joint venture, we have seeded people and they have also seeded people both in sales and management. Mitsubishi themselves is a potential client and also there are a number of Japanese companies which we will be effectively able to address.

Q: As a part of the deal, is there an agreement wherein Mitsubishi will be giving in some amount of IT work to TCS or is that an understanding outside of the agreement with the company?

A: It is not a contractual agreement, but we have a good relationship with them. We are already doing some projects with some of the companies in the group and it is something that we have to develop as we go. But apart from Mitsubishi, I think there is also a larger potential in the market, so we hope to enjoy our customer relationship with Mitsubishi as well as other companies in Japan.

Q: What's the kind of revenues that you are expecting to get from this agreement and can you give me a sense as to when will this flow into the balance sheet? Could we expect this by next quarter or would it take couple of quarters to finally flow in?

A: There is no direct revenue commitment at this point, but what I would like to say is that our revenues in Japan today is less that USD 100 million. I think with the focus we have, the relationships that we are establishing and this partnership with Mitsubishi, we hope to accelerate our revenue growth certainly at a much higher pace than the company average and hopefully we scale it to USD 500 million in the next four-five years.

Does TCS have any acquisiton plans in Japan? Read on to find out..