TCS bags $1.2 bn Nielsen deal, largest for an IT co

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TCS   has bagged a USD 1.2 billion 10-year deal from Nielsen Company.This deal comes three days after TCS posted its smallest profit growth in seven quarter.This 10-year USD 1.2 billion deal will see TCS offer IT services management, finance and HR payroll management services, and KPO services to Nielsen. TCS will under this deal also take over Nielsen's KPO centre in Baroda, which is USD 350 million.

Financials of the deal: (As per CNBC-TV18 analysis)

The revenue from this deal will start kicking in immediately, from the third quarter onwards. And TCS has also said that it has not promised any upfront savings or make any payments unlike the other big deal, the Tech Mahindra USD 1 billion that we saw, where Tech Mahindra had to pay some money to British Telecom.

TCS in the past has shied away from large margin dilutive deals, it has typically gone for USD 100 million deals. TCS says that such a large deal is not margin dilutive. It is in fact saying that it is between 20-25%, which is the normal margin for all other deals. It has also said that for the transformation in processes that it will offer Nielsen, it has the option to go for result based pricing, rather than time and material. That result based pricing will help in the scenario of rising rupee and higher wage inflation.

TCS said that this deal will not have any discretionary spending. So, the USD 1.2 billion revenue is fixed.

Excerpts from the press conference:

S Ramadorai , CEO & MD, TCS said, " What we are planning to announce is a very important milestone for the Indian IT industry and for TCS. As always we have said TCS does the pioneering role of the industry leading the change and we are about to announce an assignment, which we have bagged, an engagement that we have bagged which further raises the bar for the Indian IT industry and to TCS itself.

Tata Consultancy Services has been chosen as a strategic partner to provide full services for the Nielsen Company on a global basis.It's a full services play for Nielsen Company on a global basis. It's a 10-years deal, which is valued at USD 1.2 billion. It's a very strategic deal for the company and a benchmark for the industry itself.

It's the largest deal for the Indian IT industry and it illustrates our strategic level of involvement with the client and the customers and we will be bringing in all the competencies of TCS on a global basis to service this customer over a 10-year period. We are extremely proud of this engagement. We think we really worked at it as a team. We are very proud to make this announcement and share this glory with you."

N Chandrasekaran , COO at TCS said, "As Ram articulated it's a very strategic deal and the largest to be bagged by the Indian IT industry. It has multiple components. Again validation of TCS's strategy clearly because if you really you at the nature of this deal it fully recomposes both the full services and the global network delivery model. TCS would be completely responsible for all the IT operations application systems and maintenance support as well as new development for the Neilson Company. Second, TCS will offer a full range of business process outsourcing services across service lines in F&A, accounts payable, accounts receivables building, general accounting and HRO services in terms of work planning, in terms of payments and also in terms of global reporting and a variety of other services in terms of business processing. It also has a KPO component where we will be providing analytics reporting and reference data management. Also from a KPO point of view this will position TCS to be the one of the largest players in the KPO industry."                   

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