Tata Consultancy targets Macau casinos

Indian firm in talks to offer IT services as it pursues Greater China expansion

Tata Consultancy Services, India's largest computer services provider, says it may provide information technology services to casinos in Macau as the company seeks to expand across the Greater China region.

The company, which in December received an US$8 million order to set up a billing system for Companhia de Telecomunicaes de Macau (CTM), the largest telecommunications firm in the territory, last month opened its first sales office in Macau.

'We are now talking to some casinos and may provide services to them very soon,' said Tata chief executive and managing director S. Ramadori. 'We will help these casinos to improve their management and security.'

Tata is targeting Macau after the former Portuguese enclave overtook Las Vegas to become the world's biggest gambling city with total revenue of US$6.95 billion last year.

Mr Ramadori declined to disclose which casinos Tata was talking to but said the projects would definitely help boost the firm's sales in China.

The Mumbai company, which competes with world leader IBM and Indian rival Infosys Technologies in the IT services market, said last year it would increase its China team to 5,000 employees within five years from about 800 at present.

Tata added 22,750 employees worldwide in its last financial year for a total of almost 90,000 workers.

Mr Ramadori said 95 per cent of Tata's mainland staff would be local people, though their average salary would be 50 per cent to 60 per cent higher than their Indian peers.

Macau's gambling industry recorded 45 per cent year-on-year revenue growth to US$2.3 billion in the three months to March as the enclave, the only place in China where casino gambling is allowed, benefits from an influx of mainland tourists.

The city, which added six new casinos in the year to March for a total of 25 properties, nearly doubled the number of gaming tables and slot machines during the period. The industry growth is generating demand for related IT services.

Hong Kong-listed Automated System Holdings, whose sales grew 17 per cent year on year to US$114 million for the nine months to December, had said it was providing IT services to Macau's casinos and hotels. Net profit rose 53 per cent to US$3.8 million in the period.

Automated System said it would boost its sales of IT services in Macau, Taiwan and the mainland to 50 per cent of the total from 10 per cent. The rest would be from Hong Kong.

Tata, set up in 1968 as part of conglomerate Tata Sons, serves businesses in Hong Kong including financial institutions such as the stock exchange and logistics companies such as Hong Kong Aircraft Engineering Co.

The company, which has its Asia-Pacific headquarters in Singapore, began exploring the mainland market in 2002, targeting customers from the financial sector.

'It is the time for us to expand in the mainland as the local economy is growing so fast,' said Mr Ramadori said.

In June last year, Tata set up TCS China with Beijing Zhongguancun Software Park Development, a unit of the National Department and Reforms Commission which owns 25 per cent.

The joint venture then sold a 10 per cent stake to Microsoft, the world's largest maker of computer software.

TCS China won a multimillion-dollar order in February from the China Foreign Exchange Trade System, a sub-institution of the People's Bank of China, to implement an international trading system.

'After three years, sales in the Asia-Pacific to total sales will grow in double digits while sales in the Americas and Europe will be about 50 per cent and 25 per cent, respectively,' said Mr Ramadori.

Tata increased its net profit 43 per cent year on year to US$950 million for the year to March, while sales rose 41 per cent to US$4.28 billion.

At the same time, domestic sales fell to 9 per cent of total sales, compared with 12.5 per cent a year ago.

Sales in the Asia-Pacific region including China, Japan, Malaysia and Australia accounted for 4.8 per cent of total sales, the company said without giving figures for the previous year. The Americas contributed about 56.2 per cent to total sales, and Europe, 28.5 per cent.

Tata wants to expand in China beyond serving financial institutions, to customers from manufacturing sectors and government departments, benefiting from a forecast 238 per cent growth in the country's IT services market to US$3.8 billion by 2009 compared with US$1.12 billion in 2005, according to Analysis International data.

'Our advantage is that we can deliver to Chinese customers cross-border services that local companies cannot provide,' Mr Ramadori said. 'That is why we treat international firms such as IBM Global Services and Infosys Technologies as our major competitors in China.'

Last month, Infosys reported 46 per cent year on year sales growth to US$3.19 billion for the year to March and a 51 per cent rise in net profit to US$856 million.

Infosys and Tata are battling to maintain their strong growth in the global IT services as their margins are hurt by the appreciation of the Indian rupee.

'Margins of Tata and Infosys in the year to March were lower than our expectation due to rupee appreciation,' said Mitali Ghosh, a Merrill Lynch analyst. 'But we maintain the two companies as our top two picks due to their increasing global market shares.'

The Indian currency, which remained at 44 rupees to the US dollar last year, had appreciated 7.5 per cent since the start of the year to 41.19 rupees on April 30.

Tata said it was has US$1 billion to hedge against international currencies at about 43.5 rupees to the dollar.