Tata Infotech ties up with US partner - Views on News from Equitymaster

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Tata Infotech ties up with US partner

Feb 23, 2000

Tata Infotech has tied up with Wausau Financial Services for software development, joint marketing of financial services, consulting packages and manufacturing automatic teller machines. Wausau is an international provider of payment processing solutions for financial and commercial businesses apart from being a value–added reseller for partners such as Fuji, Unisys and Fuji.

Tata Infotech has had long–standing relationship with Unisys and it was this agreement with Unisys which helped it bag a lot of customers in the USA. In fact, the marketing was done under the brand name of Unisys itself. This contributed almost 65% of its revenues in FY99.

After Unisys set up a 100% subsidiary in India and the Y2K contracts tapered off it was the domestic system integration work which helped shore up the company’s topline. However, the margins in the domestic market were far lower than those that accrue from the US market. Hence the net profit were down 84% for the quarter ended December 1999.

This tie up could possibly serve as an anti–dote for loss of the turnover accruing from the break up with Unisys. However the details of the contract as to the revenue potential of the agreement and the margins that could accrue to the company are not known.

However the potential for automatic teller machines in India is immense and if the Tata Infotech can create a brand name for itself it could turn out to be a lucrative business in the future.

Market View:
Tata Infotech has underperformed the current boom in the software sector primarily due to concerns pertaining to its dependence on Unisys as well as its exposure to Y2K. With the company addressing both these concerns, in all probability, the worst could be over. Analysts too are taking a re–look at the stock.


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