TCS, Transamerica end $2 billion contract
BENGALURU, INDIA — India’s leading IT firm Tata Consultancy Services (TCS) and United States-based insurance provider Transamerica have mutually agreed to terminate their $2 billion contract.
Reuters reported that the decision was primarily attributed to a challenging macro environment.
Despite terminating the sizable contract, industry insiders believe the impact on TCS’s financial health will be limited. Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services, told Reuters, “It’s more of a sentimental negative rather than a big impact on the financials of TCS.”
The cancellation comes amidst an industry-wide slowdown in the telecom and communication sector. Indian IT companies, many of which derive a significant portion of their revenue from the United States and Europe, reported a drop in client spending and project rollbacks.
“We don’t see a big impact because of this. But yes, it’s a sign that the demand environment is not very good,” Khemka added.
The 10-year contract, initiated in early 2018, tasked TCS with digitizing over 10 million policies for Transamerica onto a singular, integrated platform. The responsibilities encompassed life insurance, retirement, and investment solutions, which will now transition to a new servicing model over an estimated period of 30 months.
Following the announcement, TCS stock fell by 1.3%, trading at 3,175 rupees (US$38.73).
TCS is a giant IT services, business solutions and outsourcing organization with consolidated revenues of US$25.7 billion in the fiscal year ended March 31, 2022.
The company ranked #51 in the Time Doctor OA500, an index of the world’s top 500 outsourcing firms and a vital tool in assisting the BPO decision-making community.
