TCS to acquire Postbank Systems; stock opens lower

Tata Consultancy Services (TCS) and Deutsche Bank AG on Monday evening after the market hours announced an agreement, under which, TCS will acquire 100 per cent of the shares of Postbank Systems AG (PBS) from Deutsche Bank AG.

PBS mainly provides project management, application management & infrastructure support services to Postbank and other subsidiaries of Deutsche Bank. After this transaction, PBS will become a part of TCS. This will result in deepening the relationship between the two organisations.

The press release of TCS claims the latter being ranked by analysts as the fastest-growing IT service provider in Germany with a 10-year CAGR of over 24 per cent. TCS currently partners with over 100 leading German corporations, including 17 of DAX30. Europe contributes around 30.6 per cent of TCS’s revenue as of FY20. Europe is the second biggest contributor to TCS’s overall revenue after America (52.2 per cent).

The transaction is planned to be a cash transaction. As per TCS annual report, TCS has used only 0.2 per cent of its cash on books under the head ‘Acquisitions, etc’ from FY16 to FY20. The major cash usage of the company from FY16 to FY20 has been ‘shareholder payouts’, which were around 78.8 per cent.

The stock of TCS opened today at Rs 2,725 or Rs 0.90 below its previous day’s close of Rs 2,725.90.