S&P assigns TCS with 'BBB' corporate credit rating

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Singapore, Oct 24 (UNI) Standard&Poor's Ratings Services today said today it assigned its 'BBB' corporate credit rating to India-based IT services provider Tata Consultancy Services Ltd (TCS).

''The rating on TCS reflects the company's conservative financial policy and profile, its superior and improving cost efficiency, and improving business and customer diversity,'' said Standard&Poor's credit analyst Wee Lee Cheng.

The ratings also reflect the cyclical and competitive nature of the IT services industry, the constraints affecting India-based operations, exposure to foreign exchange fluctuations and staff costs, and the company's moderate expenditure on capacity building and training, he said.

TCS has strong liquidity, with cash and bank deposits of Rs 1,230 crore, or about 9.4 per cent of total assets at March 31, 2007.

In addition, the company has investments in mutual funds, equity, and debt instruments of Rs 1,270 crore.

Standard&Poor's expects TCS' liquidity to remain strong and more than sufficient to cover its short-term debt.

''Although the rating on TCS is above that on India, it is constrained at the current level as a large proportion of the company's operations, which are based in India, remain affected by the country's economic and social conditions,'' Mr Cheng said.

''The rating on TCS is likely to be raised if there is significant diversity in geographic, customer, industry, or product services offerings while maintaining operating margins above 25-30 per cent with modest financial risk profile and high liquidity position,'' he said.

Conversely, the rating on TCS could be lowered if the company significantly increases its aggressiveness in financial policy and use of debt such that total debt to EBITDA is above 2x and FFO to total debt is above 40 per cent.

In addition, the rating could be affected negatively if the company suffers from substantially weakened business conditions or demonstrates material problems in project management and delivery capability, said Standard&Poor's.

UNI

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