Tata Elxsi may be merged with TCS soon: sources

Tata Elxsi, the 28-year old product engineering and design (E&D) firm with a market capitalisation of Rs 5,203 crore is likely to be merged with Tata Consultancy Services very soon, say sources familiar with the matter.

According to company sources, Tata Elxsi is surviving as a standalone entity because of the influence of its Chief Executive Officer Madhukar Dev within the Tata Group. “He already got three extensions and will retire next year and after that the merger will happen,” a source said.

Tata Sons Chairman Natarajan Chandrasekaran in a recent interaction with a media house in New York said the Tata Group is already a $100 billion group and to get to the next level it needs scale.

“We can’t do it with multiple small companies. We need top companies. I am not saying specifically that all companies need to be No 1 or 2 in their sectors, but we need to have top companies,” Chandrasekaran said.

Dev, who turns 63 this year and has worked at Tata Elxsi for a quarter century, helped the company’s turnaround journey after the global recession by building a culture of engineering and design in India.

When contacted, Tata Elxsi said the company will not comment on media speculation. The company has offices in Mumbai, Pune, Chennai, Trivandrum, Kolkata and Chandigarh. The company has divisions like Embedded Product Design, Industrial Design, System Integration and Professional Services and Visual Computing Labs.

Talking to DH, an analyst said Dev’s phenomenal leadership helped the company to grow its revenues from Rs 415.9 crore in FY11 to Rs 1,075 crore in FY16.

“During the same period profit grew nearly five times, from Rs 32.5 crore to Rs 154.8 crore. It's market capitalisation is less than 1% of the m-cap of 14 listed Tata companies,” said the analyst.

Besides automotive to consumer durable, Tata Elxsi is also involved in E&D activities in telecommunications, electronic devices, and big data, power sector and healthcare. Dev during a result announcement last year had said that nearly 25% of revenues of the company comes from JLR and Tata Motors.

Tata group took the name ‘Elxsi’ in Tata Elxsi from a supercomputer startup born at Stanford University in the 1970s. The Elxsi super-computer architecture was based on the ECL (emitter-coupled logic) semiconductor technology. Elxsi had two early adopters in India, Tata Motors and TCS.

When the Tatas wanted to bring Elxsi to India and applied for a government licence in the 1980s and thus Tata Elxsi was born.

Besides TCS, the group also owns Tata Interactive Systems, which sells computer-assisted learning products, and an outsourcing provider Tata Business Support Services in the technology space.