(Bloomberg) -- It’s good to be back. Tata Consultancy Services Ltd. is on the brink of becoming India’s first $100 billion corporation in a decade, underscoring the growing importance of the technology sector to Asia’s third largest economy.
India’s most valuable company gained more than 6 percent Friday after unveiling better-than-expected earnings, taking its market capitalization to more than $98 billion. If it achieves that milestone, it could outstrip Goldman Sachs Group Inc. and join the ranks of the world’s 100 most valuable corporations. The last Indian name to cross that threshold -- in 2008 -- was Reliance Industries Ltd., the telecoms-to-energy conglomerate controlled by billionaire Mukesh Ambani.
TCS is the largest of a coterie of firms including Infosys Ltd. that put Indian technology on the map, by taking over many of the back-office support functions for household names from General Motors Co. to Citigroup Inc. Backed by the Tata Group, TCS and its peers built a thriving model adopted by much of the rest of the world -- and fostered the generations of software engineers that provided much-needed talent to Silicon Valley.
TCS’ industry, which today generates some $167 billion of revenue annually, is now going through a painful transition with the rise of automation, mobile, artificial intelligence and cloud computing -- converging trends that’ve pushed clients away from the labor-intensive back-office programming operations that Tata and its peers specialize in.
Analysts are betting that Tata is among the best-placed to make that transition. The company has gained more than 25 percent this year, putting it on track to cross the $100 billion barrier. TCS is moving faster than its Indian peers into digital services, said Rahul Jain, an analyst with Mumbai-based Emkay Global Financial Services. Its digital revenue has expanded by 30 percent on a trailing 12-month basis, he estimates.
In the near term, TCS continues to grapple with soaring hiring costs as immigration curbs hamper its ability to move cheaper Indian workers into its largest market, the U.S. It’s far from certain whether it can continue to lead the industry’s digital transition. Then there’s the expensive training effort underway to get thousands of employees up to speed on the digital era.
“If they need to compete with IBM and Accenture, they have to do far better,” said D.D. Mishra, research director at Gartner Inc.
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