The acquisition of Unisys Corporation’s insurance business, Unisys Insurance Services Ltd (UISL), by Tata Consultancy Services’ UK subsidiary Diligenta could help India’s largest IT firm’s revenue from insurance sector take off.
Diligenta was formed in 2006 after TCS won a 12-year contract worth over $850 million from UK-based insurance firm Pearl Group (now Phoenix Group) and included transfer of over 1,000 staff and management of over 4 million policies from the Pearl group, making it the second-largest life and pension outsourcing company in the UK after Capita.
As part of the UISL acquisition, TCS gets an incremental business of £250 million. UISL, too, serves Phoenix Group besides a South African firm Old Mutual.
TCS spokespersons could not provide financial details of the acquisition neither how many employees would be added to Diligenta. With this buy, Diligenta adminsters five million life and pensions policies.
“Taking on the UISL’s book of business is testament to the positive results and impact we have already delivered to our customers. Diligenta will use its vast experience of life and pensions BPO and the existing expertise available at UISL to continue to build its UK operations and service UISL’s customers,” said Suresh Menon, CEO, Diligenta, hinting at scope for more incremental revenue from the clients of UISL.
The firm had recently announced an IT transformation programme, migrating two million policies for Phoenix Group from numerous platforms onto the single TCS BaNCS system.
Analysts are of the opinion that there is a lot of room for Indian IT firms to mine existing clients and grow revenue from them. Bhavtosh Vajpayee, CLSA analyst, recently wrote in an article in DNA, “TCS still counts over 500 customers that pay under $1 million in annual revenues. Much can be done to mine these customers deeper.” However, worries remain as Diligenta could get just two clients, namely SLF in 2008 and Old Mutual as part of the current deal, in four years.
In response to a query in January this year, TCS CEO N Chandrasekharan admitted of worries with the Europe business. “Europe is lagging currently. But it is beginning to recover. The transformation of Diligenta will be complete this year. Then we will be able to add more clients,” Chandrasekharan had then said.
Meanwhile, the firm is witnessing an uptake of services from the hi-tech sector.
Yogesh Agarwal and Atul Agarwal, HSBC analysts, in an August 31 note to clients, mentioned a similar sentiment expressed by Nagaraj Ijari, vice-president & head of hi-tech industry solutions unit of TCS and also Bangalore operations.
“According to Mr Ijari, IT services demand from the hi-tech clients has recovered smartly and he expects the momentum to continue in the second half and next year,” wrote the HSBC analysts. The hi-tech division contributed $325 million in the fiscal 2010 and employs 7,000 engineers.
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