Stock update: TCS

Stock update: TCS

Tata Consultancy Services (TCS) has won a Rs140 crore contract from the Andhra Pradesh Government to establish the largest State Wide Area Network (SWAN).

The project will be implemented over the next five years, on a ‘build, own, operate, and transfer’ (BOOT) model. SWAN is a collection of networks covering the entire state, providing data, voice and video services.

It qualifies as core infrastructure under the National e-Governance Plan instituted by the Centre. The Andhra Pradesh project will see the state headquarters connected to 1,088 mandals and district headquarters.

Once the project is commissioned, the network will enable the State Government to have video conferencing facilities across government offices over VoIP (voice over IP) phones. The network backbone will also carry various e-governance applications such as RTO, healthcare, education and municipality.

This project will roll out in 12 months and TCS will maintain it for the next five years. It should be noted that in the next three years the software major expects the Government space to account for 10% of its revenues.

We are currently Neutral on the stock, owing to the steep stock price run-up seen recently, but believe that any correction should be used as an opportunity to ACCUMULATE, given our positive stance on the Software Sector, with the global economic recovery expected to lead to a rebound in volume growth post-FY2010.