M&G Prudential partners with TCS to digitally transform its customer service

Tata-Consultancy-Services1

M&G Prudential announces a new agreement with Tata Consultancy Services (TCS), a global leader in IT, business process and digital services, to digitally transform their business and deliver enhanced service for its UK savings and retirement customers. 

The value of this agreement exceeds £500million ($690million USO) over 10 years and covers the support of over 4 million customer policies.

The administration of over 4 million life and pensions contracts will move from Prudential's incumbent business partner to TCS which is the market leader in UK life and pension administration, having transferred more than 17 million policies to its digital platform, TCS BaNCS.

TCS will also assume responsibility for the operation of some of Prudential's internal IT infrastructure to enable the IT operations function to deliver greater flexibility in the provision of services to the businesses within the Prudential Group. This move will enable Prudential to focus efficiently on its digital transformation. About 180 full-time roles in London, Reading and Craigforth will also transfer under the TUPE arrangements from M&G Prudential to TCS.

Rajesh Gopinathan, CEO and MD, TCS said, "TCS is delighted  to  be  the  digital  transformation partner for M&G Prudential to enhance service for its UK savings and retirement customers and drive sustainable growth. We will propel this digital transformation through TCS' continuous investments in digital and technology services. We will also bring the combined strength and capabilities of our deep domain expertise in BFSI and TCS' strong record of managed policy administration in the UK life & pension industry. In addition, TCS' BaNCS platform will power digitized front, mid and back-office operations which will enable M&G Prudential to become more agile and improve customer experience."

The stock is currently trading at Rs2907.05, up by Rs56.2 or 1.97% from its previous closing of Rs2850.85 on the BSE. The scrip opened at Rs 2857.1 and has touched a high and low of Rs2925 and Rs2857 respectively.

TCS is among world’s top 10 IT companies deriving ~40.2% of its revenue from BFSI vertical in FY17. Retail and distribution contributed 17.3% to TCS revenue, while communication, media & technology contributed 16.5% each to its revenue in FY17. Company’s revenue has grown at 17% CAGR over FY13-17.

The company expects digital segment (current 17.9% of revenue) to contribute major share in company’s revenue in coming quarters. This is expected to be driven by opportunities in cloud automation, analytics, and IoT. Company is positive about BFSI vertical due to strong deal pipeline and also it expects strong impetus in insurance vertical. Notably, recent renewal deal win worth Rs.14513cr gives confidence to invest in TCS. Consequently, we expect revenue to grow at 8% CAGR over FY17-19E. To tackle H1-B visa issue company is hiring US locals, which will keep EBITDA margins under pressure. Hence this couple with rupee appreciation, we expect EBITDA margin to remain at near 27.5% over FY17-19E. The company is expected to use buyback route periodically, therefore company's ROE is expected to improve in coming fiscals.

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