Why TCS is facing a $194M penalty in the US
What's the story
Tata Consultancy Services (TCS) has had a $194 million damages ruling upheld by the United States Court of Appeals for the Fifth Circuit. The ruling comes after a legal battle with Computer Sciences Corporation (CSC), now part of DXC Technology. The court found TCS liable for using DXC's trade secrets to win a lucrative contract and develop its own software platform, BaNCS.
Legal strategy
TCS's defense and future plans
In response to the ruling, TCS said it is considering all legal options, including a review and appeal before the relevant courts. The company intends to "vigorously defend" its position. It also assured that necessary provisions related to this matter will be made in its financial statements as per applicable accounting standards.
Case details
The case's background and implications for TCS
The case dates back to 2019 when CSC accused TCS of stealing its trade secrets. CSC claimed that TCS gained an unauthorized access to its software after several Transamerica employees who had licensed the software moved to TCS as part of a $2 billion deal. This enabled the Indian IT giant to create a competing insurance platform.
Market implications
Impact of ruling on TCS's market position
The ruling comes at a time when TCS's valuation premium over Infosys and HCLTech has been shrinking. Margins have tightened and investors have also become more selective. Sanchit Vir Gogia, Chief Analyst and Founder at Greyhound Research, said competitors will now position themselves as safer options in terms of core platforms and insurer-grade systems.