India’s leading software services company Tata Consultancy Services has taken on lease around 2.50 lakh sqft of commercial space at Godrej & Boyce's factory premise in Mumbai's eastern suburb Vikhroli. The deal is important considering the scenario of slower business momentum for software exports amid US protectionist noise and visa issue. The transaction was concluded recently and the agreement was registered two weeks ago.
The company will be paying rent of nearly Rs 63 per sqft a month with 5% escalation per year. The total tenure of the lease transaction is four years. As per the deal terms, the occupier has also paid a security deposit worth lease rentals of six months. The agreement notes the usage of the space for information technology/IT-enabled services including sales, contact centre, software development and other IT/ITES activities.
It may be recalled that in 2016, TCS had leased around 2 mln sqft of built-to-suit space at Hiranandani Estate in Thane on lease, in what was billed as the largest single office space transaction in India in terms of area. This lease deal is for 15 years with a reset clause that will kick in every three years. As per the terms of the deal, TCS also holds a soft option to extend the lease by another 2 mln sqft.
TCS has 150 facilities spread over 35 mln sqft of area across India, which accommodate around 280,000 associates of the company, according to its annual report for 2016-17. In Mumbai and surrounding areas alone, the company has 19 offices, including its headquarters, and over 10 delivery centres in Mumbai and Thane. For the year ended March 2017, the company generated consolidated total income of Rs 122,187 cr.
Despite all the talks about slower growth in software services exports, several IT companies have been leasing spaces across the country. Recently, Accenture India and digital services firm Atos Origin leased two lakh sqft of commercial space each at K Raheja Corp’s IT park Gigaplex in Navi Mumbai. In May this year, Microsoft signed a 15-year lease deal for nearly 2 lakh sqft office space at Knowledge City in Hyderabad with plans to pick another 2,50,000 sqft of space in its next phase of expansion.
The growth of information technology and IT-enabled services sector had been facing headwinds since the past few quarters. The software industry body NASSCOM had also trimmed the sector’s guidance for growth to 8-10% in 2016-17 from earlier of 10-12%. Global macroeconomic headwinds, including the fallout of Britain's exit from the European Union and the threat of protectionism in key market America, have resulted in lower growth expectations.