Tata Consultancy Services Research Report

25November2012 SectorITConsulting& packet CMP1288 RatingBUY Target de boundine1500 StockInfo coronation issue15months Introduction TataConsultancyServicesLimitedisanIndian multinationalinformationtechnology run, line of merchandise solutionsandoutsourcingServicesCompanyfoundedby JRDTataintheyear1968headquarteredinMumbai. TCSis a adjuvantoftheTataGroup. ItisoneofIndiasmost valuablecompaniesandisthe monolithicstIndia? foundIT servecompanyby2012 taxations. Ithas183offices across43countriesand117 takeycentresacross21 countries.It as well ashas58subsidiarycompanies. Products TCSprovidesawiderangeofITrelatedproducts suchasapplication aimment,BPO( line of merchandise go outsourcing),consulting, initiativesoftware,payment processing,softwaremanagementand readingservices. Followingaretheservicelinesandtheir per centumtothe totalTCSrevenueintheQ22012? 13? Application in marchesitmentandmaintenance ADMisapartofITthatworkswiththebusinesstodevelop newsoftware,keepitrunningand fudgeongoing improvements.Assetleveragesolutions Assuranceservices Assuranceservicesprovide case-by-caseandprofessional opinionsthatreducetheinformation bump(riskthatcomes fromincorrectinformation). Businessintelligence BIistheabilityofanorganizationtocollect,maintain,and organizeknowledge. Thisproduceslargeamountsof informationthatcanhelpdevelopnewopportunities. MarketCap2,52,109crs candor195. 7crs Face judge1 52WeekH/L1438? 1045 discloseFinancials(incrores) earnSales EBIDTA valuation account% Net improvement EPS Divid lay off FY11? 12 38,858. 55 33. 87 13366. 33 55. 97 25 FY10? 11 29,275. 0 29. 47 8700. 44 38. 62 14 military ratingSummary FY11? 12 20. 60 8. 5 55. 31 44. 24 0. 72 FY10? 11 23. 7 10. 4 44. 38 38. 80 na priceto Earning Priceto Book RoCE% RoNW% of import unconditionalRetune 3months 1year 5. 3% 3 old age 131. 7% TCS 30. 1% Sensex 3. 70% 17. 90% 7. 70% Share memoryPattern(%) admirer FII DII sell 74 15 6. 5 4. 5 PromoterandPromotergroup TataSonsLtd73. 75% Others0. 25% For eignInstitutionalInvestors NumberofFIIShareholders853 roundofthem accommodate DomesticInstitutionalInvestors animationInsuranceCorporationofIndia . 10% FranklinTempletonInvestmentFunds 1. 67% Others1. 73% Retail Individualswith surveylessthan1lac 3. 5% Individualswithvaluemorethan1lac 1% DividendPolicy(Mar12) Indicators TCS Wipro EPS D/P ratio (%) D/R proportionality (%) DivYield (%) Face Value Book value 55. 97 52 48 1. 94 1 19 36. 60 63. 40 1. 64 2 HCL 28. 13 49. 50 50. 50 1. 87 2 95. 25 Businessprocessoutsourcing BPOisasubsetofoutsourcingthatinvolvesthecontractingof trading operationsandresponsibilitiesof special(prenominal)businessfunctions orprocesstoathirdpartyserviceprovider.Consulting ITconsultingisafieldthatfocusesonadvisingbusinesseson how beattouseinformationtechnologyto tackletheir businessobjectives. EngineeringandIndustrialservices E deliverengineering faithfulnessandoperationalefficiency, ensuringacompetitiveadvantage. attemptsolutions Anenterprisesolutionisanybu sinesstoolthatreliably empowersyoutoaccess,shareand gainresourceswithany ofyourpeersandcustomers,anywhere,atanytime.IT cornerstoneservices ITInfrastructureServices(IS)OrInfrastructureManagement Services(IMS)deliverend? to? end,effectiveandreliable solutionsthat translatehelptobusinessoperations. Services functionto Quarteron overallrevenue Quarter(%) (%) AMD 43. 1 3. 8 EnggSrvcs 4. 6 4. 6 IMC 11. 4 12. 5 EAS 14. 9 2. 5 Consulting 3 12 Products 2. 7 0. 8 Testing 7. 7 5. 9 BPO 12. 6 1. 3 IMCwasthekey egressionserviceline,expanding12. 5%QoQ, followedbyConsultingwhichalsogrew12%QoQ. BPO,EAS andProductslaggedduringthelastquarter. Sector newPerformance(Q22012? 3) Verticals Contributionto Quarteron overallrevenue Quarter(%) (%) BFSI Mfg telecommunication Healthcare Retail Transportation vital force Media Hi? tech Others 126. 50 99 42. 8 8. 2 10. 3 5. 2 13. 4 3. 6 3. 6 2. 2 5. 9 4. 9 4. 6 9. 0 5. 1 3. 1 6. 6 2. 2 5. 1 5. 1 3. 3 7. 2 CapitalStructure(incrores) Mar12 Mar11 Shareholdersf unds virtue 195. 72 195. 72 druthers 100 100 militia 24560. 90 19283. 77 Net worthy 24856. 63 19579. 50 Debtfunds Secured 93. 47 35. 87 Unsecured 2. 76 5. 25 agreeDebt 96. 23 41. 12 fare 24952. 86 19620. 1 Capital *PreferenceSharesworth100crsissuedtoTata SonsLtd(theholdingcompany)whichwouldbe reformableatparattheendofsixyearsfromthe dateof storage allocationie. March28,2008,butmaybe redeemableanytime subsequently3yearsfromthedateof allotmentatthe natural selectionofshareholder. Theseshares wouldcarryafixed cumulativedividendof1%pa anda variable quantitynon? cumulativedividendof1%ofthe difference surrounded bytherateofdividend say duringtheyearontheequitysharesandaverage rateofdividenddeclaredontheequitysharesfor threeyearsprecedingtheissueofredeemable alternativeshares. BFSIgrew4. %QoQ,despitebeingaffectedbythe true environmentandcontributed87%totheincremental revenues. Whiletelecomtoogrewatanimpressive5. 1% despite intentnesstrouble,themanufacturingandretail verticalsgrewt hefastest. GeographiesGrowth(Q22012? 2013) Verticals Contributionto QoQ(%) overallrevenue (%) NorthAmerica 52. 8 3. 2 LatinAmerica 3. 4 7. 7 UK 17. 1 5. 2 atomic number 63 9. 5 3. 5 India 7. 5 10. 5 APAC 7. 6 7. 4 MEA 2. 1 4. 6 *APACAsiaPacific,*MEAMiddleEastandAfrica Growthwas determinedbyemergingeconomies. India(10. 5%) grewthefastest,followedbyLatinAmericaandAPAC(7. % . 4%)respectively. UK(5. 2%)remainedstrong,with EuropeandNorthAmerica suppurationat(3. 5%. 2%). display boardofDirectors executiveBoardMembers Weighted fair(a)CostofCapital Rf tryFreeRateofReturn=8%,Rm MarketReturn(nifty)for1year= 10. 80%(moneycontrol. com),Beta= 0. 72(reuters. com)TaxRate= 2390. 35/13366. 33(taxexpenses/PBT) =17. 88% We(proportionofequity)=E/(E+D)= 24856. 60/24952. 85=0. 9961 Wd(proportionofdebt)=D/(E+D)= 96. 23/24952. 85=0. 0039 Kd(costofdebt)=Interestpaid/total debt=16. 0/96. 23=0. 1704 TaxShield=0. 1704(1? 0. 1788)=0. 1399 Ke(costofequity)=Rf+B(Rm? Rf)= 0. 80+0. 72(0. 108? 0. 08)=0. 10 W ACC=(We*Ke)+(Wd*Kd)= (0. 9961*0. 10)+(0. 0039*0. 1399)= 10. 015% NChandrasekaranCEO SMahalingamCFO Non? ExecutiveBoardMembers RatanTata chair SRamadoraiViceChairman CyrusMistryDeputyChairman SuprakashMukhopadhyayCompanySecretary Compliance police officer RSommer,IHussain,VKelkar,AMehta,VThyagarajan, LauraCha,CMChristensen,PAVandrevalaOPBhatt DirectorsCompetitors Infosys,Wipro,HCL,Mahindra? Satyam,TechMahindra, PatniComputersetc. FinancialSummary gain BalanceSheet 2011 Revenuefrom operations OtherIncome TotalIncome Expenses a. Employee benefit expenses b. procedure andother expenses 2012 2012 195. 72 100 24560. 91 24856. 63 96. 23 118. 10 197. 59 154. 78 566. 70 2847. 18 1598. 56 4389. 74 8835. 48 34258. 81 4012. 16 51. 46 1399. 82 5463. 44 5150. 15 139. 74 4332. 81 2636. 88 17723. 02 538. 24 4. 14 1567. 47 9107. 72 3280. 07 1648. 2 389. 43 16535. 79 34258. 81 2011 195. 72 100 19283. 77 19579. 49 36. 33 69. 32 129. 91 76. 17 311. 73 2153. 38 1584. 27 2413. 94 6151. 59 26042. 81 3363. 78 58. 40 1072. 86 4495. 04 5457. 91 52. 03 2864. 09 2603. 26 15472. 33 337. 58 5. 37 836. 37 4806. 67 3120. 52 1369. 05 94. 92 10570. 48 26042. 81 38858. 54 29275. 41 2685. 18 494. 73 41543. 72 29770. 14 14100. 41 10221. 85 13372. 41 10290. 03 c. Financecosts 16. 40 d. disparagement 688. 17 and Amortisation 20. 01 537. 82 TotalExpenses 28177. 39 21069. 1 Profit to begin with Tax Tax expenditure a. mensestax 13366. 33 8700. 43 2865. 38 1335. 73 30. 32 (235. 61) b. Deferredtax (38. 93) c. mattedcredit entitlement Total (436. 10) 2390. 35 1130. 44 Profitaftertax 10975. 98 7569. 99 EarningsPer Share 55. 95 38. 61 Liabilities ShareholdersFunds Equity ceiling Preferencecapital Reserves fit Non? currentLiabilities a. languish end point borrow b. Deferredtaxliabilities(net) c. Otherlong? termliabilities d. Longtermprovisions radical on-line(prenominal)Liabilities a. betraypayables b. Othercurrentliabilities c. Short? ermprovisions conglomeration SOURCESOF silver Assets Non? currentAssets a. Fixedassets 1. Tangibleassets 2. intangible assetassets 3. Capitalwork? in? mount positive b. Non? currentInvestments c. Deferredtaxassets(net) d. Longtermloans e. Othernon? currentassets TOTAL CurrentAssets a. CurrentInvestments b. Inventories c. UnbilledRevenue d. Tradereceivables e. Cashandbankbalances f. Short? termloan g. Othercurrentassets TOTAL APPLICATIONOFFUNDS Long? marchesProvisionsconsistofprovisionforemployeesincludegratuityandotheremployeebenefits. Short?TermProvisionsincludesprovisionforemployeebenefitsandforproposedfinaldividendon equityshares. CurrentLiabilitiesincludesincomereceivedinadvance,fairvalueofforeign switchforwardsand currencyoptionscontractssecuredagainsttradereceivables. RatioAnalysiswithPeerCompetition? FY? 12 27. 52 29. 30 26. 15 55. 31 44. 24 126. 50 In(%) crudeProfitMargin OperatingProfitMargin NetProfitMargin ReturnonCapital assiduous ReturnonNet worth(predicate) ReturnonTotalAssets TCS Wipro FY? 11 FY? 12 FY? 11 ProfitabilityRatios 28. 2 17. 29 19. 62 29. 96 19. 63 21. 90 25. 44 14. 39 17. 96 44. 38 21. 41 22. 34 38. 80 99. 53 19. 23 20. 41 HCLTechnologies FY? 12 FY? 11 24. 21 28. 18 25. 66 33. 64 29. 53 19. 13 23. 42 24. 31 21. 20 20. 45 CurrentRatio QuickRatio Debt? EquityRatio Asset turnover rateRatio FixedAssetsTurnover Ratio DebtorsTurnoverRatio 2. 45 2. 43 0. 01 1. 74 5. 39 5. 59 SolvencyRatios 2. 41 1. 92 1. 45 2. 40 2. 48 2. 20 0. 01 0. 22 0. 22 Management efficacyRatios 4. 91 1. 14 3. 45 4. 91 3. 81 3. 45 7. 19 4. 61 4. 87 1. 38 1. 42 0. 11 1. 26 2. 88 4. 88