Tata Consultancy Services(TCS) - An Honest Analysis of India's IT Giant
Tata Consultancy Services(TCS) is an Indian Multinational, that provides IT consulting and management services. More specifically, the company provides software, automation management, blockchain and AI consulting and various other products and services. The company primarily follows a B2B business model, serving the banking, healthcare, communication, aviation and many more industries. TCS is one of India's largest firms by Market Capitalisation and it employs over 400,000 worldwide.
One of the first things to notice from TCS's income statement is the consistent growth in the firm's revenue. Revenue has grown 1.5 times in the last 5 years, which shows that the company is on the track of fast growth, which is very satisfying to see, especially in such a large firm. Furthermore, looking at its expenses, being an IT company, employee costs demonstrate the highest weightage in the statement. Many investors, may be unhappy to see that employee costs are rising, but for me it provides another signal that the company needs more employees because its sales are rising so fast.
Consequently the profit has also risen significantly with EBIT(Earnings Before Interest and Tax) reaching 41,563 crores in 2019.
Looking at the firm's liabilities in the last 5 years. The only concerning factor is the fast growth of 'Other Current Liabilities'. Currently, it is unclear what the company is piling up these debts for. However, as of now, this is not a large concern, as the company still has a surplus of current assets with almost 12,000 crore in cash, and another 29,000 crore in trade receivables. The balance sheet looks healthy with a surplus(equity) of around 89,000 crore, and compared to its size, the company has a low level of debt.
TCS's shareholding pattern is simply breathtaking. 72% of the company is under the control of its promoter Tata Sons. Additionally about 24% of the company is under the holding of institutions with 15.9% under the control of Foreign Portfolio Investors. LIC also holds a solid 4.12% in the firm. This means that the public only has access to about 4% of all the company's shares. The shareholding pattern demonstrates that institutions, are confident that TCS will continue to provide returns on it stock through growth and dividends over the future.
- TCS has been showing promising sales growth
- The company is currently valued at just over Rs 6 lakh crore
- Around 16% of the holding comes from FIIs
- The company offers its services to some of the largest firms globally, such as ABN Amro, CITI Bank, Panasonic and Microsoft.
In such a time of uncertainty, I believe that TCS's stock is coming at a highly discounted rate. The company has been showing steady growth, and I believe that such a strong company should be held until it is worth Rs 17 lakh crore, if it continues to grow at such a rate.