Tata Consultancy Services (TCS) is a leading global IT services company that has grown significantly over the past 50 years. It has over 420,000 employees serving clients in 50 countries. While TCS has increased its revenues and profits in recent years, it has also substantially increased its debt levels. Based on the company's financial performance and market valuation, the current share price of TCS appears to be overvalued relative to its intrinsic value.

1. - Submitted by
Tanuja Gadde
TATA CONSULTANCY SERVICES

2. TCS is an IT service, consulting and business solutions provider leading the world’s largest
business in 50 years of journey. TCS offers a consulting, cognitive powered, integrated
portfolio of business, technology and engineering services and solutions. This is delivered
through its unique, Location Independent Agile delivery model, a benchmark of excellence in
software development. TCS has over 4,20,000 of the world’s best-trained consultants in 50
countries. TCS proactive stance on climate change and award-winning work with communities
across the world have earned it a place in leading sustainability indices such as the Dow Jones
Sustainability Index (DJSI), MSCI Global Sustainability Index and the FTSE4 Good Emerging
Index.
Tata has always been a values-driven organisation, these values continues to direct the growth
and business of Tata Companies.
INTEGRITY
RESPOSIBILITY
EXCELLENCE UNITY
PIONEERING
Revenue $
1,110.7 billion
28 publicly
listed
Mkt Cap $
145.3 billion
7,00,000
employees
Dividend
Rs. 8,142 crore

3. GROWTH AND TRANFORMATION WITH BUSINESS 4.0

4. TCS RECENT NEWS
The company declares a divided of 1000% based on high profits in FY2018-19, the total
dividend outgo will be Rs. 404 crores, when compared to last year the dividend paid was 800%.
In FY2018-19 the net profits raise by 30% to Rs. 1,114 crores and the operating revenues stood
at Rs. 9,598 crores.
As per the annual report 2018-19 the gross debt was up by Rs. 14.5% to Rs. 31,363 crores
while the net debt was up by 52.1% due to sharp fall in cash and cash equivalents which was
decline by 595 in the last financial year. The gross debt equity ratio roses by 0.72 times while
the net debt to equity ratio was 0.63 times against 0.42 times a year ago. Both the ratios were
highest in the last 15 years.
The company announces the total dividend of Rs. 45 per share, including a Rs. 40 as special
dividend. The projected quarterly 2 profits inclines up by 2% at Rs. 8,304 crores and revenues
increased by 5.80% y-o-y to Rs. 38,977 crores. The operating margin remains at 24% while
net margin at 20.6%.
Country’s largest IT services firm Tata Consultancy Services (TCS), 1.80% year-on-year rise
in consolidates net profit at Rs. 8,042 crores for the quarter ended September 30. The company
had posted a net profit of Rs. 7,901 crores in the corresponding quarter last year. The shares of
TCS are declining by 4.41% to Rs. 1,987.1 from Rs. 2,078.7.
In the quarterly 1 of 2018-19, the net profit rises by 30% and the total income on the other hand
declined by 27.7% y-o-y to Rs. 20,229 crores in FY19. The buyback of shares from its equity
partners DoCoMo, which resulted in additional liability in fiscal 2018. Excluding other income,
operating profit of the company decline by 14% in 2018-19.
The non-convertible debentures worth Rs. 7000 crores from insurance companies such as LIC,
were brought back as insurance regulations bar which further invested in private limited
companies. By the end of 2019, the debt grew up by 50% to Rs. 27,587 Crs. from Rs. 18,142
Crs, which results in increase of finance cost by 36.5%.
The company for the first time raises the debt of Rs. 9,683 crores from the overseas market in
2018-19, which incurred in hedging cost of Rs. 476 Crs. Even the employee cost of the
company also rose up by 67% to Rs. 399 crores from Rs. 239 crores. The company has also
proposed high dividend of 1000% to its Shareholders which includes Tata Trusts and the Mistry
family.

5. TCS has focused on areas like simplifying the structure, scaling up businesses and
recapitalising companies. They planned their funding the money into companies either through
rights, preferential shares of selling cross-holdings. They focus on strengthening the balance
sheet and recapitalising companies.
The new company Tata Digital which create a number of digital platforms. Their focus mainly
is on particular segments and need; some will be B2C platforms, some will be B2B.
Leading the IT sector, the TCS stock is outperforming the sector and market. It is witnessing
major moving average crossover which would result in strong bullish movement. Considering
the stop loss at Rs. 2,145 on closing basis.
The IT services major and General Motors (GM) announces a new partnership on future global
vehicle engineering.
GROWTH IN Q2
Note: Total dividend per share of Rs. 45 per share including Rs. 40 as special dividend
Q2 Revenue growth
of 8.4% YOY; Digital
Revenue 33.2%
Drive Growth of
UK (+13.3%),
Europe (+16%yoy)
Net Margin –
20.6%; EPS Growth
– 3.8% YOY
Special
Dividend of Rs.
40 per share
Net cash from
Operations at Rs.
8,686 crores i.e.
108% of Net Income
Operating Margin
at 24%; Net
Margin at 20.6%
Net Income at Rs.
8,042 crores,
+1.8% YoY
Earnings Per Share
at Rs. 21.43,
+3.8% YoY

6. INCOME STATEMENT:
Financial Year FY 2019 FY 2018 FY 2017 FY 2016 FY 2015
Total Revenue 1,46,463 1,23,104 1,17,966 1,08,646 94,648
Gross Profit 1,32,863 1,11,412 1,06,304 97,663 84,018
EBITDA 39,512 32,532 32,328 30,702 24,990
PBIT 37,456 30,518 30,341 28,814 23,191
PBT 41,563 34,092 34,513 31,840 26,298
Net Income 31,472 25,826 26,289 24,270 19,852
EPS 84.10 135.19 133.76 123.52 102.41
DPS 30.0 39.5 23.5 21.8 19.5
Pay-out Ratio 0.36 0.58 0.35 0.35 0.38
Over the last 5 years the Revenue has grown at 12.35%, net income was increase by 10.47%
and the potential market share also increased by 38.28% from 34.9%.
EBITA has been grown by 9.59% CAGR in 2019 when compared to that of 2015.
PAT has been increased by 9.49% over the 5 years.
There is a decrease in EPS to -3.85% as there has been a new issue of shares over the years
The Equity Share Dividend has also come down to -8.21%.
Return on Equity is about 35.29% in the year 2019.
CAPITAL STRUCTURE
Period
Instru
ment
Authoriz
ed
Capital
Issued
Capital
- P A I D U P -
Increase/
Decrease
From To (Rs. cr) (Rs. cr)
Shares
(nos)
Face
Value
Capital
2018 2019
Equity
Share
460.05 375.24 3752384706 1 375.24
49.0%
2017 2018
Equity
Share
460.05 191.43 1914287591 1 191.43
-2.9%
2016 2017
Equity
Share
460.05 197.04 1970427941 1 197.04
0.0%
2015 2016
Equity
Share
460.05 197.04 1970427941 1 197.04
0.6%
2014 2015
Equity
Share
420.05 195.87 1958727979 1 195.87
0.0%

7. There was a New Issue of Shares in the year 2015 of about Rs. 1.17 Crores.
Buy back of Shares in the year 2018 lead to decrease in the Equity Capital by Rs. 5.61 Crores.
The recent issue of shares led the paid-up capital to increase by Rs. 183.81 Crores.
49.00%
-2.90%
0.00% 0.60% 0.00%
Capital Structure
2018-2019 2017-2018 2016-2017 2015-2016 2014-2015
0.00%
50.00%
100.00%
150.00%
200.00%
250.00%
2011 2012 2013 2014 2015 2016 2017 2018 2019
CAPITAL STRUCTRE
Authorised No. of Shares Capital Linear (No. of Shares)

8. REVENUE AND DEBT
PARTICULARS FY18 FY19 % Change
Revenue from Operations 8,684 9,598 10.5%
Other Income 19,290 10,630 -44.9%
Total Income 27,974 20,228 -27.7%
Finance cost 2,034 2,776 36.5%
Exceptional items 24,342 15,082 -38.0%
Adjusted net profit after exceptional items 879 1,144 30.1%
Net Worth 43,252 43,592 0.8%
Total Debt 27,404 31,388 14.5%
The Revenue from Operations are increased by 10.5%, the Net Worth of the company was
increased by 0.8% and the Total Debt was increased by 14.5%.
Significant increase of Equity Share Capital of about 13.8% CAGR over the years.
Decrease in Long-term & Short-term borrowings by -17.38% and -100% CAGR
respectively.
Net Deferred Tax has been increased by 34.93% over the span of 5 years.
Other Non-Current Assets have been increased by 65.91% over the years
The changes can also be seen in the Current Investments by 81.12%
s
8,684
19,290
27,974
2,034
24,342
879
43,252
27,404
9,598 10,630
20,228
2,776
15,082
1,144
43,592
31,388
Revenue from
Operations
Other Income Total Income Finance cost Exceptional
items
Adjusted net
profit after
exceptional
items
Net Worth Total Debt
FY18 FY19

9. CASH FLOW STATEMENT
CASH FLOW Mar-15 Mar-16 Mar-17 Mar-18
Mar-
19 CAGR
Net Profit/Loss before Extraordinary item and
tax
24,549.97 29,339 23,653 25,241 30,065
4.14%
Net cash flow from Operating Activities 16,319.89 17,986 23,132 21,587 23,998 8.02%
Net cash used in Investing Activities 611.01 -4,518 -15,782 5,634 5,883 57.29%
Net cash used from Financing Activities -16,914.20 -9,586 -10,891 -26,827 -27,825 10.47%
Foreign Exchange gains/Losses -27.26 40 -52 94 -7 -23.81%
Adj on Amalgamation/Merger/Others 1.97 0 0 0 0 -100.00%
Net Inc./Dec. in Cash & Cash Equivalents -8.59 3,922.00 -3,593 488 2,049 -398.89%
Cash & Cash Equivalents begin of year 438.37 461 4,383.00 790 1,278 23.86%
Cash & Cash Equivalents end of year 429.78 4,383.00 790 1,278.00 3,327 50.58%
Net Cash Flow from Operations has been increased by 8.01% CAGR over the years.
There is a significant increase if 57.29% CAGR in the Net Cash Flow used in Investing
Activities as there have been investment in various projects made over the years.
Net Cash Flow from Financing Activities has been showing a growth of 10.47% CAGR.
There has been a Net Increase in Cash & Cash Equivalents by 398% CAGR.
VALUATION OF THE FIRM
Market Return (Rm) 23.66%
Risk Free Rate (Rf) 6.73%
Cost of Capital (Ke) 0.099042
Growth (g) 9.49%
Dividend (D1) 8.261485
Beta 0.187434
Price (Po) 1986.85
Intrinsic Value 1814.668
The Intrinsic Value calculated came up to be Rs. 1841.67, which is low when compared to
the Market Price of the Share which was Rs. 1986.85.
This suggests the Company currently is Overvalued.
DIVIDEND & SHARE PRICE
It can be seen that there is no significant impact of Dividend on the Share Price as in various
instances the share price has fallen by 1.62%, 1.85% & 2.91%, while in other instances it has

10. raised by 1.51% & 0.85%. which is similar to the daily changes in the share price. And
Buyback and Bonus Issue if shares increased the share price by 4.53% & 6.62% respectively.
CONCLUSIONS
As per the report it can be concluded that the share price of TCS is overvalued and there is a
significant change in the share price with respect to Buyback and Bonus issue. But when it
comes to announcement about the dividend only a little change can be seen. The company has
issued shares in the year 2019 which lead to the reduction of EPS and also the Dividend Pay-
out Ratio has been decreased over the years. The company according to the trend analysis
which was conducted showed us that the company is swiftly moving towards no debt and it is
hugely taking part in the investing activities. The Net Cash Flow also shows a positive trend
which means the company is able to maintain positive cashflows. All of the above observations
suggest that a company is looking for a expansion and will likely be growing at a significant
rate in the near future.
TCS_CIA%201%20-%2
018321111.xlsx
17-Jul-18 1,973.06
17-Jul-18 4 Dividend
16-Jul-18 1,956.35
% Change 0.85%
04-Jun-19 2,178.01
04-Jun-19 18 Dividend
03-Jun-19 2,219.12
% Change -1.85%
17-Jan-19 1,874.71
17-Jan-19 4 Dividend
16-Jan-19 1,846.86
% Change 1.51%
23-Oct-18 1,820.69
23-Oct-18 4 Dividend
22-Oct-18 1,875.35
% Change -2.91%
20-Apr-18 1,659.32
19-Apr-18 Bonus Issue
19-Apr-18 1,556.27
% Change 6.62%
24-Sep-18 2,166.50
21-Sep-18 Buyback
21-Sep-18 2,072.59
% Change 4.53%