NES & IFSA Investment

Research Challenge 2021

Athena Consulting
Aryan Bharadwaj | Ishaan Jain | Manpreet Malik | Vedansh Chopra
University of Delhi
Industry Analysis
IT & BPM Sector
 Industry Overview: IT BPM India

Industry Sectors and Subsectors Overview India’s IT market size is growing BFSI – A key business vertical
Export Domestic Revenue share of IT majors from BFSI in 2020

IT & BPM Sector +7.5% CAGR

29.8% 29.7%
31.3%
27.6%

20.5%
IT Services 117 126 136
147
15.3%
108

§ Market Size: US$ 97 billion in FY20.

§ Over 81% revenue comes from the export market. 35 37 41 41 44
§ BFSI continues to be the key vertical for the IT
2016 2017 2018 2019 2020 Tech Mahindra Mindtree Wipro TCS Infosys L&T Infotech
sector.
§ IT services accounted for about 50.50% of the IT & § IT & BPM industry revenue was estimated at around US$ 191 § BFSI is a key business vertical for the IT & BPM industry. A
BPM market revenue in India in FY20. billion in FY20 at 7.7% growth y-o-y. major share of revenue of IT majors comes from the BFSI
§ In FY20, the sector added 205,000 jobs, up from 185,000 jobs business vertical.
added in FY19. § Adoption of new technologies is expected to accelerate growth
BPM of the BFSI vertical. The need for undertaking investment in IT
§ The domestic revenue of the IT industry is estimated at US$ 44
billion and export revenue is estimated at US$ 147 billion in will also be required for gaining competitive advantage instead
§ Market size: US$ 38 billion in FY20. Market size of solely reducing operational costs.
FY20.
of BPM industry to reach US$ 54 billion by FY25.
§ About 87% revenue comes from the export market.
§ BPM had a 19.79% share of the IT & BPM market With 62% share, US is a major importer Highly Competitive Sector (Porter’s 5 forces)
revenue in India in FY20.

2%
US Force Factors Effect
Software 8% UK
Europe Rivalries Equally balanced competitors High
§ Market size: US$ 34.39 billion during FY19. Asia
Substitutes Easy switching between competitors High
§ Over 83.9% of revenue comes from export. 11%
RoW
§ It had around 19% revenue share in the Indian IT 62%
Supplier Limited supply of skilled professionals;
space in FY19. Moderate
Power requires high compensation
17%
Hardware Buyers Buyers generally risk averse; comparing
Moderate
Power across different substitutes
§ Market size: US$ 14.48 billion in FY19.
§ The domestic market accounts for a significant share. § US has been the biggest importer of Indian IT exports as it Threat of SEBI Regulations, Low entry cost, Low
Low
§ Hardware exports from India was estimated to grow absorbed over 62% of Indian IT & BPM export during FY19. new entry Margins
at 7- 8% in FY19. § Non-US-UK countries accounted for just 21% of the total
Indian IT & BPM export during FY19.

Sources: McKinsey, Economic Times, MarketLine 1

 Industry Overview: IT BPM India
PESTLE DIMENSION FACTS

§ Simplified Other Service Provider (OSP) Guidelines: The government released Market size of domestic IT industry excluding hardware across India FY
2013-2019 in billion USD
these guidelines in 2020 to enhance the Ease of doing Business in the IT +8%
+8%
industry, Business Process Outsourcing and IT-enabled services. This is aimed at +14% 28.0
26.0
considerably reducing compliance burden and facilitating a more flexible +12%
+9%
24.0
working environment. 21.0
19.2
§ One of the 12 champion service sectors: The industry has found a place among 17.1

highly prioritized service spheres. The Indian government has set aside a 5000
crore rupees fund for giving a boost to these sectors.
POLITICAL
§ Efforts to develop Artificial Intelligence: NITI Aayog has laid a holistic plan for
making India a leading force in AI through its National Strategy for Artificial
Intelligence in India. In the 2019-20 interim budget, the govt also announced 2014 2015 2016 2017 2018 2019

intent to launch a national program and portal for AI.

Sector-wise breakup of FDIs in the fiscal year 2020
§ MOUs and Foreign Investment: The government has entered into various 16%
collaborations and Memoranda of Understanding with different nations in order 13%
to strengthen research and development in IT. Up to 100 percent foreign 10%
investment has been allowed in the ICT sector to attract fresh capital inflow. 7%
6%
5%
4%
3% 3%

§ Foreign Direct Investment: The computer hardware and software sector in India
Services IT & BPM Telecom Trading Infra Automobile Chemicals Pharma Tourism
attracted cumulative FDI inflows worth US$ 62.47 billion between April 2000
and September 2020. The sector ranked 2nd in FDI inflows. Share of Indian IT industry in global IT spend from 2001 to 2020
§ Contribution to the GDP: From a very small contribution of 0.4% in 1991-92,
ECONOMIC the IT industry grew to an 8% share in the Gross Domestic Product. This is 19%
+11% CAGR
expected to grow to 10 % by 2025.
10%
8%
§ Spending: The IT spending in India is expected to touch $93 billion in 2021.
This can be attributed to the increasing digitization of businesses outside of 3%

technology. This is a 7.3% increase from last year. 2001 2008 2010 2020

Sources: Ernst & Young Industry Outlook, Team Analysis 2

 Industry Overview: IT BPM India
PESTLE DIMENSION FACTS

§ Education: According to a KPMG report, the Indian digital education sector is

expected to expand from 1.6 million customers in 2016 to 9.6 million customers
by 2021. India’s digitally skilled pool has grown over the period and accounted
Digital education sector
will grow at a CAGR of 21%
for around 75 percent of global digital talent.
§ Workforce: As of April 2020, India's IT workforce accounts for 4.36 million of the growth will
SOCIAL employees and indirect employment to 10 million people. Thus, the sector
employees a significant chunk of the population.
64% originate from content
§ Growth of Business: With a vast multitude of medium sized companies and start 22.4bn
ups coming up rapidly in the country, India has been transformed into a Incremental
knowledge-driven economy. This, coupled with greater adoption of digital growth between
2019-24
means across demographics, has driven the growth of the IT industry. 14.3bn +177%

8.1bn
§ National Supercomputing Mission: In 2019, the Department of Electronics and
IT launched the National Supercomputing Mission which aims to bolster India’s
capability of delivering high-performance results in fields such as
bioinformatics, weather prediction, big data analytics etc. 2019 2024

§ Research and Development: In 2018, about $1.7 billion was spent on training Internet penetration rate in the country has been growing at a CAGR of 13%
and development of the workforce and for growing R&D.
+84.0%

TECHNOLOGICAL § Increased Internet Connectivity: With the coming of Jio, India has undergone a
50.0%
sea change in internet connectivity and smartphone usage. Internet penetration 48.5%

increased from 27% in 2015 to 50% in 2020. This change has majorly been 38.0%
34.8% 34.4%
driven by increase in rural internet subscribers and India became the country 27.2%
with the cheapest mobile data tariffs in the world.
§ Increased Automation: India is increasingly adopting AI and ML practices,
especially in the BFSI sector, in which it does not lag far behind the developed
countries. Automation is also permeating into the healthcare industry where it is 2015 2016 2017 2018 2019 2020
used for predictive analysis and diagnosis.
Sources: Ernst & Young Industry Outlook, Team Analysis 3
 Industry Overview: IT BPM India
PESTLE DIMENSION FACTS

§ New IT Rules 2021: In February 2021, the Indian government proposed a set of
controversial new regulations for the IT sector which covered social media and “The Union Budget has broadened our efforts
to link education with employability and
OTT companies in particular and added compliance obligations. These laws entrepreneurial capability, especially in IT and
came under scrutiny for giving the government excessive censorship control and Tech fields” – PM Modi

undermined data privacy of individuals.

§ Lack of data privacy laws: India currently does not have a law specifically
targeted towards data protection. The Parliament passed the IT Act in 2000
(amended in 2008), but no further advancements have been made. It does not
LEGAL currently adequately protect the rights of Indian citizens and does not Consumers view healthcare and financial-services businesses as the most trustworthy
differentiate between data collection rights of Indian versus foreign companies. Healthcare 44
Financial Services 44
§ New Data Protection Bill: A new data protection bill is, however, currently Pharmaceuticals 22
underway in the parliament and is said to be modelled after the EU’s GDPR Electric Power 19
Reatil 18
guidelines. Technology 17
Advanced electronics 17
§ National Cyber Security Policy 2013: In 2013, the Ministry of Communication Travel 14
. The trust worthiness
and Information Technology of the Government of India had released the Defense
Telecommunication
13
12
of IT as a sector is not
high
National Cyber Security Policy to protect the information, such as personal Automotive 12

information, financial/banking information, sovereign data, etc. Public sector

CPG
11
10
Agriculture 10
Media 10

§ Smart Buildings: The government has launched a public-private partnership Oil and gas 10

initiative for developing smart buildings with low carbon emissions in Chennai
and Bangalore. It is also working on the development of eco-friendly systems Govt. is trying to boost the IT sector’s involve through many of its schemes

using IoT in technology hubs in southern India.

ENVIRONMENTAL
§ Power Optimization: The government is also experimenting with technologies
and rules that would help in optimizing the power usage in high-performance
computing systems in Pune. This would reduce the electricity consumption of
these centres and fulfil sustainability goals.

Sources: Ernst & Young Industry Outlook, Team Analysis 4

 Industry Overview: IT BPM India

1 The IT-BPM sector has contributed a significant share to the GDP of India over 2 The share of revenue generated from the export market is higher than that of
the years, etching just below eight percent in 2020 revenue generated from the domestic market and this gap continues to widen
10% 200

9% Export Domestic
44
8% 160

Revenue in billion U.S. dollars

41
41
7%
37
35
Share of GDP

6% 120 34
5% 32
9.5% 9.3% 32
4% 8.1% 80 32
7.5% 8% 7.7% 7.9% 7.8% 7.7% 29 147
6.4% 136
3% 5.8% 6.1% 24 117 126
99 108
2% 40 86
69 76
50 59
1%

0% 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

3 Communication services and devices have been the dominant segments of the IT 4 The IT services sector generated the maximum share of revenue followed by
industry, in spite of the decline in spending because of the COVID-19 pandemic software products and engineering services in fiscal year 2020
Devices IT Services Telecommunications Services Data Center Systems Software Hardware
90 6.65 9%
3.74
80 5.58
4.88 7.42
3.47 6.69
3.37 3.67
70 3.48
27.94
Spending in billion U.S. dollars

3.73 4.2 4.49

4.08
2.91
60
2.33 2.28 2.89 Software
30.42
29.97
27.59 28.19 20%
50
29.23 27.75 29.80
52% IT Services
29.62 15.41
40
13.84
12.61 15.04 15.84
30
9.95 11.44 10.13 10.99
20 38.28
28.73 30.74
10 22.18 21.52 21.82 19.75
26.46 26.78
19%

0
BPM
2013 2014 2015 2016 2017 2018 2019 2020 2021

Sources: Statista, Euromonitor, Mordor Intelligence 5

Industry Overview: IT BPM India

1 The IT exports dominate the industry and constitute the majority of the total 2 The revenues from the enterprise software market of India was around 6.13
revenue. However, the domestic market has shown encouraging trends as well. billion USD in 2020 with presence of global leaders like Microsoft, Oracle, IBM
140
IT services BPM Software products and engineering services 6.29 6.13
120 31 6 5.58
28 5.16
Exports in billion U.S. dollars

4.88

Revenue in billion U.S. dollars

25 4.7
100 5
22
31 4.01
20 28 3.7
80 26 4
14 24
14 23
60 3
13 20
11 18
40 9 10 16 2
70 74
10 12 14 61 66
52
20 40 44 1
34
25.8 26 26
0 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 2020

3 The EAS market in India was forecasted to decline by less than two percent in 4 The south Asian country is the largest offshoring destination for IT companies
2020, due to the recession caused by the COVID-19 pandemic across the globe with over 15 million people employed directly and indirectly
3,000 12
12
Direc t employment Indirect employment
132
2,500 10 10 10
160.1 156 9.5
10
533 8.9
Revenue in million U.S. dollars

560.7 542 8.2 8.3

8
2,000
344 8

Employees
347.8 337
1,500 430 6
367.8 363
3.7 3.86
1,000 4 3.29 3.52
717 2.8 3
615 631 2.5
2.3
1.96
500 2
220.9 223 252

283.1 272 297

0 0
2019 2020 2021 2009 2010 2011 2012 2013 2014 2015 2016 2017
Analytics and business intelligence Content services
Customer experie nce and relationship management Email a nd authoring
Enterprise resource pla nning Other application software
Supply chain management
6
 Industry Overview: IT BPM Global

1 In 2021, spending on IT services is expected to amount to 1.1 trillion USD 2 Overall, the IT market is forecast to experience growing revenues over the next
worldwide, a growth of 9 percent from the previous year four years after declining revenues in 2020 due to the coronavirus pandemic.
4,500 Communication Services Enterprise software Devices IT Services Data Center Syste ms 1,400 Americas Asia Pa cific EM EA
248
4,000 237 1,200
215 220
Spending in billion U.S. dollars

210

Revenue in billion U.S. dollars

3,500 140 140
166 181 1193 390
171 170 1113 1,000 375
1040 360
3,000 906 922 993 1021 340 350
897 931 330 325
866 894 317.9
800 303.1
2,500 779 240
676 677 756 215 225
649 665 712 712 663 195 205
2,000 646 630 600 174.7 185 185
572 166.6
285 300 310 517
1,500 310 326 369 419 477 467
400
1,000 570 595 615 640
1641 1624 507.5 527.3 545 540 555
1541 1392 1374 1392 1380 1373 1386 1450 1505 200
500

0 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

3 Customers are increasing the adoption of digital channels, a trend seen across 4 Visible difference in the cash positions of different sectors post first-wave of
global regions COVID-19 pandemic, even lower quartiles are faring well in IT BPM industry
75 72
70 First-time users Regular users
65 64
61
60 21
55
50 24
% of digital access

45 31 44
40 39 38 37
13 35
35 9 6
11 8
30
25 51
20 40
15 30 31 30 31
27 27
10
5
0
Banking Entertainment Grocery Apparel Utilities Telecom Travel Insurance
carriers

Sources: Statista, Euromonitor, Mordor Intelligence 7

Business Description
Company Overview and Offerings
 Business Summary

Company Overview Business Segments & Verticals

§ Tata Consultancy Services Ltd, a subsidiary of Banking, Financial Services and Insurance (BFSI)
Tata Sons Pvt Ltd, is an information technology

Tata Consultancy Services

(IT) company
Manufacturing
§ Headquartered in Mumbai, Maharashtra, India
§ It provides IT Services, Consulting, and Business Retail & Consumer Business
Solutions to various industries including banking,
financial services, healthcare across 46 countries Media and Technology
§ Under IT services, TCS offers analytics, Internet of
Things, blockchain, cloud infrastructure, Communication & Others
enterprise applications, automation, Artificial
Intelligence, engineering and industrial services,
and cybersecurity Geography-wise Revenue

§ TCS serves clients across geographies consisting of North America, UK,

Board of Directors
Continental Europe, Asia Pacific, India, Middle East, and Latin America

45.00%

30.00%

15.00%
N. Ganapathy
Rajesh Gopinathan Natarajan
Subramaniam CEO Chandrasekaran 0.00%
COO Chairman
North Ameri ca UK Continental Asia Pacific India Middle East Latin America
Europe
Sources: Company Report 8
Value Creating Business Model
Tata Consultancy Services Limited has a global presence, deep domain expertise in multiple industry verticals and a complete portfolio of offerings which are
delivered using the latest technologies through a unique Location Independent Agile™ delivery model, embedding a Machine First™ approach, recognized as a
benchmark of excellence in software development.

Earnings Quality: Strong

Inputs Value Creation Process Output Outcomes

Financial • INR156,949 Crore Revenue • Creation of more jobs & opportunities

Capital • 24.6% Operating Margin • High profitability and strong balance
• INR 44,311 crore CC&CE & INR 73 Dividend/Sh sheet to weather economic downturns

• 24,179 Net Addition of Employees • Best in class talent retention

Human • Strong domain expertise knowledge
Capital • 12.1% Attrition
• 4.7 Million Learning Days • Deep digital technologies

• 5,216 Patents Applied • Intellectual property led to new revenue

Intellectual • 1,341 Patents Granted • Streams
Capital • 43 Active Research Partners in COIN Program • Expansion of market IP-led solutions

• 25,20 YoY Increase in $20M,$10M Clients • Deep and enduring customer relations
Social & • $13.5 Bn Brand Valuation • High repeat business, reduction in COGS
Relation • INR 755 Crore CSR Spend • High goodwill in community
Capital

• 11.8% Reduction in Carbon Footprint • Environment conscious moves have

• 9% Reduction in Fresh Water Consumption limited the impact of operations along
Natural
• 1.65 Power Utilization Efficiency with adding to goodwill in the market
Capital

• 1,000+ Agile Workspaces • Promote LIA model

• 2 Pace Ports • innovation partner for leading
Manufactur • Launched 30+ Innovation Labs corporation across the world
-ed Capital
9
 TCS Strategy
TCS invests in broadening and deepening customer relationships by continually looking for new areas in their value chain where the company can add value, proactively
investing in building newer capabilities, reskilling its workforce and launching newer services, solutions, products and platforms. This strategy has resulted in deep and
enduring CR, a vibrant and engaged workforce, a steady expansion of the addressable market, and a proven track record in delivering longer term stakeholder value.

Market Trends TCS Approach Outcomes

• More and more industries are leveraging technology to • Position as a growth and transformation partner • Industry-defining mega deals
1. differentiate themselves.
• Customers want solutions to business problems and
•
•
Investment in research, innovation and collabs
Domain-specific IP; focus on contextual knowledge
•
•
Thinner competitive set
Higher quality revenue
not just technology skills • Proactive solution selling • More fulfilling work; better retention

2. • Non-CIO buyer emerging in enterprises • Full stakeholder service and solutions

• Expansion of addressable market
• More deeply embedded in customer’s business
• Higher profile, important engagements--

• Transformational partners selected based on solution • Leverage TCS’ contextual knowledge, Location • Thinner competitive set
3. quality and time to market Independent Agile, Machine First Delivery Model
and Intellectual Property
• Higher quality revenue

• Greater platformization of business • Launch of cloud based platforms and new business • Large deals that improve business visibility
4. models • Expansion of addressable market
• Frees up spends for systems of differentiation
• Leverage IP portfolio

• Pandemic disruption highlights need for • Launch of SBWS • Highlights company’s responsiveness
5. operational resilience and enterprise adaptability • Greater focus on Location Independent Agile & MFDM
• Promote operating model transformation using AI
• Market share expansion

Sources: Company Report 10

 Suit of Products and Platforms
TCS BaNCS TCS OmniStore
• 23 new wins (7 for TCS BaNCS Cloud) and 24 go-lives in FY 2020
• AI powered system of actionable intelligence – powered by an enterprise digital twin
• Banking: Serves ~25% of the world population.
(customer, product, process) to help business leaders simulate and optimise
• Capital Markets: Records 10 million trades per day (peak), represents $40 trillion worth of enterprise decisions, predict and proactively manage outcomes
AUC across 100 countries
TCS TwinX
• 2 new wins and go-lives in FY 2020
• Insurance: Administers over 20 million life, annuity and pension policies; 135 million
property and casualty policies

TCS iON TCS Optumera

• Digital Glass room: Virtual learning platform, made available to educational institutions • AI and ML powered merchandise optimization platform that enables retailers to
across the country shut down by lockdown, free of cost. 2,000 institutions resumed their OptumeraTM unlock exponential value by optimizing their space, mix and price in an
teaching sessions in a span of one week since launch integrated manner.
• Learning: 3 million+ learners on the platform, 47,000 courses available, 18,000 communities • new wins and 1 go-live in FY 2020
• Process Management: 500+ SMB clients, 1 million+ users

Ignio
TCS OmniStore
• World leading cognitive automation software for enterprise IT and business operations
• Unified store suite which leverages AI to help deliver personalized, interconnected
• 54 new wins and 34 go-lives in FY 2020 OmnistoreTM journeys across various touch points for frictionless customer experience and
• 12 VARs and distributors and 13 tech and cloud partners in FY 2020 predictive operations
• Manages over 1.5 million technology resources autonomously • 4 new wins and 2 go-lives in FY 2020

TCS ADD
Mastercraft
• Comprehensive suite for digital transformation of drug development and clinical trials
TCS • Digital platform to optimally automate and manage IT processes
• 9 new wins in FY 2020
ADD
TM

• 6 new offerings enabled by AI and predictive analytics launched in Site Feasibility, Safety
Leveraging Decision Fabric, Clinical Analytics and Insights Platform, Regulatory Insights,
Metadata Registry, Digital Documents
• FY 2020 Highlights: 29 new wins, 1 billion+ records cleansed, 110 billion records
masked, 500+ million lines of code (mloc) analyzed, 25+ mloc generated
• Successfully delivered 60+ modernization projects so far

TCS HOBS
Jile
• Plug and play SaaS based business platform to digitally transform business, network and
TCS revenue management domains of subscription based businesses. • SaaS-based, scalable Agile DevOps platform to accelerate software development
HOBS • Serving 27+ clients, across Communications, Utilities, Manufacturing and Personal Care; and delivery and integrate DevOps tools
Serving 21 million+ subscribers, handling 125,000+ devices and processing 1 billion+ events. • 8 new wins and go-lives in FY 2020
• 5 new wins and 4 go-lives in FY 2020

Sources: Company Report 11

 Company Overview

1 BFSI segment that forms 32% of its revenues...

Vertical wise revenue split
2 ... drove growth in 4QFY21
4QFY21 Vertical wise revenue growth
BFSI Retail/CPG Comm/Meida Manufacturing Health Tech/Services Regional & Others 7.0
BFSI
100%
Overall 4.2
90% 20 19 19 20 19
80% Retail/CPG 4.0
9 9 9 9 8
70% 10
9 10 10 10 Manufacturing 3.9
% of Revenue

60% 9 9
10 10 10
50% 7 7 Health 3.8
7 7 7
40% 14 15 15 14
15 Tech/Services 2.8
30%
20% Comm/Meida 1.8
30 32 32 31 32
10% Regional & Others 1.7
0%
4Q20 1Q21 2Q21 3Q21 4Q21 0 1 2 3 4 5 6 7

% QoQccy

3 Share of continental Europe continued to rise... 4 ...with the market witnessing fastest growth in 4Q
Region wise revenue split 4QFY21 Region wise revenue growth

Continental Europe 8.5

North America Latin Americ a UK Continental E urope India Asia Pa cific ME A

100% MEA 4.3

4 2 4 3 5
90% 9 10 10 10 9
4 Overall 4.2
4 3 4 3
80%
15 16 16 16 17
70% North America 3.9
% of Revenue

60% 16 15 16 16 16 UK 3.4
50% 2 2 1 2 1
India 2.8
40%
30% Latin America 2.5
50 51 50 49 49
20%
Asia Pacific 1.0
10%
0% 0 1 2 3 4 5 6 7 8 9
4Q20 1Q21 2Q21 3Q21 4Q21
% QoQccy

Sources: Company Report, Team Analysis 12

 Company Overview

1 TCS returned to YoY revenue growth in 4Q...

YoY cc revenue growth
2 EBIT margin expanded by 20bps in 4Q21, despite higher subcontracting costs
4QFY21 Vertical wise revenue growth
15 28
12.7
11.5 12.1
10.6 26.8
9.3 27 26.5 26.6
10 8.4 26.2
7.2 6.8
5.9 26 25.6
25.4
25.0 25.1 25.0 25.1

% of Revenue
5
3.0 25
% YoYcc

24.2
0.4 24.0
0 24 23.6

23
-5 -3.2
22
-6.3
-10 21
4Q18 2Q19 4Q19 2Q20 4Q20 2Q21 4Q21 4Q18 2Q19 4Q19 2Q20 4Q20 2Q21 4Q21

3 Employee cost/sales ratio declined due to fall in average employee costs 4 Headcount increased by over 19k in 4Q, while attrition came down to 7.2%
Employee Cost Trends Headcount and Attrition

100 180 500 14

90
12
480
80 160

70 10
460
60 140
% of Revenue

Rs k/month
8
50 14 12 12 13 440
13 12 12 12 12 13 13 13 12
489
6
40 120
469
420
30 451 454 4
447 448 444
45 45 437
20 41 42 41 41 41 42 42 42 42 43 42 100
400 424
2
10

0 80 380 0
4Q18 2Q19 4Q19 2Q20 4Q20 2Q21 4Q21 4Q19 2Q20 4Q20 2Q21 4Q21

Sources: Company Report, Statista 13

 Company Overview

1 Subcontracting expenses picked up as the company utilized it tactically

Subcontracting expenses trends
2 Travel costs continue be low
Travel cost expenses

9 8.9 3

2.5
8.4 8.4 2.5 2.4 2.4
8.5 2.3 2.3
8.2 2.2
8.1 2.1 2.1
8.0 8.0
8 7.9 2 1.8

% of Revenue
7.7
% of Revenue

7.6
7.5 7.5
7.5 7.4 1.5

7 1
0.7 0.7
0.6 0.6

6.5 0.5

6 0
4Q18 2Q19 4Q19 2Q20 4Q20 2Q21 4Q21 4Q18 2Q19 4Q19 2Q20 4Q20 2Q21 4Q21

3 Healthy deal TCV of US$9.2bn in 4Q 4 Healthy book to bill suggests strong growth prospects
Deal TCV trends TTM TCV trends

10 BFSI Retail Other 40 TT M TCV TT M Revenue Book to bill ratio (RHS) 1.6x

9
35 1.4x
31.2 31.5
8 30.4
30 28.2 1.2x
3.4 3.9 27.0
7
25 1.0x
6 22.0 22.2

TTM, US$ bn
21.6 21.5 21.6
5.9
US$ bn

5 3.2 20 0.8x
2.7 3.9
3.4 1.4
2.7 3.3
4 3.1 15 0.6x
3 1.0
1.4 0.8
1.1 0.9 10 0.4x
0.9 1.0
2 3.9

2.2 2.4 2.6 5 0.2x

1 2.1 2.0 1.8 2.1 1.7
0 0 0.0x
4Q19 2Q20 4Q20 2Q21 4Q21 4Q20 1Q21 2Q21 3Q21 4Q21

Sources: Company Report, Statista 14

 Company Overview

1 Strong order book and healthy book to bill in BFSI

BFSI TCV Trends
2 Book to bill ratio in retail reset downwards due to exclusion of Walgreens
Retail TCV Trends
12 TT M TCV TT M Revenue Book to bill ratio (RHS) 2.0x 10 TT M TCV TT M Revenue Book to bill ratio (RHS) 2.5x

10.3 1.8x
10
1.6x 8 2.0x
8.8
8.4 8.5
8.0 1.4x
8 6.0
7.0 5.8 5.7 5.9
6.8 6.7 6.7 6.7 6 1.5x

TTM, US$ bn
1.2x
TTM, US$ bn

6 1.0x 4.3
0.8x 4 3.3 1.0x
3.2 3.2 3.2 3.2
4
0.6x

0.4x 2 0.5x
2
0.2x

0 0.0x 0 0.0x
4Q20 1Q21 2Q21 3Q21 4Q21 4Q20 1Q21 2Q21 3Q21 4Q21

3 Large client relationships continue to be robust 4 The overall client base was steady QoQ
Number of US$50m+ client relationships of TCS Number of US$1m+ client relationships of TCS
1,096
110 105 1,100 1,072
99 101 1,008
100 97 1,000 963
897
90 900
84 829
791 286
80 800 286
73 56 272
53 253
70 68 55 700 226
59
193 225
60 49 600
53 36
50 39 500

40 29 400
681 709
30 300 613 637
587
49 530 531
44 48
20 37 38 200
35
29
10 24 100

0 0
2014 2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021

US$50-100mn >US$100mn >US$100mn US$50-100mn US$10-50mn US$1-10mn

Sources: Company Report, Team Analysis 15

 Company Overview: SWOT Analysis

Strengths Weaknesses

§ Consistent improvement in revenue growth and § Weak balance sheet position of the company with
operating efficiency deteriorating receivables and inventory ratios

§ Established market leadership in an industry which
itself is going to be the fastest growing industry in the
next decade
§ Continuous growth in non-conventional segments
§ Declining EBITDA and Gross Profit margins in the
last few quarters with uncertainty about bounce back
§ Tough industry to participate due to consistent
domestic competition with visible market loss to

S W
and geographies such as manufacturing and
continental Europe major players in some segment

Opportunities Threaths

§ An opportunity to be the first choice partner for

O T
technical turnaround of all major companies in the
world and bag large size deals
§ Great opportunity to effectively channel human
resource and other overheads to improve profitability
§ Great gap to fill in developing countries in absence of strong
domestic IT infrastructure and to expand from 55 countries to
many more
§ COVID-19 related risks of employee safety and
revenue momentum seem tricky at the moment
§ The firm exposure in more than 55 countries of
the world in this current dynamically changing
environment
§ Valuation threat looms high for TCS with
overvaluation risk at the current market price.

Sources: Team Analysis 16

Valuation and Financials
Financial Projections, DCF, Relative Comparison etc.
 (Perp. Growth Method), WACC & Sensitivity Analysis
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
TATA CONSULTANCY SERVICES Enterprise Value Calculation Amount
Actual Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate
DCF Valuation (all figures are in INR crore except stated
otherwise)
Explicitly Forecasted Values Not Explicitly Forecasted Sum of PV of FCF 4,52,978

31-Mar- 30-Mar- 30-Mar- PV of Terminal Value 7,60,865

Date 31-Mar-21 31-Mar-22 23 24 31-Mar-25 31-Mar-26 31-Mar-27 28 31-Mar-29 31-Mar-30 31-Mar-31
Enterprise Value 12,13,843
Time (in years) 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00
Contribution in EV from Sum of PV of FCF 37.3%
WACC 10.7%
Terminal Growth Rate 5% Contribution in EV from PV of Terminal Value 62.7%
Equity Value Calculation
Revenues 1,64,177 1,71,993 1,89,376 2,10,612 2,34,393 2,60,549 2,81,393 3,03,904 3,28,217 3,54,474 3,82,832
Revenue Growth 4.8% 10.1% 11.2% 11.3% 11.2% 8.0% 8.0% 8.0% 8.0% 8.0% Debt 7,795

Free Cash Flow to Firm Cash & Cash Equivalents 9,329

EBIT 41,263 50,600 59,220 70,262 82,377 95,245 1,02,865 1,11,094 1,19,982 1,29,580 1,39,946 Net Debt
Tax Rate 25.6% 25.6% 25.6% 25.6% 25.6% 25.6% 25.6% 25.6% 25.6% 25.6% 25.6%
(1,534)

EBIT*(1-Tax rate) or NOPAT 30,704 37,652 44,066 52,283 61,297 70,872 76,542 82,666 89,279 96,421 1,04,135
Equity Value 12,15,377

Add: Depreciation & amortization 4,065 2,603 2,822 3,069 3,347 3,660 3,952 4,269 4,610 4,979 5,377
Number of Shares 370

Less: Capital expenditure (4,254) (1,772) (2,970) (3,301) (3,673) (4,082) (4,784) (5,166) (5,580) (6,026) (6,508) Per Share Value (INR) 3,285
Add / Less: Change in working capital (2,285) (1,243) 942 471 471 471 509 550 594 641 692
Growth Rate
Free Cash Flow 28,230 37,240 44,861 52,521 61,443 70,922 76,220 82,317 88,903 96,015 1,03,696
y/y growth - 31.9% 20.5% 17.1% 17.0% 15.4% 7.5% 8.0% 8.0% 8.0% 8.0% 4.0% 4.5% 5.0% 5.5% 6.0%
3,285
Terminal Value - - - - - - - - - - 19,10,193 9.7% 3519 3745 4019 4359 4791
PV of FCF 28,230 33,641 36,608 38,716 40,915 42,662 41,417 40,407 39,422 38,460 37,522 10.2% 3217 3399 3617 3880 4206

WACC
PV of Terminal Value 6,91,196
10.7% 2961 3110 3285 3493 3746
Free Cash Flows as a % of revenue
EBIT 25.1% 29.4% 31.3% 33.4% 35.1% 36.6% 36.6% 36.6% 36.6% 36.6% 36.6% 11.2% 2741 2864 3007 3175 3375
Depreciationn & Amortisation 2.5% 1.5% 1.5% 1.5% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%
Capital Expenditure -2.6% -1.0% -1.6% -1.6% -1.6% -1.6% -1.7% -1.7% -1.7% -1.7% -1.7% 11.7% 2550 2653 2771 2909 3070
Change in Working Capital -1.4% -0.7% 0.5% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

17
 Intrinsic Valuation (Bull, Base, Bear Case Scenario)
The FCFF is expected to decline at a CAGR of 2.44% from INR 47,884 cr. in We expect the Current Equity Value Per Share of TCS to range between INR
2022 to INR 43,380 cr. whereas the Operating Profit is increasing at a CAGR of 2,204 & INR 5,017 as per the Intrinsic Valuation (DCF Analysis – Bull Case)
8% till 2026. Perpetual Growth Rate
+8% 3,436 4.0% 4.5% 5.0% 5.5% 6.0%
+8% +8% 9.7% 3682 3919 4207 4564 5017
+8%
1,62,105 10.2% 3365 3556 3784 4061 4403
WACC
1,50,097 10.7% 3096 3252 3436 3655 3920
1,38,979
1,28,684 11.2% 2865 2994 3144 3321 3531
1,19,152 11.7% 2665 2773 2897 3041 3210

We expect the Current Equity Value Per Share of TCS to range between INR
47,884 46,716 45,576 44,465 43,380 2,204 & INR 5,017 as per the Intrinsic Valuation (DCF Analysis – Base Case)
Perpetual Growth Rate
3,285 4.0% 4.5% 5.0% 5.5% 6.0%
2022P 2023P 2024P 2025P 2026P 9.7% 3519 3745 4019 4359 4791
10.2% 3217 3399 3617 3880 4206
WACC
Operating Profit Unlevered FCFF 10.7% 2961 3110 3285 3493 3746
11.2% 2741 2864 3007 3175 3375
11.7% 2550 2653 2771 2909 3070
The valuation is dated 31 March 2021 and has a forecast period of 5 years, with
tax rate of 25.6% (Indian Corporate Tax Rate) & WACC of 10.7% We expect the Current Equity Value Per Share of TCS to range between INR
Assumptions Terminal Value 2,204 & INR 5,017 as per the Intrinsic Valuation (DCF Analysis – Base Case)
Valuation Date 31 Mar 2021 Perpetual Growth Rate
Calculated using
3,002 4.0% 4.5% 5.0% 5.5% 6.0%
Tax Rate 25.60% the Gordon
9.7% 3215 3420 3670 3978 4370
Growth Model
Discount Rate 10.7% with WACC 10.7% 10.2% 2941 3106 3303 3543 3839
WACC
and Perpetual 10.7% 2708 2843 3002 3191 3421
Perpetual Growth Rate 5%
Growth Rate of 5% 11.2% 2508 2620 2750 2902 3084
Terminal Value (Perpetual Growth Rate) 6,91,196 11.7% 2335 2428 2535 2660 2806

Sources: Team Analysis 18

 Comparable Company Analysis

2021 EV/EBITDA
23.3x 23.8x
20.2x 19.4x
17.5x
Median
Mean
12.2x
10.6x

Tata Consultancy Services Trading Comparable Analysis

Relative Comparison (all figures are in INR crore except EPS and number of shares)
Financial Data Market Data (31/03/21) Valuation Forward Multiples
Particulars
EBITDA
(Values in INR crores) Revenue EBITDA EBIT EBIT % PAT % Share Price Market Cap EV EV/Revenue EV/EBITDA EV/EBIT P/E EV/Revenue EV/EBITDA P/E
%
TCS 1,64,177 48,462 44,397 29.5% 27.0% 19.8% 3115.3 11,52,643 11,51,109 7.0x 23.8x 25.9x 35.5x 5.9x 20.59x 29.0x
Infosys Limited 1,01,014 27,427 24,782 27.2% 24.5% 19.3% 1356.4 5,75,808 5,54,167 5.5x 20.2x 22.4x 30.4x 4.8x 17.60x 25.4x
Tech Mahindra Limited 37,855 6,847 5,389 18.1% 14.2% 11.7% 976.9 85,398 72,822 1.9x 10.6x 13.5x 19.5x 1.7x 9.17x 16.2x
Wipro Limited 61,943 13,911 12,014 22.5% 19.4% 17.4% 489.9 2,67,420 2,43,471 3.9x 17.5x 20.3x 25.7x 3.3x 14.73x 24.0x
HCL Technologies 75,790 19,454 15,445 25.7% 20.4% 16.5% 909.6 2,46,821 2,38,247 3.1x 12.2x 15.4x 20.1x 2.8x 11.00x 17.8x
Mindtree Limited 7,968 1,657 1,397 20.8% 17.5% 13.9% 2097.8 34,555 32,110 4.0x 19.4x 23.0x 31.1x 3.5x 16.56x 26.2x
Persistent Systems 4,001 596 452 14.9% 11.3% 9.9% 1998.4 15,273 13,861 3.5x 23.3x 30.7x 38.5x 3.0x 18.06x 29.9x
Mean 3.7x 17.2x 20.9x 27.6x 3.2x 14.5x 23.2x
Median 3.7x 18.4x 21.3x 28.1x 3.1x 15.6x 24.7x

Sources: Team Analysis, CapitalIQ 19

 Valuation Summary

Valuation Metric Equity Value per Share (Upper & Lower Limit)

INR 3109 (Current Price) INR 3285 (Base Case)

Intrinsic Gordon Growth Model

3,002 3,436
Valuation WACC: 10.7%; PGR: 5%

LTM TEV / Total Revenue

928 2,570
1.9x – 5.6x

LTM TEV / EBITDA

1,419 2,891
10.6x – 22.3x

Total Enterprise LTM TEV / EBIT

1,635 3,611
Value Multiples 13.5x – 30.7x

NTM TEV/Forward Revenue

1.7x – 4.8x 967 2,520

NTM TEV/Forward EBITDA

1,434 2,743
9.2x – 18.1x

LTM P/Diluted EPS

1,001 2,047
19.5x – 38.5x

Pricing NTM Forward P/E

1,733 3,206
16.2x – 29.9x
Multiples

LTM P/TangBV 1,691 3,338

4.4x – 9.0x

Sources: Team Analysis 20

 Income Statement Breakdown
The Total Revenue in Forecast period is expected to grow from INR 16.4T to EBIT is expected to grow from INR 4.4T in 2021 to INR 10.1T in 2026 at a
INR 27.0T while the Profit Margins increases gradually over the years. CAGR of 19.5% over the next five years.

2,80,000 35 1,10,000 1,08,103 1,07,425

2,70,424 EBIT PBT
Net Profit Margin Revenues
2,60,000 1,00,000
2,41,962 93,684 93,007
2,40,000 90,000
28.7% 30
2,20,000 2,16,219 27.6% 79,771 79,094
80,000
1,93,340 26.1%
2,00,000
70,000 66,755 66,078
1,74,608 24.2%
1,80,000 25
1,64,177 60,000 56,034 55,356
1,56,949 22.3%
1,60,000
1,46,463
50,000
1,40,000 44,397 43,760
19.3%
18.4% 18.4% 20
1,20,000 40,000

1,00,000 30,000

80,000 15 20,000
2019A 2020A 2021A 2022P 2023P 2024P 2025P 2026P 2021A 2022P 2023P 2024P 2025P 2026P

The ROE improves from 37.9% to 44.4% in 2026 showing proper utilization of The EBITDA Margin is forecasted to increase gradually over the years while the
revenues generated and at the same time ROA remains stabilized at ~28%. EBIT Margin is expected to lie between the range of 25%-35%.
50 42 40.2%
38.8% 38.8%
44.2% 44.4% 40
42.9% 37.4%
45 42.6% 36.9%
41.4% 38
35.4%
36 34.4%
40 37.9% 32.9%
37.2% 34
36.0% 31.8%
32 30.3%
35
30
27.6%
28.5% 28.3% 28.0% 28.1% 28.4% 28
30 27.5% 27.1% 25.1%
25.9% 26

25 24
22
20 20
2019A 2018A 2021A 2022P 2023P 2024P 2025P 2026P . 2021A 2022P 2023P 2024P 2025P 2026P

Return on Equity (ROE) Return on Assets (ROA) EBITDA Margin EBIT Margin

Sources: Team Analysis 21

Investment Thesis and Risks
Investment Rationale
 Investment Thesis

1 Strong Operating Performance 2 Efficient Employee and Client Management

Operating efficiency continues to be a strong point for TCS with adequate recovery Employee cost/sales ratio came down with effective people management as the
post COVID-19 driven fall. We expect the strong performance to hold across the 2nd employee headcount increased by 19,000 in the 4QFY2021 and the attrition rate
or a potential 3rd wave. came down to just 7.2%

500 14

480 12

10
460
8
440
489 6
469
420
451 448 454 4
447 444
437
400 424
2

380 0
4Q19 2Q20 4Q20 2Q21 4Q21

§ TCS had a Gross margin ratio of 43.2% as against an industry leaders’ average of § Large client relationships show a clear increasing trend over the years showing a
35.43% ( 21.9% lead over leaders) and a visible leadership in EBITDA margins strong base for future large deals leadership. The overall client base for small to
having 21.5% higher margins (28.4% as against 23.37% average for industry) medium sized clients continue to hold shape amidst the pandemic as well
110 105
US$50-100mn >US$100mn 99 101
97
Gross Margin EBITDA Margin 100
90 84
Infosys Limited 34.0% 27.2% 80 73 56
68 55 53
70 59
Tech Mahindra Limited 35.9% 18.1% 60 53 49
36
50 39
Wipro Limited 31.7% 22.5% 40 29
30
HCL Technologies Limited 40.1% 25.7% 44 49 48
20 37 35 38
24 29
Tata Consultancy Services Limited 43.2% 28.4% 10
0
2014 2015 2016 2017 2018 2019 2020 2021
Sources: Team Analysis 22
 Investment Thesis

3 Positive Demand and Revenue Momentum 4 Inclusive Growth across all the Segments

TCV of large-deal wins stood at an all-time high of USD 9.2bn (+35% QoQ), with TCS has shown impressive growth across non-conventional growth segments and
USD 3.9/1.4bn TCV signed in BFSI/Retail. This is a clear indicative of the positive geographical markets. The recent stall in segments due to the pandemic is now
client relation the company maintaining leading to more deal. recovering and the firm has reinstated normal growth margins.

TCV of large deal wins (USD million)

BFSI 7.0
10000
Overall 4.2
9000
Retail/CPG 4.0
8000

7000 Manufacturing 3.9

Building on top of a solid
6000
rebound last quarter (+7%
Health 3.8
cc QoQ), the Manufacturing
5000
2.8
vertical delivered 3.9% cc
Tech/Services
QoQ growth in 4Q.
4000
Comm/Meida 1.8
3000
Regional & Others 1.7
2000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
0 1 2 3 4 5 6 7
2019 2020 2021

North America 3.9 Continental Europe led the

way in 4Q, with 8.5% cc
§ USD revenue grew 4.2% cc QoQ with QoQ growth, while the UK

BFSI (+7%) growing the fastest, aided by

New Clients Latin America 2.5
saw steady growth of 3.4%
UK 3.4 cc QoQ.
full ramp-up of the two large deals
Continental Europe 8.5
(Postbank and Pramerica) and the
customer experience, core transformation India 1.0

and reg-tech initiatives. Life sciences APAC 2.8

(+3.8%) and manufacturing (+3.9%)
4.2
verticals remained the drivers of growth. EMEA

0 1 2 3 4 5 6 7 8 9

% QoQccy
Sources: Team Analysis 23
 Environmental, Social & Governance

Tata Consultancy Services (TCS) follows the Tata Group philosophy of building sustainable businesses that are rooted in the community and demonstrate care for the environment. It has
contributed in various CSR initiatives. Strong leadership and effective corporate governance practices have been the Company’s hallmark.

1 Environmental 2 Social 3 Governance

§ TCS has been able to reduce its specific energy consumption by over The company is liable to donate 2% of its profits to CSR activities. The § The Company has a strong legacy of fair, transparent and ethical
60% over baseline year FY 2008, and bring down its greenhouse gas company has over the years donated more than the regulatory requirements. governance practices.
emissions Some of the key contributions are:
§ In FY 2020, TCS migrated to the ISO 45001:2018 Occupational Health
§ Compared to the prior year, the specific energy consumption is down and Safety Management System standard and successfully completed
11.9% and specific carbon footprint is down 11.8% YoY § Digital Glass room: Virtual learning platform, made external certification for 126 of its facilities worldwide.
available to educational institutions across the country
§ The company has saved ~11 million units of electricity by switching over shut down by lockdown, free of cost. 2,000 § The Company’s corporate governance philosophy has been further
to energy-efficient LED lighting across 90% of its operations in India. institutions resumed their teaching sessions in a span strengthened through the Tata Business Excellence Model, the TCS Code
of one week since launch of Conduct for Prevention of Insider Trading and the Code of Corporate
§ Assessment: 200 million+ candidates assessed Disclosure Practices
27% ~ 89% § Learning: 3 million+ learners on the platform, 47,000
reduction in reduction in per capita courses available, 18,000 communities Global Business: Understanding, of global business dynamics,
freshwater usage paper usage since ‘08 across various geographical markets, industry verticals and
§ TCS’ Digital Nerve Centre (DiNC) is a unique and regulatory jurisdictions.
innovative delivery model designed to connect,
ZERO 57% communicate, coordinate and deliver care by Strategy and Planning: Appreciation of long-term trends, strategic
ODP refrigerants office space as per leveraging people choices and experience in guiding and leading management teams
in its operations green building standards
to make decisions in uncertain environments.
§ Digital Impact Square (DISQ), is an open social
Specific Scope 1 + Scope 2 Emissions (TCO2E/FTE/ANNUM) innovation centre located in Nashik, Maharashtra, Governance: Experience in developing governance practices,
which encourages innovation using digital serving the best interests of all stakeholders, maintaining board and
technologies to address social challenges. management accountability, building long-term effective
3.00 -7.7%
stakeholder engagements and driving corporate ethics and values.
2.71
2.44 2.35 2.21
1.99 1.97 SLR Philosophy: The company’s fixed-income
1.82 1.67 1.53 1.43 1.32 1.15 840,000 310,000 investment philosophy focuses on credit quality and follows the
beneficiaries reached via students reached via various philosophy of SLR (Safety, Liquidity and Return) generally
community initiatives in ‘20 STEM activities of TCS
prioritized in that order.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Sources: Team Analysis, Company Report 24

 Key Risks & Mitigants
No. Risk Impact Mitigant
§ The company’s operations might be adversely impacted due to § Establishment of a Covid-19 Emergency Response Apex committee at Enterprise level
incapacitation of sections of the global workforce due to to drive a holistic action plan and coordinate global efforts • Deployment of TCS’
Disruption and
exposure to the pandemic Secure Borderless Workspaces infrastructure enabling associates to work from home
uncertainty in
§ Demand for the company’s services may be adversely affected and ensure business continuity
R1 business due to
§ Regular communication with customers about measures taken to maintain business
COVID-19
services and reporting of status
pandemic
§ Drawing up of plans and identification of opportunities for proposing new and re-
purposed offerings and solutions during and post the Covid-19 disruption

§ Political disruptions or volatile economic conditions (trade § Broad-based business mix, well diversified across geographies and industry verticals
Volatile global
tensions, post-Brexit uncertainty, COVID-19 pandemic impacts § Cater to market segments which might provide counter-cyclical support
R4 R2 R1 political and
R2 on the global economy, US presidential elections etc.) may § Long term contracting models
economic
adversely affect that outlook resulting in reduced spending which § Leverage business ecosystem through collaboration with partners, start-ups and
scenario
could restrict revenue growth opportunities. alliances to participate in transformation initiatives of customers
Significance
of Risk

§ Distributed software development models require the free § Ongoing monitoring of the global environment, working with advisors, partners and
R6 R5 R3 Restrictions on movement of people across countries and any restrictions in key governments
global mobility, markets pose a threat to the global mobility of skilled § Material reduction in dependency on work visas through increased hiring of local talent
R3
location professionals including freshers, use of contractors, local mobility and training in all major markets
strategies § Use of Location Independent Agile to promote systematic collaboration and reduce the
need for co-location

§ Given the scale and geographic spread of the company’s § Strengthening internal processes and controls to adequately ensure compliance with
operations, litigation risks can arise from commercial disputes, contractual obligations, information security and protection of intellectual property
perceived violation of intellectual property rights and § Improved governance and controls over immigration process /increasing localization
Probability of R4 Litigation risks
employment related matters. and sensitization of business managers
Risk § Potential disputes are promptly brought to the attention of management and dealt with
appropriately

§ Volatility in currency exchange movements results in transaction
and translation exposure. Appreciation of the INR against any
Currency
R5 major currency could impact the reported revenue in INR terms,
volatility
the profitability and also result in collection losses.
§ TCS follows a currency hedging policy that is aligned with market best practices, to
limit impact of exchange volatility on receivables, forecasted revenue and other current
assets and liabilities
§ Hedging strategies are decided and monitored periodically by the Risk Management
Committee of the Board convened on a regular basis

§ Data privacy and protection of personal data is an area of § A global privacy policy is in place covering all applicable geographies and areas of
Breach of data
R6 increasing concern globally. Legislations like GDPR in Europe operations, which sets out the privacy principles within TCS
protection laws
carry severe consequences for non-compliance or breach

Sources: Team Analysis 25

Appendix
Supporting Slides and Analysis
 Income Statement
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
TATA CONSULTANCY SERVICES
Actual Actual Actual Actual Actual Estimate Estimate Estimate Estimate Estimate

Income Statement (all figures are in INR cr except stated otherwise)

I. Revenue from operations 1,17,966 1,23,104 1,46,463 1,56,949 1,64,177 1,71,993 1,89,376 2,10,612 2,34,393 2,60,549
II. Other income 4,221 3,642 4,311 4,592 3,134 3,134 3,134 3,134 3,134 3,134
III. TOTAL INCOME 1,22,187 1,26,746 1,50,774 1,61,541 1,67,311 1,75,127 1,92,510 2,13,746 2,37,527 2,63,683
IV. Expenses
Employee benefits expense 61,621 66,396 78,246 85,952 91,814 92,732 98,296 1,04,685 1,12,013 1,20,414
Cost of equipment and software licences 2,808 2,700 2,270 1,905 1,462 1,474 1,485 1,497 1,509 1,521
Depriciation and ammortization expense 1,987 2,014 2,056 3,529 4,065 2,603 2,822 3,069 3,347 3,660
Other Expenses 21,226 21,492 26,441 26,983 25,573 24,584 27,553 31,098 35,146 39,709
Finance Costs 32 52 198 924 637 667 667 667 667 667
TOTAL EXPENSES 87,674 92,654 1,09,211 1,19,293 1,23,551 1,22,060 1,30,824 1,41,017 1,52,683 1,65,971
V. PROFIT BEFORE TAX 34,513 34,092 41,563 42,248 43,760 53,067 61,687 72,729 84,844 97,712
VI. Tax Expense 8,156 8,212 10,001 9,801 11,198 13,580 15,785 18,611 21,711 25,004
(a) Current tax 8,235 8,265 9,502 10,378 11,635 - - - - -
(b) Deferred tax (79) (53) 499 (577) (437) - - - - -
VII. PROFIT FOR THE YEAR 26,357 25,880 31,562 32,447 32,562 39,487 45,901 54,118 63,133 72,708
VII. Other Comprhensive Income/Losses (177) (128) 324 464 461 461 461 461 461 461
IX. TOTAL COMPREHENSIVE INCOME FOR THE YEAR 26,180 25,752 31,886 32,911 33,023 39,948 46,362 54,579 63,594 73,169
X. PROFIT ATTRIBUTABLE TO:
Non Controlling Interests 68 54 90 107 132 132 132 132 132 132
Shareholders 26,289 25,826 31,472 32,340 32,430 39,355 45,769 53,986 63,001 72,576
XI. COMPREHENSIVE INCOME ATTRIBUTABLE TO
Non Controlling Interests 63 70 99 147 147 147 147 147 147 147
Shareholders 26,117 25,682 31,787 32,764 32,914 39,801 46,215 54,432 63,447 73,022

XII. SHARES
Weighted average number of Equity Shares 197 385 379 375 370 370 370 370 370 370
Earnings Per Share (basic & diluted) (INR) 133 67 83 86 88 106 124 146 170 196
Face Value Per Share 1 1 1 1 1 1 1 1 1 1

XII. DIVIDEND (including taxes)

Dividends Paid 10,947 10,726 11,424 37,634 10,850 - - - - -
Dividend Per Share (basic & diluted in INR) 56 28 30 100 29 - - - - -
Dividend Payout Ratio 41.6% 41.5% 36.3% 116.4% 33.5% 40.0% 40.0% 40.0% 40.0% 40.0%

Sources: Team Analysis 26

 Balance Sheet: Asset Side
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
TATA CONSULTANCY SERVICES
Actual Actual Actual Actual Actual Actual Estimate Estimate Estimate Estimate Estimate

Balance Sheet (all figures are in INR cr except stated otherwise)

ASSETS (APPLICATION OF FUNDS)
Non-current assets
(a) Property, plant and equipment 9,971 10,057 10,216 10,411 10,941 11,110 11,205 11,352 11,585 11,911 12,333
(b) Capital work-in-progress 1,670 1,541 1,278 963 906 926 - - - - -
(c) Goodwill 1,669 1,597 1,745 1,700 1,710 1,798 1,891 1,988 2,090 2,198 2,311
(d) Other intangible assets 134 47 12 179 283 480 732 992 1,282 1,620 1,975
(e) Financial assets
(i) Investments 343 344 301 239 216 213 223 223 223 223 223
(ii) Trade Receivables - 67 94 95 74 55 58 58 58 58 58
(iii) Unbilled receivables (Previous year:Unbilled revenue) - 143 227 391 324 273 286 286 286 286 286
(iv) Loans Receivables 2,472 9 1,975 60 29 29 30 30 30 30 30
(v) Other Financial Assets 1,325 825 691 738 1,184 1,573 1,648 1,648 1,648 1,648 1,648
(f) Income Tax Assets (net) 4,465 4,789 4,131 4,017 2,462 1,845 1,933 1,933 1,933 1,933 1,933
(g) Deferred tax assets (net) 2,908 2,828 3,449 2,656 2,828 3,931 4,118 4,118 4,118 4,118 4,118
(h) Other Assets 926 689 953 1,363 1,711 1,613 1,690 1,690 1,690 1,690 1,690
(i) Rights of use assets - - - - 7,994 7,633 - - - - -
Total non-current assets 25,883 22,936 25,072 22,812 30,662 31,479 23,813 24,318 24,943 25,714 26,604

Current assets
(a) Inventories 16 21 26 10 5 8 8 8 8 8 8
(b) Financial assets
(i) Investments 22,479 41,636 35,707 29,091 26,140 29,160 30,548 30,548 30,548 30,548 30,548
(ii) Trade Receivables 24,073 22,617 24,943 27,346 30,532 30,079 30,569 29,626 28,684 27,741 26,799
(iii) Unbilled receivables (Previous year:Unbilled revenue) 3,992 5,208 6,686 5,157 5,732 6,583 6,896 6,896 6,896 6,896 6,896
(iv) Cash & Cash Equivalents 6,295 3,597 4,883 7,224 8,646 6,858 55,691 1,02,030 1,55,995 2,18,828 2,91,116
(v) Other Balances with banks 493 552 2,278 5,624 1,020 2,471 - - - - -
(vi) Loans Receivables 2,743 2,909 3,205 8,029 8,475 11,472 12,489 12,961 13,432 13,903 14,374
(vii) Other financial assets 916 1,474 875 1,769 1,473 1,394 1,460 1,460 1,460 1,460 1,460
(c) Income tax assets (net) 32 26 37 1,853 8 19 20 20 20 20 20
(d) Other Assets 2,174 2,276 2,584 6,028 8,206 11,236 12,713 13,656 14,598 15,541 16,483
Total current assets 63,213 80,316 81,224 92,131 90,237 99,280 1,50,396 1,97,206 2,51,642 3,14,946 3,87,706

Total assets 89,096 1,03,252 1,06,296 1,14,943 1,20,899 1,30,759 1,74,209 2,21,524 2,76,584 3,40,660 4,14,310

Sources: Team Analysis 27

 Balance Sheet: Liabilities and Equity Side

FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
TATA CONSULTANCY SERVICES
Actual Actual Actual Actual Actual Actual Estimate Estimate Estimate Estimate Estimate

Balance Sheet (all figures are in INR cr except stated otherwise)

EQUITY AND LIABILITIES (SOURCES OF FUNDS)
EQUITY
(a) Share Capital 197 197 191 375 375 370 370 370 370 370 370
(b) Other Equity 70,875 86,017 84,937 89,071 83,751 86,063 1,25,550 1,71,451 2,25,569 2,88,702 3,61,410
Equity attributable to the shareholders of the company 71,072 86,214 85,128 89,446 84,126 86,433 1,25,920 1,71,821 2,25,939 2,89,072 3,61,780
Non-controlling interest 355 366 402 453 623 675 675 675 675 675 675
Total equity 71,427 86,580 85,530 89,899 84,749 87,108 1,26,595 1,72,496 2,26,614 2,89,747 3,62,455

LIABILITIES
Non Current Liabilities
(a) Financial Liabilities
(i) Long term Borrowings 83 71 54 44 6,906 6,503 6,813 6,813 6,813 6,813 6,813
(ii) Other financIal liabilities 493 454 503 287 291 280 293 293 293 293 293
(b) Unearned and deferred revenue 0 0 503 844 697 1,197 1,254 1,254 1,254 1,254 1,254
(c) Employee Benefit Obligations 237 245 290 330 417 749 785 785 785 785 785
(d) Provisions 40 39 26 - - - - - - - -
(e) Deferred Tax liabilities (Net) 805 919 1,170 1,042 779 767 804 804 804 804 804
(f) Other Liabilities 442 432 392 413 - - - - - - -
Total Non-Current Liabilities 2,100 2,160 2,938 2,960 9,090 9,496 9,948 9,948 9,948 9,948 9,948

(a) Financial Liabilities

(i) Borrowings 113 200 181 - 1,268 1,292 1,354 1,354 1,354 1,354 1,354
(ii) Trade Payables 7,541 4,905 5,094 6,292 6,740 7,860 9,648 10,590 11,061 11,533 12,004
(iiI) Other financIal liabilities 2,364 2,924 3,913 4,903 6,100 6,150 6,914 7,385 7,856 8,328 8,799
(b) Unearned and deferred revenue 1,359 1,398 2,032 2,392 2,915 3,650 3,824 3,824 3,824 3,824 3,824
(c) Income Tax Liabilities (net) 805 1,412 1,421 2,667 3,712 6,243 6,540 6,540 6,540 6,540 6,540
(d) Employee benefit obligations 1,635 1,862 2,018 2,356 2,749 3,498 3,665 3,665 3,665 3,665 3,665
(e) Provisions 115 66 240 239 293 1,394 1,460 1,460 1,460 1,460 1,460
(f) Other Liabilities 1,637 1,745 2,929 3,235 3,283 4,068 4,262 4,262 4,262 4,262 4,262
Total Current Liabilities 15,569 14,512 17,828 22,084 27,060 34,155 37,666 39,080 40,022 40,964 41,907

Total Equity and Liabilities 89,096 1,03,252 1,06,296 1,14,943 1,20,899 1,30,759 1,74,209 2,21,524 2,76,584 3,40,660 4,14,310

Sources: Team Analysis 28

 Cash Flow Statement
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
TATA CONSULTANCY SERVICES
Actual Actual Actual Actual Actual Actual Estimate Estimate Estimate Estimate Estimate
CASH FLOW STATEMENT (all figures are in INR crore except stated otherwise)
I. CASH FLOWS FROM OPERATING ACTIVITIES
Profit After Tax (PAT) 26,357 25,880 31,562 32,447 32,562 39,487 45,901 54,118 63,133 72,708
Add: Depriciation & Ammortization 1,987 2,014 2,056 3,529 4,065 2,603 2,822 3,069 3,347 3,660
Add: Interest 32 52 198 924 637 667 667 667 667 667
Less: Other Income (4,221) (3,642) (4,311) (4,592) (3,134) (3,134) (3,134) (3,134) (3,134) (3,134)
Change in Working Capital (excluding cash) (20,799) 5,420 (964) 3,688 (2,285) (1,243) 942 471 471 471
Net Cash Flow 3,356 29,724 28,541 35,996 31,845 38,381 47,199 55,192 64,484 74,372

II. CASH FLOWS FROM INVESTING ACTIVITIES

Change in Fixed Assets (1,944) (1,910) (1,936) (4,002) (4,254) (1,772) (2,970) (3,301) (3,673) (4,082)
Change in intangible assets 159 (113) (122) (114) (285) (345) (357) (392) (446) (468)
Change in investments 2,752 (1,900) 1,765 (304) (316) (102) - - - -
Other Income 4,221 3,642 4,311 4,592 3,134 3,134 3,134 3,134 3,134 3,134
Net Cash Flow 5,188 (281) 4,018 172 (1,721) 915 (193) (560) (985) (1,416)

III. CASH FLOWS FROM FINANCING ACTIVITIES

Change in Debt (51) 32 (226) 6,866 (414) 323 - - - -
Less: Dividend & Dividend Tax (10,947) (10,726) (11,424) (37,634) (10,850) - - - - -
Change in Equity Capital - (6) 184 - (5) - - - - -
Less: Interest Paid (32) (52) (198) (924) (637) (667) (667) (667) (667) (667)
Other Equity Adjustments (268) (16,234) (16,004) (133) (19,400) - - - - -
Other Adjustments 115 555 796 (7,525) 845 7,410 - - - -
Net Cash Flow (11,183) (26,431) (26,872) (39,350) (30,461) 7,066 (667) (667) (667) (667)

Net change in cash and cash equivalents (2,639) 3,012 5,687 (3,182) (337) 46,362 46,339 53,965 62,833 72,289
Cash & cash equivalents at the beginning of the year 6,788 4,149 7,161 12,848 9,666 9,329 55,691 1,02,030 1,55,995 2,18,828
Cash & cash equivalents at the end of the year 6,788 4,149 7,161 12,848 9,666 9,329 55,691 1,02,030 1,55,995 2,18,828 2,91,116

Cash & Cash Equivalents (includig other bank balances) 6,788 4,149 7,161 12,848 9,666 9,329 55,691 1,02,030 1,55,995 2,18,828 2,91,116

Sources: Team Analysis 29

NES & IFSA Investment
Research Challenge 2021

Thank You!