TCS
ASHISH RANJAN
Introduction
Tata Consultancy Services (TCS), headquartered in Mumbai, is the world’s largest IT service
provider and the largest IT company in India in terms of revenue. It has over 4,20,000
employees and from past 50 years it is providing business solutions, consulting and IT
services to the world top businesses. TCS has over 4,80,000 of the world’s best trained
consultants in 46 countries. The company is listed on BSE (Bombay Stock Exchange) and the
NSE (National Stock Exchange) in India, and it has generated US $22.2 billion in the fiscal
year ended March 31, 2021.
Financial Analysis
1.Du Pont Analysis
DuPont analysis is a useful technique to decompose ROE (Return on Equity), which further
allows the investors to focus on the key metrics of financial performance and identify
strengths and weakness.
DuPont Analysis=Net Profit Margin× Asset Turnover × Equity Multiplier
2.TCS Balance sheet analysis
TCS BALANCE SHEET
No. of Months Year Ending 12 Mar-20* 12 Mar-21* % Change
Net worth Rs m 841,260 864,330 2.7
Current Liabilities Rs m 270,600 341,550 26.2
Long-term Debt Rs m 0 0 0.0
Total Liabilities Rs m 1,180,710 1,268,280 7.4
Current assets Rs m 902,370 992,800 10.0
Fixed Assets Rs m 278,340 275,480 -1.0
Total Assets Rs m 1,180,710 1,268,280 7.4
TCS’s current liabilities during FY21 is Rs 342b as compared to Rs
271b in FY20, showing an increase of 26.2%
TCS’s current assets rose to 992b in FY21 from 902b in FY20 and
shows an increase of 10%
Fixed assets fell by 1% and stood at Rs 275 in FY21.
TCS’s total assets and liabilities for FY21 is Rs 1,268b as against Rs
1,181b in FY20, showing a growth of 7%.
3.TCS’s Income Statement Analysis
TCS Income statement
No. of Mths Year Ending 12 Mar-20* 12 Mar-21* % Change
Net Sales Rs m 1,569,490 1,641,770 4.6%
Other income Rs m 45,920 31,340 -31.8%
Total Revenues Rs m 1,615,410 1,673,110 3.6%
Gross profit Rs m 421,090 453,280 7.6%
Depreciation Rs m 35,290 40,650 15.2%
Interest Rs m 9,240 6,370 -31.1%
Profit before tax Rs m 422,480 437,600 3.6%
Tax Rs m 98,010 111,980 14.3%
Profit after tax Rs m 324,470 325,620 0.4%
Gross profit margin % 26.8 27.6
Effective tax rate % 23.2 25.6
Net profit margin % 20.1 19.5
Net Sales rose by 4.6% in FY21.
Gross Profit rose by 7.6% in FY21
Depreciation charges increased by 15.2% in FY21
Other income declined by 31.8% in FY21
Net Profit grew by 0.4% in FY21
4.Ratio Analysis
Ratio Analysis is used to evaluate the financial health of a company by scrutinizing
past and current financial statements. The data can be used to compare the
company’s performance over time and at the same time can be compared with the
performance of other companies of the same sector
Solvency Ratios
Current Ratio: It measures the company’s ability to pay short- and long-term
obligations.
Current Ratio = Current Assets / Current Liabilities
For 2020, CR= 902370/270600 =2.9
For 2021, CR=992800/341550 = 3.3
The company’s current ratio fell to 2.9 during FY21, from 3.3 in FY20.
Interest coverage ratio: This shows how easily a company can pay the interest
expenses on outstanding debt. Higher ratio is good.
Interest Coverage Ratio = Earning before interest and taxes / Interest expense
For 2020, ICR = 421090/9240 = 45.57
For 2021, ICR = 453280/6370 = 71.16
The interest coverage ratio of the company has improved in FY21 to 71.16 from 45.57
in FY20.
Profitability Ratios
Return on Equity (ROE): The ROE measures the company’s ability to generate
profits from its shareholders capital.
ROE =Net income/Average Shareholder equity.
ROE FY21 = 345B/907B = 0.38
Which means ROE for FY21 is 38%
This means that for Rs 1 of shareholders’ capital, the company has made Rs 0.38 in
profit.
The ROE of TCS for FY20 was 37%, which means that the ROE has improved in
FY21.
Return on Capital Employed (ROCE): This is the amount of pre-tax income (in %)
which a company earns on the capital invested in the business.
ROCE = EBIT / (Total Assets – Total Liabilities)
ROCE for FY21 = 450b / 1.4t – 356b = 0.45
Which means ROCE = 45% for TCS for FY21
5. Cash Flow Statement
Cash Flow Statement summarizes the amount of cash and cash equivalents entering and
leaving the company.
No. of
12 12 %
Particulars months
Change
Year Ending Mar-20 Mar-21
Cash Flow from Operating
Rs m 323,690 388,020 19.9%
Activities
Cash Flow from Investing
Rs m 85,650 -81,290 -
Activities
Cash Flow from Financing - -
Rs m -
Activities 399,150 326,340
Net Cash Flow Rs m 14,220 -17,880 -
TCS’s cash flow from operating activities (CFO) during FY21 was Rs
388b and showed an improvement of 19.9% on a YoY basis.
Cash flow from investing activities (CFI) is Rs – 81b for FY21
Cash flow from financial activities (CFF) is Rs -326b during FY21,
and shows an improvement of 18%
Net Cash flow for TCS during FY21 is Rs -18b
Marketing Analysis
1.Marketing Goals and Marketing Strategies
TCS marketing goal is customer centric and it wants to provide the best service possible to
its customers. They collaborate closely with their customers and try come with the best
possible design to satisfy their customer’s need. TCS focuses on building a long-term
customer relationship, which makes it a trusted and reliable partner in the industry.
2.Mission and Vision of TCS
Mission: To help customer achieve their business objectives by providing innovative,
best in class consulting, IT solutions and services.
Vision: To grow sustainably and help the customers to achieve sustainable growth
through green solutions and service offerings.
3.KPI
KPI (Key Performance Indicator) are certain key indicators which is used to measure the
performance of a company over time.
TCS ranked 1st for consecutive 3 years in Customer satisfaction in Europe’s digital
economy
TCS ranked 1st in both application and infrastructure services.
TCS raked 1st in all 9 KPI’s of White Lane i.e., service delivery, report quality,
change management, innovation, contract flexibility, price level, escalation
effectiveness, account management and proactivity.
4.Philantrophy
TCS is involved in many Philanthropic activities in the field of education,
employment and entrepreneurship.
TCS devised a program called Adult Literacy Programme in 2000 to
improve the adult literacy rate of the country. The company collaborates
with various NGOs to implement this programme throughout the country.
The company uses a combination of methods to provide basic education to
the illiterates, and it focuses on making them literate using their mother
tongue.
Youth Employment Program: The company runs this program to give
training to the youths from the rural areas and provide them guidance in
their careers. This program mainly focuses on underprivileged students of
rural areas, and this program also tries to give the youth an industry
exposure.
Bridge IT: TCS’s Bridge IT focuses on making new entrepreneurs from the
rural India. This program supports and guide young men and women from
rural India to start their own small but flourishing businesses.
Operation Analysis
Location: TCS is headquartered in Mumbai, though it has offices in various cities of the
world, but the main operations are carried out in Mumbai headquarters.
Equipment: TCS provide business solutions and IT services to its customers, therefore
there is no raw material involved in the production. All software and data are stored in the
various servers of the company. High tech computers are used to innovate new solutions
for its customers.
Distribution Channel: TCS provide service to its customers according to the
customer’s need.
Human Resources Analysis
1.Payroll Analysis and Compensation Analysis: The average salary at TCS ranges
from 0.6 lakhs per year for a pantry boy to 153.3 Lakhs per year for a managing director and
CEO.
2.Recruitment and Training at TCS: TCS hires talent from the country based on
interviews and qualifications. TCS ignite is an intense learning program for young science
graduates who join TCS. On completing this training associates are deployed in TCS client
projects. Out of 4000 Ignite alumni, around 10% are deployed onsite and 5% are project
leaders. The Company claims that it hired around 40,000 employees from campuses around
the country.
3.Employee Diversity: TCS has more than half a million employees working in various
countries. The company has a large number of employees and almost 95% of its employees
are Indian and 5% are from different countries. The number of employees makes it one of the
largest organization in India, only lagging behind Indian Railway and Central government in
terms of number of employees. According to current data out of 5.3 lakh employees only
90,000 are foreigners and the rest are Indian.
4.Employee Turnover: TCS hired almost 19000 employees in September quarter and
the attrition rate was 11.9% for the quarter, making it one of the least attrition rates in the
industry. However, the attrition rate of the company in the previous quarter was 8.9% and
there was a slight increase in the attrition rate in the next quarter.
5.Learning and Development: TCS provide many learning and development
programmes to garnish the talent of its employees. Some of such programmes are:
TCS initial learning programme: this programme aims in training the fresh recruited
employees. This program helps in making the employees understand the industry as
well as focuses on grooming their basic talents. Trainees are introduced to various
technologies and are also provided with project delivery, project management and
business or life skills.
TCS Ignite: This programme aims to give training to fresh science graduates about
the industry and provide them guidance to learn various skills which will help them
to work in the industry.
Aspire an e learning module: this is used by the fresh recruited of TCS and the course
contains 4 modules of IT foundation skills introduction to computers, problem
solving and database and programming and fundamentals. The course also has one
module on soft skills required by the IT professionals.
