TATA CONSULTANCY SERVICES FINANCIAL ANALYSIS

FINANCIAL ANALYSIS TATA CONSULTANCY SERVICES

VAIBHAV JAIN B-23 PGDM 05

EXECUTIVE SUMMARY This financial analysis report examines Tata Consultancy Services (TCS), a major player within the computer software industry and compares it to industry itself in order to evaluate its performance and financial health. The industry players taken into consideration while aggregating the industry financial statements were the largest players in the computer software industry – Capgemini India, Cognizant Technologies, HCL Technologies, HP, IBM India, IGate, Infosys, Microsoft, Mphasis, Oracle, Polaris, Satyam, Sun Microsystems, TCS, Tech Mahindra and Wipro. So as to facilitate consistent comparison the overall financial performance for the past 3 years from fiscal 2013 to fiscal 2015 were reviewed and analyzed to come to a conclusion for recommendation of investment. The financial analysis covers both TCS’ and the industry’s common-size income statements and balance sheets, comparative income statements and balance sheets, and various financial statement ratios such as liquidity, leverage, efficiency, profitability and valuation. Information technology is playing an important role in India today and has transformed India's image from a slow moving bureaucratic economy to a land of innovative entrepreneurs. The IT sector in India is generating 2.5 million direct employments. India is now one of the biggest IT capitals of the modern world and all the major players in the world IT sector are present in the country. Currently, the IT industry accounts for 7% of gross domestic product (GDP) according to industry body NASSCOM, up from 1.2% in 1998. That this contribution comes on the back of a mere 10 million people employed directly or indirectly, makes it a vital driver for the economy. The IT industry is ever evolving and has entered every facet of our lives. We are at the beginning of a new age where the Default is Digital – an interplay of a phenomenon called “Consumerisation of IT” fuelled by a set of technologies commonly referred to as Social, Mobile, Big Data & Analytics, Cloud, and AI & Robotics resulting in reimagined business models, business processes, systems and workplaces, disrupting the old ways of doing business in multiple industries and opening up entirely new, often unconventional, revenue sources for those who have imaginatively leveraged these forces. The global market for outsourced IT services is estimated to have grown by 1.9% in 2014 (3.3% in constant currency), with strong growth in key markets like the US (4.1%) and UK (8.6%), driven by increased spending on digital technologies and continued quest for efficiency in IT operations. TCS is an information technology services, consulting and business solutions company. The Company provides end-to-end technology and technology related services to corporations all over the world. The Company has deep domain knowledge across industry sectors and technology expertise across traditional and new age technologies. TCS’ domain knowledge and technology expertise combined with its global delivery capability offers unique advantage to its customers. In fiscal 2015, in line with previous years, TCS significantly outperformed the industry, growing at 15% (in USD terms) in comparison to the market growth of 1.9%, evidencing the fact that the Company continues to gain market share. This was further evidenced by the fact that while the industry witnessed a reduction in sales and profits and a decline in key financial ratios, TCS, through its adoption of new technologies and efficiency in operations witnessed the exact opposite with increasing sales and improving financial health which it achieved through its expansion strategies. Moreover, fiscal 2015 marked 10 years since TCS launched its IPO and

so as to commemorate this event gave an additional dividend of INR 40 per share to shareholders and a one-time bonus payment to its employees showcasing the company’s stakeholder centric approach and making it a good company for potential investors to pursue.

Contents EXECUTIVE SUMMARY .................................................................................................................................. 1 OBJECTIVE ..................................................................................................................................................... 4 FINANCIAL ANALYSIS ..................................................................................................................................... 4 Common Size Analysis .............................................................................................................................. 4 Common Size Income Statement Analysis................................................................................................ 4 Common Size Balance Sheet Analysis ....................................................................................................... 5 Comparative Statement Analysis .................................................................................................................. 6 Comparative Income Statement Analysis ................................................................................................. 6 Comparative Balance Sheet Analysis ........................................................................................................ 7 Financial Ratio Analysis ................................................................................................................................. 7 Liquidity..................................................................................................................................................... 7 Leverage .................................................................................................................................................... 8 Efficiency ................................................................................................................................................... 8 Profitability................................................................................................................................................ 9 Valuation ................................................................................................................................................... 9 CONCLUSION AND RECOMMENDATION FOR INVESTMENT......................................................................... 9 APPENDICES ................................................................................................................................................ 11

OBJECTIVE The primary objective behind the financial analysis was to compare Tata Consultancy Services to the industry within which it functions so as the gauge the performance of the company and judge its financial health. This was done through a 3 year (from fiscal 2013 through fiscal 2015) common size and comparative analysis of the income statement and balance sheets of TCS and the industry. A further comparison of key financial ratios of TCS and the large players in the computer software industry helped coming up with recommendations for investment.

FINANCIAL ANALYSIS Common Size Analysis Common Size Income Statement Analysis The common size income statement for Tata Consultancy Services (TCS) shows that for the financial year ended 2014-15 it had an operating expense of 24.89% as compared to 24.53% in the previous year. The last 3 years average of the operating expenses has been 24.67% showing that it has quite a flat history of operating costs. Compared to the industry average of 14.10% over the same period it is seen that TCS’s operating expense cost is on the higher side. However, this can be attributed to the increased expenses borne by the company in the form of repairs which have increased by 72.37% over the last 3 years which in turn can be explained by the ever increasing asset base which increased by 21.43% over the same period. Other reasons which contributed to the high operating expenses were the contract charges and project charges which increased by 64.89% and 52.90% respectively as compared to the expenses incurred by the company 3 years ago. However, the additional expenditure under these heads was due to the increased number of projects undertaken by the company in the aforesaid period. As has been the case for the past 3 years, the largest expense for TCS in the income statement for this year also was the employee expense. It made up for 39.34% of the net sales of the company as compared to 35.78% a year ago. The 3 year average of this expense is 37.53% showing that the cost has increased slightly and when compared to the industry average of 34.94% over the same period it is noticed that the expenses under this head are on the higher side. This once again can be explained by the fact that the company has undertaken a lot more projects in the last few years, thereby requiring more manpower which has increased by 14.31% in the last 3 years and has resulted in TCS becoming the biggest employer in the IT industry just behind IBM. The operating profit for the current financial year ended 2014-15 declined to 28.67% as compared to 32.10% a year ago and overall having a 3 year average of 30.54%. This fall in profit was in line with the fall in overall industry operating profit which declined slightly to 30.34% as compared to 30.51% a year

ago. This fall was due to a sluggish demand in technology services from clients in energy, insurance and telecom sectors. This, coupled with the increase in salary, employee bonus and hiring costs as explained above were the main contributors for the decline in TCS’ operating profit for the current year. Yet, when compared to the overall 3 year industry average of 29.56%, TCS’s overall operating profit is slightly higher at 30.24%. Overall, the net profit declined to 20.39% from 23.17% in the financial year ended 2013-14. The contributors to this decline were an increase in depreciation to 1.83% from 1.62% on account of investment in new assets and an increase in interest expense to 0.11% as compared to 0.05% in the previous year due to an increase in unsecured debt by 78.10% even though secured debt reduced by 29.94%. The overall net profit for TCS for the last 3 years was 21.83% which is slightly higher than the overall industry average of 21.02% for the same period of time.

Common Size Balance Sheet Analysis The common size balance sheet of TCS reflects a decrease in total reserves from 73.32% in the financial year ended 2013-14 to 68.79% in the current financial year. Even though there was a quantitative increase in the reserves there was a decline in the relative proportion due to an increase in the current liabilities and provisions. The overall reserves of TCS for the last 3 years were 71.99% of the total liabilities which is pretty similar to the industry average for the same period which stood at 71.02%. However, an interesting thing was noticed when comparing TCS’ secured and unsecured loans to that of the industry standard. Over the past few years TCS is relying less on secured loans as a source of funds. The proportion of secured loans to total liabilities has shown a decreasing trend and decreased further as it fell from 0.24% to 0.16%. At the same time the industry average over the past few years has shown an opposite trend with the secured loans showing an increasing trend increasing consistently from 0.73% 2 years back to 3.14% in the current financial year. Alongside while the industry standard with respect to unsecured loans has fallen from 3.46% to 0.12%, TCS has started relying on unsecured loans as a source of funds which has shown an increasing trend and has increased from 0.21% in the previous year to 0.33% now thereby also explaining the increased interest expenditure since unsecured loans typically have a higher interest rate. The common-size balance sheet of TCS reflects current assets to total assets three year average of 47.45% and shows a short term liabilities to total liabilities and shareholders’ equity three year average of 24.28%. TCS’s current assets and current liabilities both increased over the 3 year period from 2013 to 2015, but their current assets increased at a faster rate than their current liabilities did. The gap between the two in 2013 was 18.75% and had increased to 25.83% by 2015, providing plenty of opportunity to grow and develop the company further their plans. The industry common size balance sheet represents a similar picture. Their a current assets to total assets three year average was 48.37% and short term liabilities to total liabilities and shareholders’ equity three year average was 15.31% . Current liabilities have consistently shown an increasing trend increasing from 22.57% to 23.92%. Current assets have also increased from 49.69% to 51.28% of the total assets. The gap between the

current assets has also been increasing consistently from 26.21% in 2013 to 27.11% in 2014 to 27.28% in 2015. While the gap in greater in the industry common size statements it is to be noted the gap between current assets and liabilities has increased at a faster rate thus giving a sign to potential investors that this could act as a catalyst to their ability to expand. Within TCS’ current assets, cash and bank to total assets increased from 21.61% in 2014 to 25.31% in 2015 due to an increase in term deposits with banks. The inventories of TCS remained same at just 0.02% of total assets when compared to the previous year. These inventories made up just 0.04% in 2013 as well showing that TCS follows a strategy of keeping low inventory at hand so as to minimize holding period and costs. The investments also showed an interesting picture. Investments made by the company decreased to 2.27% from 5.14% due to investments in unquoted debentures and bonds reaching its maturity date. TCS has a 3 year average investment of 3.69% which is strikingly low when compared to the industry average of 14.67% over the same period showing that the company is reinvesting its excess funds in itself so as to grow, expand and achieve its objectives as is further strengthened by the fact that net assets in TCS have increased to 15.87% in the current year from 14.28% in the previous year thereby explaining the increased depreciation and repairs in the income statement. TCS has been investing heavily in assets as the 3 year average net assets for TCS is 16.36% which is significantly higher than the industry average of 10.99% over the same period of time.

Comparative Statement Analysis Comparative Income Statement Analysis In 2015 TCS experienced an increase of 17.88% in net sales compared to the 30.04% increase it witnessed in 2014. This was a rather remarkable performance as the industry witnessed a 23.42% decrease in net sales in 2015 and a 25.57% increase in 2014 showcasing the company’s ability to outperform its industry which has been falling due to a sluggish demand in technology services from clients in energy, insurance and telecom sectors. Alongside, the operating expenses increased by 19.64% in 2015 and 29.72% in 2014 while the industry observed increases of 14.89% and 57.07% in 2015 and 2014 respectively. When this increase is compared to the increase in net sales it can be seen that TCS has been brandishing a better and efficient manner of carrying out operations. This is further bolstered by the fact that while TCS’ operating profit has increased by 5.27% in 2015 and roughly 40% in 2014 the industry witnessed a 23.84% decrease and a 37.76% increase in 2015 and 2014 respectively. TCS’ margins, though consistently much better than the industry averages over the same period were brought down by the consistent increases in the selling, administration, depreciation and interest heads of expenses. While the industry witnessed a y-o-y decrease of 7.30% in selling and administration expenses the company saw an increase of 13.17% due to the increase in communication and travel expenses on account of undertaking new projects. An increase of 33.32% in depreciation in 2015 was due to TCS’ investments in net assets in its quest to expand while an increase of roughly 170% in

interest was due to the company’s strategy of reducing its reliance on secured loans and increasing its dependence unsecured loans as a source of funds a which is typically a more expensive source of funds.

Comparative Balance Sheet Analysis TCS’ reserves showed an increase of 2.94% in fiscal 2015 as compared to the industry decrease in reserves of 24.53% in the same year. This decrease was due to the slowdown in the IT industry. Even though TCS’ foreign currency translation reserve decreased by roughly 32.5% due to movement in exchange rates of currencies in fiscal 2015 it was offset by increases in the closing balance of hedging reserve account, arising out of cash flow hedges as at March 31, 2015 and a transfer of an amount of ` INR 255.57 crores pursuant to redemption of preference shares by Diligenta. While the industry witnessed a 29.48% decrease in current liabilities TCS saw an increase of 36.25% in the same for fiscal 2015. This was mainly attributable to a bank overdraft required for management of working capital. Another factor resulting in this increase in current liabilities was the increase in trade payables to 9.33% of revenue from 6.77% of revenue which was due to a one time employee reward of INR 2700 crores which was 2.78% of the revenues. As compared to the industry increase in provisions of just 1.44%, TCS’ increase was 19.87% for the same for the financial year ended 2014-15. The driving factors behind this were the short term provisions created for proposed final dividend and employee benefits. The fixed assets base for TCS increased by 21.9% pursuant to the company’s strategy for expansion as it has been investing in infrastructure development across various locations in India to meet its growing business needs. TCS also witnessed a decrease of 51.61% in its investments; the driving factors of which were decreases in inter-corporate deposits and redemption of bonds and debentures. Goodwill on consolidation as at March 31, 2015 stood at 2,093.22 crores. Significant acquisitions over the years which resulted in goodwill were Alti SA, TCS Do Brasil Ltd, TCS Financial Solutions Australia Holdings Pty Limited, Diligenta Limited and TCS Switzerland Ltd. In fiscal 2015, acquisition of a controlling interest (51%) in ITF from Mitsubishi Corporation resulted in goodwill of 51.61 crores. Most of these acquisitions have contributed significantly to the overall financial performance of the company.

Financial Ratio Analysis Liquidity Current Ratio: The average current ratio of TCS is 2.41while that of the industry is 3.13. While on the face of it, it may seem that TCS is not as able to service its financial obligations what is to be seen is that their current assets increased at a faster rate than their current liabilities did. The gap between the two in 2013 was 18.75% and had increased to 25.83% by 2015, providing plenty of opportunity to grow and develop. Also, the slight decline the current ratio was due to the one-time bonus payment to

employees. However, this shouldn’t be focused on too much considering that TCS has consistently overshadowed the industry performance with respect to sales and profits. Collection Period: The average collection period for TCS for the fiscal years 2013-15 is 74.67 days as compared to the industry average of 97.12 days for the same period. While the collection period for TCS has remained relatively flat, that of the industry has shown a continual increase. This reflects the fact that TCS is being able to collect payments from customers better than how the industry as a whole showcasing the efficient management policies thus reducing the probability for bad debt and need for short time financing for working capital which in turn would result in more profits and value for the stakeholders of the company.

Leverage Debt Equity Ratio: The average debt equity ratio for TCS for fiscal years 2013-15 has been zero while that of the industry has been slightly higher at 0.073 thus showing that the company has similar capital structure to the rest of the industry. As TCS has a lower D/E ratio its creditors enjoy a higher degree of protection. Its reliance on equity capital and internally generated funds as a source of funds results in low fixed interest charges resulting in higher profitability and flexibility in decision making for the management. Interest Coverage Ratio: The average ratio for TCS for the previous 3 years was 610.03 as compared to the industry average of 210.97. However for fiscal 2015 this ratio took a hit in TCS falling from 1006.74 in 2014 to 309.53 while that of the industry rose from 108.3 in 2014 to 473.17. This can be attributed to TCS’ strategy of relying more on unsecured loans as a source of funds which is typically a costlier source. However, this shouldn’t be focused on too much considering that TCS has consistently outperformed the industry and has increasing sales and profits.

Efficiency Fixed Assets Turnover: The average fixed assets turnover for TCS was 5.99 as compared to the industry average of 3.69 which has been declining continually. In fiscal 2015 the ratio for TCS fell from 6.31 to 5.77 on account of the company’s strategy for expansion as it had been investing in infrastructure development across various locations in India to meet its growing business needs. This ratio yet again showcased TCS’ ability to outperform the industry levels as it has been able to generate more sales per asset on account of more efficient running of the business and its ability to increase its sales while that of the industry as a whole have been falling. Inventory Turnover: The average inventory turnover for TCS for fiscal 2013-15 was 8318.44 as compared to the industry average of 376.17. This is due to the company strategy of keeping low inventory so as to reduce holding costs. Even though the ratio has been decreasing from roughly 9300 to 7000 it is still much higher than the industry standard which would result in increased profitability for the company.

Debtors Turnover: While TCS’ average debtors turnover has remained relatively flat at an average of 4.83, over the same period of time the industry average has been significantly lower at 3.90 and has been on a steady decline. While the industry has witnessed slowdown the sales of TCS have been increasing. Since, the company has a high debtor turnover the probability of bad debt and the need for short term financing for working capital needs is rather low.

Profitability Return on Capital Employed and Net Worth: While TCS and the industry have followed the same trend with regards to the trend of the ratio TCS’ average return on capital employed has been 55.86% as compared to the industry average of 32.82% over the same period. Similarly, while the average return on net worth was 45.3% for TCS, it was 27% for the industry. In 2015 TCS experienced an increase of 17.88% in net sales compared to the 30.04% increase it witnessed in 2014. This was a rather remarkable performance as the industry witnessed a 23.42% decrease in net sales in 2015 and a 25.57% increase in 2014 showcasing the company’s ability to outperform its industry which has been falling due to a sluggish demand in technology services from clients in energy, insurance and telecom sectors. Alongside, the operating expenses increased by 19.64% in 2015 and 29.72% in 2014 while the industry observed increases of 14.89% and 57.07% in 2015 and 2014 respectively. When this increase is compared to the increase in net sales it can be seen that TCS has been brandishing a better and efficient manner of carrying out operations. This is further bolstered by the fact that while TCS’ operating profit has increased by 5.27% in 2015 and roughly 40% in 2014 the industry witnessed a 23.84% decrease and a 37.76% increase in 2015 and 2014 respectively.

Valuation Price Earnings Ratio: The P/E ratio of TCS has increased from 23.31 in fiscal 2014 to 29.94 in fiscal 2015. TCS is able to show that its investors have higher expectations of their company performance by being committed to paying a higher price per share because of the company’s ability to not follow industry trends and outperform the industry as a whole having an increasingly better financial health and bright future prospects.

CONCLUSION AND RECOMMENDATION FOR INVESTMENT The IT industry on the whole followed a downtrend, the main reason for this being a sluggish demand in technology services from clients in energy, insurance and telecom sectors. This resulted in a 24.42% decrease in sales and a 24.84% decrease in operating profit. This affected the financial health of the sector and adversely impacted key financial ratios. However, the future of this sector seems bright as

India continues to show enormous future potential with the government embarking on several digital and e-governance initiatives. As against the backdrop of a sector which was in the red in fiscal 2015, TCS has continued to deliver strong performance and further strengthened its position in key markets. This industry-leading performance was achieved in environment of currency headwinds and a fast changing industry landscape. During the year, TCS grew net annual revenues by 17.78%, while operating profit grew by 14.30%, excluding the impact of the special one-time employee bonus. TCS has been diluting its investments and has been increasing heavily in assets following an aggressive growth strategy wherein TCS continues to develop deeper, more strategic partnerships with global customers by playing the role of a full stakeholder in their business. During the year, TCS added 5 clients to the $100m+ category; taking the total to 29 clients, while customers in the $50+ and $20+ million bands grew by 15 and 26 respectively and has continued to elevate its position in key markets like North America, the UK, Europe, and Australia strengthening its presence in new geographical markets. The past year also marked 10 years since the IPO of TCS and to commemorate the event the board of directors announced a special Dividend of INR 40 per share and also announced a special one-time bonus of `2,630 crore for all the employees with over one year of service in appreciation of their efforts. As the company’s sales increased while that of the industry’s fell the company’s workforce increased by 14.28% to counter this increased workload. TCS’s financial health is also much better than the industry’s with respect to key financial ratios, and in ratios where its performance has been lower than the industry standard the company has shown signs of improvement in leaps and bounds whereas those of industry have remained stable implying that the company may overshoot these standards in the near future. This further underscores the management’s focus on financial management and operating discipline. After reviewing the financial statements and analyzing the previous 3 fiscal years’ financial statements and ratios, it is believed that TCS would be a good investment with its tendency to not be affected by the performance of the industry, ever increasing market capitalization, brand name, increasing sales volumes and better growth potential in the long run.

APPENDICES Table 1: TCS Common Size Income Statement Year INCOME : Sales EXPENDITURE : Operating Expenses Employee Cost Power/Electricity Charges Selling and Administration Exp Miscellaneous Expenses Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit Tax Deferred Tax Net Profit Minority Interest (after tax) Net Profit after Minority Interest & P/L Associate Co. Extraordinary Items Adjusted Net Profit

2015

2014

2013

Average

100.00

100.00

100.00

100.00

24.89 39.34 0.58 4.92 1.59 71.33 28.67 0.11 28.56 1.83 26.73 6.37 0.00 -0.03 20.39 0.21

24.53 35.78 0.63 5.13 1.83 67.90 32.10 0.05 32.06 1.62 30.44 7.31 0.00 -0.03 23.17 0.20

24.59 37.46 0.74 5.50 1.75 70.05 29.95 0.08 29.87 1.68 28.19 6.23 0.00 0.02 21.94 0.25

24.67 37.53 0.65 5.18 1.72 69.76 30.24 0.08 30.17 1.71 28.46 6.64 0.00 -0.01 21.83 0.22

20.18 0.56 19.62

22.97 0.16 22.80

21.69 0.05 21.64

21.61 0.26 21.35

Table 2: TCS Common Size Balance Sheet 2015 LIABILITIES: Share Capital Reserves Total Minority Interest Secured Loans Unsecured Loans Current Liabilities Provisions Other Liabilities

2014

2013

0.27 0.29 0.57 68.79 73.32 73.85 1.54 1.06 1.34 0.16 0.24 0.40 0.33 0.21 0.04 16.94 13.64 14.11 10.44 9.56 8.15 1.53 1.69 1.53 Total Liabilities 100.00 100.00 100.00

ASSETS: Net Block 15.87 14.28 18.92 Capital Work in Progress 3.77 4.74 3.65 Investments 2.27 5.14 3.65 Inventories 0.02 0.02 0.04 Sundry Debtors 27.88 27.28 27.14 Cash and Bank 25.31 21.61 13.03 Loans and Advances 11.33 13.54 18.45 Net Deferred Tax 0.34 0.17 0.14 Other Assets 13.20 13.22 14.96 Total Assets 100.00 100.00 100.00

Average 0.38 71.99 1.31 0.27 0.19 14.90 9.38 1.58 16.36 4.05 3.69 0.03 27.43 19.98 14.44 0.22 13.79

Table 3: TCS Comparative Income Statement Year INCOME : Sales EXPENDITURE : Operating Expenses Employee Cost Power/Electricity Charges Selling and Administration Exp Miscellaneous Expenses Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit Tax Deferred Tax Net Profit Minority Interest (after tax) Net Profit after Minority Interest & P/L Asso.Co. Extraordinary Items Adjusted Net Profit

2015

2014

2013

Average

98,368.07 83,446.10 64,167.71 81,993.96 24,485.93 38,701.15 573.87 4,842.25 1,563.50 70,166.70 28,201.37 104.19 28,097.18 1,798.69 26,298.49 6,266.60 0.37 -28.18 20,059.70 207.52

20,466.04 29,860.01 527.1 4,278.52 1,524.90 56,656.57 26,789.53 38.52 26,751.01 1,349.15 25,401.86 6,097.00 0.13 -27.14 19,331.87 168

15,777.08 24,039.96 475.76 3,532.00 1,124.77 44,949.57 19,218.14 48.49 19,169.65 1,079.92 18,089.73 4,000.72 0.33 12.99 14,075.69 158.38

20,243.02 30,867.04 525.58 4,217.59 1,404.39 57,257.61 24,736.35 63.73 24,672.61 1,409.25 23,263.36 5,454.77 0.28 -14.11 17,822.42 177.97

19,852.18 19,163.87 13,917.31 17,644.45 551.49 137.4 31.51 240.13 19,300.69 19,026.47 13,885.80 17,404.32

Table 4: TCS Comparative Balance Sheet Year LIABILITIES: Share Capital Reserves Total Minority Interest Secured Loans Unsecured Loans Current Liabilities Provisions Other Liabilities Total Liabilities ASSETS: Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Loans and Advances Net Deferred Tax Other Assets Total Assets

2015

2014

2013

Average

195.87 50438.89 1127.76 113.69 244.01 12419.65 7655.16 1122.89 73317.92

195.87 48998.89 707.99 159.79 137.08 9114.74 6385.96 1128.66 66828.98

295.72 38350.01 695.31 209.48 22.79 7329.96 4233.46 795.66 51932.29

229.15 45929.26 843.69 160.99 134.63 9621.45 6091.53 1015.74 64026.40

11638.17 2766.37 1661.78 16.07 20437.94 18556.04 8310.35 250.98 9680.22 73317.92

9544.33 3168.48 3433.74 15.21 18230.40 14441.84 9051.77 111.26 8831.95 66828.98

9828.01 1895.36 1897.34 21.15 14095.58 6769.16 9583.53 74.74 7767.52 51932.29

10336.84 2610.07 2330.95 17.48 17587.97 13255.68 8981.88 145.66 8759.90 64026.40

Table 5: Industry Common Size Income Statement Year INCOME : Net Sales EXPENDITURE : Cost of Traded Software Packages Operating Expenses Employee Cost Power/Electricity Charges Selling and Administration Exp. Miscellaneous Expenses Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit

2015

2014

2013

100

100

100

1.30 19.23 41.48 0.54 5.52 1.59 69.66 30.34 0.24 30.11 1.84 28.27 6.63 0.06 21.58 0.64 20.94

1.13 12.82 31.50 0.50 4.56 18.98 69.49 30.51 0.23 30.28 2.26 28.03 6.45 -0.13 21.70 0.16 21.54

1.47 10.25 31.84 0.56 6.57 21.50 72.19 27.81 0.31 27.50 2.44 25.06 5.39 -0.09 19.77 0.16 19.61

Table 6: Industry Common Size Balance Sheet Year SOURCES OF FUNDS : Share Capital Reserves Total Equity Application Money Secured Loans Unsecured Loans Current Liabilities Provisions Other Liabilities

2015

2014

2013

0.76 71.89 0.00 2.19 0.03 14.52 8.05 2.55 100.00

0.95 70.68 0.00 0.73 3.46 14.47 7.74 1.96 100.00

0.88 71.02 0.00 2.02 1.20 14.10 8.80 1.97

Total Liabilities

0.92 70.51 0.00 3.14 0.12 13.31 10.61 1.40 100.00

10.60 2.84 13.65 0.18 22.39 27.12 12.39 0.92 9.91 100.00

11.38 2.49 17.47 0.30 22.45 21.38 13.32 0.93 10.28 100.00

10.99 2.52 14.67 0.25 21.45 26.68 12.89 0.76 9.79

Total Assets

11.01 2.24 12.89 0.25 19.50 31.53 12.97 0.44 9.16 100.00

APPLICATION OF FUNDS : Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Loans and Advances Net Deferred Tax Other Assets

Average

Table 7: Industry Comparative Income Statement

INCOME : Net Sales EXPENDITURE : Cost of Traded Software Packages Operating Expenses Employee Cost Power/Electricity Charges Selling and Administration Exp. Miscellaneous Expenses Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit

2015

2014

2013

Average

194649.5

254149.4

202387.8

217062.2

2524.42 37434.7 80747.02 1053.52 10737.43 3088.09 135585.2 59064.32 459.44 58604.88 3584.97 55019.91 12895.75 123.17 42000.98 1249.18 40751.8

2876.24 32582.31 80047.8 1273.99 11582.51 48237.63 176600.5 77548.87 591.55 76957.32 5731.83 71225.49 16384.62 -318.58 55159.46 405.76 54753.7

2978.08 20743.34 64438.43 1134.73 13293.89 43509.28 146097.8 56290.08 630.58 55659.5 4931.42 50728.08 10902.22 -182.37 40008.24 324.66 39683.58

2792.913 30253.45 75077.75 1154.08 11871.28 31611.67 152761.1 64301.09 560.5233 63740.57 4749.407 58991.16 13394.2 -125.927 45722.89 659.8667 45063.03

Table 8: Industry Comparative Balance Sheet

SOURCES OF FUNDS : Share Capital Reserves Total Equity Application Money Secured Loans Unsecured Loans Current Liabilities Provisions Other Liabilities Total Liabilities APPLICATION OF FUNDS : Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Loans and Advances Net Deferred Tax Other Assets Total Assets

2015

2014

2013

Average

1793.93 138161.20 0.30 6150.13 230.52 26084.51 20793.87 2740.46 195954.92

1940.03 183056.57 9.51 5570.78 89.09 36986.06 20497.52 6496.93 254646.49

1935.37 143384.82 5.31 1481.10 7023.96 29348.97 15711.31 3980.28 202871.12

1889.78 154867.53 5.04 4400.67 2447.86 30806.51 19000.90 4405.89

21566.59 4388.24 25268.09 491.74 38205.66 61790.73 25419.68 867.05 17957.14 195954.92

26988.85 7229.39 34762.26 469.10 57016.32 69053.16 31543.85 2342.86 25240.71 254646.50

23080.08 5054.31 35439.28 617.38 45551.10 43370.19 27014.41 1889.48 20854.91 202871.14

23878.51 5557.31 31823.21 526.07 46924.36 58071.36 27992.65 1699.80 21350.92

Table 9: TCS Key Financial Ratios Year Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Inventory Debtors Interest Cover Ratio PBIDTM (%) PBITM (%) PBDTM (%) CPM (%) APATM (%) ROCE (%) RONW (%) Price Earning (P/E) Price to Book Value ( P/BV) Price/Cash EPS (P/CEPS) EV/EBIDTA Market Cap/Sales

2015

2014

2013

Average

0 0 2.54

0 0 2.59

0 0 2.11

0.00 0.00 2.41

5.77 7,037.99 4.67 309.53 35.37 33.47 35.26 28.06 26.17 53.73 43.05 29.94 10.98 27.63 18.55 6.78

6.31 8,675.53 5.04 1,006.74 38.11 36.44 38.07 30.24 28.57 60.13 48.22 23.61 9.46 22.25 16.41 6.45

5.88 9,241.79 4.77 513.84 34.15 32.49 34.08 28.06 26.4 53.73 44.63 25.52 9.48 23.93 18.37 6.35

5.99 8318.44 4.83 610.04 35.88 34.13 35.80 28.79 27.05 55.86 45.30 26.36 9.97 24.60 17.78 6.53

Table 10: Industry Key Financial Ratios Year Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Inventory Debtors Interest Cover Ratio PBIDTM (%) PBITM (%) PBDTM (%) CPM (%) APATM (%) ROCE (%) RONW (%)

2015

2014

2013

Average

0.05

0.07

0.1

0.07

0.05 3.18

0.07 3.18

0.1 3.02

0.07 3.13

2.83 502.17 2.92 473.17 36.19 34.28 36.11 27.9 25.99 28.4 22.57

4.05 403.69 4.22 108.3 33.04 31.01 32.75 25.53 23.49 35.17 28.63

4.19 222.65 4.57 81.45 28.77 26.25 28.45 22.97 20.45 34.89 29.78

3.69 376.17 3.90 220.97 32.67 30.51 32.44 25.47 23.31 32.82 26.99