ANALYSIS OF ANNUAL REPORT

ON

TATA CONSULTANCY SERVICES

(TCS)

Subject Corporate Finance

MASTER OF BUSSINESS ADMINISTRATION
(MBA)
AT

Submitted To:

Submitted By:

Biranchi N Panigrahi
Asst. Prof (Finance)
KIIT School of Management

Purnendra Shrivastava
Shivam Kumar Mahto

Analysis on Annual Report of TCS

14202118
14202078

1|Page

C E R T I F I C A T E
This is to Certify that the project entitled Analysis of Annual Report on Tata
Consultancy services is being carried out by Name of the Students in partial
fulfilment for the award of degree of Master in Business Administration, KIIT
University, Bhubaneswar during the academic year 2014 2016 under my
supervision. The matter embodied in this project is original and has not been
submitted for the award of any other degree.

Date: 04.01.2015
Place: KSOM, Bhubaneswar

Signature of the Guide

Biranchi N Panigrahi

Asst. Prof (Finance)

Analysis on Annual Report of TCS

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ACKNOWLEDGEMENT
We thankfully acknowledge the golden guidance given by Asst. Prof. Biranchi N
Panigrahi (Finance) of KSOM, KIIT, without whose enthusiastic support and
blessing, this project would not have taken its shape.
He guided us throughout the project to complete this in the presentable manner.
We would also like to thank our parents for their motivation in making this
project a success. I wish to avail ourselves of this opportunity to express a sense
of gratitude and love to our friends and for their manual support, strength, and
help and for everything.

Date:-04.01.2014
Place: KSOM, Bhubaneswar

Analysis on Annual Report of TCS

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CONTENTS
Introduction5
Companys Balance Sheet, Income and Cash Flow Statements..6-14
Ratio Analysis15-27
Liquidity Ratio...15
Current ratio.15
Quick Ratio..15
Turnover/Activity Ratio16-18
Stock Turnover Ratio...16
Avg. Days to Sell Inventories..17
Days Sales Outstanding....18
Debt Management Ratio..19-20
Debt to Equity Ratio...19
Interest Coverage Ratio...20
Assets Management Ratio....20-21
Fixed Asets Turnover Ratio....20
Total Asset Turnover Ratio.....21
Profitability Ratio..22-24
Operating Margin Ratio...22
Profit Margin Ratio..22
Return on Assets Ratio.....23
Return on Equity Ratio.24
Market Value Ratio....24-27
Earning Per Share.24
Dividend Per Share...25
Dividend Payout Ratio..26
P/ E Ratio..27

Trend Analysis for Last Three Years..27

Bibliography..28

Analysis on Annual Report of TCS

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INTRODUCTION
Tata Consultancy Services Limited (TCS) is an Indian multinational information technology (IT) service,
consulting and business solutions company headquartered in Mumbai, Maharashtra. TCS operates in 46
countries. It is a subsidiary of the Tata Group and is listed on the Bombay Stock Exchange and the National
Stock Exchange of India. TCS is the largest Indian company by market capitalization and is the largest Indiabased IT services company by 2013 revenues. TCS is now placed among the Big 4 most valuable IT services
brands worldwide. In 2013, TCS is ranked 40th overall in the Forbes World's Most Innovative Companies
ranking, making it both the highest-ranked IT services company and the top Indian company. It is the world's
10th largest IT services provider.

Tata Consultancy Services Ltd., incorporated in the year 1995, is a Large Cap company (having a market cap
of Rs 503559.58 Cr.) operating in Information Technology sector.
Tata Consultancy Services Ltd. key Products/Revenue Segments include Information Technology &
Consultancy Services which contributed Rs 63332.83 Cr to Sales Value (97.92% of Total Sales), Sale of
Equipment & Software Licences which contributed Rs 1340.10 Cr to Sales Value (2.07% of Total Sales), for
the year ending 31-Mar-2014.
For the quarter ended 30-Sep-2014, the company has reported a Standalone sales of Rs. 18405.05 Cr., up
5.54% from last quarter Sales of Rs. 17438.43 Cr. and up 10.82% from last year same quarter Sales of Rs.
16607.72 Cr. Company has reported net profit after tax of Rs. 4991.68 Cr. in latest quarter.
The companys management includes Mr.Suprakash Mukhopadhyay, Mr.Ajoyendra Mukherjee, Mr.Rajesh
Gopinathan, Mr.Suprakash Mukhopadhyay, Dr.Ron Sommer, Dr.Vijay Kelkar, Mr.Aman Mehta, Mr.Cyrus
Mistry, Mr.Ishaat Hussain, Mr.N Chandrasekaran, Mr.O P Bhatt, Mr.Phiroz Vandrevala, Mr.V Thyagarajan,
Prof.Clayton M Christensen.
Company has Deloitte Haskins & Sells as its auditors. As on 30-Sep-2014, the company has a total of
1,958,727,979 shares outstanding.

Analysis on Annual Report of TCS

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Last Three Years Annual Reports of TCS:-

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RATIO ANALYSIS
A. LIQUIDITY RATIO: Liquidity ratios analyze the ability of a company to pay off both its current
liabilities as they become due as well as their long-term liabilities as they become current.
1. Current Ratio =

Current Assets
Current Liabilities
Crores

RATIO

2013-14

Current Ratio =
Current Assets
Current Liabilities

2012-13

2011-12

= 34834.81
12265.70

= 23330.54
9498.81

= 2.84 : 1

= 2.45 : 1

= 16535.79
8835.48
= 1.87:1

Current Ratio Analysis

2.84
2.45

3
1.87

2.5
2
1.5
1
0.5
0

2011-12

2012-13

2013-14

Analysis:

The Viable Current Ratio is 2:1.

A Higher Current ratio enables a firms ability to pay off Current Obligations and thus provide adequate
margin of safety to its creditors.
There is More proportionate increase in Current asset (.39%) as compared to its Current obligations for
a year 2014. This Indicate that a fair proportion of increase in current asset in 2014 as compared to
previous year.

2. Quick Ratio / Acid Test Ratio = Quick Assets

Quick Liabilities
Quick Assets = Current Assests Stock Prepaid Expenses
Quick Liabilities = Current Liabilities Bank Overdraft

Analysis on Annual Report of TCS

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Crores

RATIO

2013-14

2012-13

2011-12

Quick Assets = Current Assests

Stock Prepaid Expenses

= 34834.81-8.57-0
= 34826.24

= 23330.54-6.34-0
= 23324.2

= 16535.79 4.14
= 16531.65

Quick Liabilities = Current

Liabilities Bank Overdraft

= 12265.70-0
= 12265.70

= 9498.81-80.02
= 9418.79

= 8853.48 0
= 8853.48

Quick Ratio = Quick Assets

Quick Liabilities

= 34826.24
12265.70
= 2.84 :1

= 23324.2
9418.79
= 2.48 : 1

16531.65
8853.48
= 1.87:1

Quick Ratio Analysis

2.84
2.48

3
2.5

1.87

2
1.5
1
0.5
0
2011-12

2012-13

2013-14

Analysis:

It evaluates Companys Overall Short-term Solvency or Liquidity Position .

The Viable Acid Test Ratio is 1:1 Proportion.
Investment in Quick Ratio is Increased As Company is investing in high proportion as compared to
previous year (i.e.36 % more) this indicate that Company is following conservative approach and
pooling high proportions of funds in liquid assets to facilitate day to day operations.

B. ACTIVITY / TURNOVER / EFFICIENCY RATIO : Accounting ratios that measure a

firm's ability to convert different accounts within its balance sheets into cash or sales. Activity ratios
are used to measure the relative efficiency of a firm based on its use of its assets, leverage or other such
balance sheet items. These ratios are important in determining whether a company's management is
doing a good enough job of generating revenues, cash, etc. from its resources.
1.

Stock Turnover Ratio =

Cost of Goods Sold

Average Stock / Inventory

Cost of Goods Sold = Sales Gross Profit

Average Stock = Opening Stock + Closing Stock
2

Analysis on Annual Report of TCS

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Crores

RATIO

2013-14

2012-13

2011-12

Cost of Goods Sold = Sales Gross

Profit

= 64672.93 20453.17

= 48426.14 13503.41

= 38858.54 11335.56

= 44219.76

= 34922.73

= 27522.98

Average Stock = Op.+ Closing Stock

2

= 0.54+0.61
2
= 0.58

= 0.54+0.54
2
= 0.54

= 0.52+0.53
2
= .53

= 34922.73
0.54
= 64671.72 times

= 27522.98
.53
= 51930.15 times

= 44219.76
Stock Turnover Ratio =
0.58
Cost of Goods Sold
=
76240.97
times
Average Stock / Inventory

Stock Turnover Ratio Analysis

76240.97
64671.72

80000
70000

51930.15

60000
50000
40000
30000
20000
10000
0
2011-12

2012-13

2013-14

Analysis:

2.

It represents Relative size of inventory and amount of cash available to payoff its certain liabilities.
A less Inventory turnover ratio means a company has less cash tied up in Companys Inventory in
associating with Cost of Goods or services that are to be rendered & Viceversa.
Stock (Inventory) of Company has been increased, and depicting significant cost structure is ensured
in holding Inventory which ultimately reflects companies has build up inventory as compared to
previous years & diluting companies performance.
Average days to sell Inventory = No. Of Days / Months in a Year
Stock Turnover Ratio
Crores
RATIO

Avg. days to sell Inventory =

No.of Days / Months in a Year
Stock Turnover Ratio

2013-14
=

365
76240.97

= 0.0048 days

Analysis on Annual Report of TCS

2012-13
=

365
64671.72

= 0.0056 days

2011-12
=

365
51930.15

= 0.0070 days

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Avg. day to Sell Inventory Analysis

0.007
0.0056

0.007

0.0048

0.006
0.005
0.004
0.003
0.002
0.001
0
2011-12

2012-13

2013-14

Analysis: It is used to measure inventory management efficiency of business.

A higher value of inventory turnover indicate better performance & a lower value means inefficiencies
in controlling inventory levels.
Management of Inventory levels are confined to maintaining a level of stock clearance
and reducing substantial cost blocked in stock holdings in facilitating operations of business concern
as turnover period has been reduced from 70 days Conversion cycle time to 48 days cycle period.

3.

Days Sales Outstanding =

Average Accounts Receivables

Net Credit Sales

X 365
Crores

RATIO

2013-14

2012-13

Debtors Turnover Ratio =

Avg. Accounts Receivables X 365
Net Credit Sales

= 14471.89 X 365
64672.93
= 82 days

= 11202.32
48426.14

2011-12
X 365 = 8936.76
38858.54

= 84 days

365

= 84 days

Days Sales Outstanding Analysis

84

84

84
83.5
83
82

82.5
82
81.5
81
2011-12

Analysis on Annual Report of TCS

2012-13

2013-14

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Analysis:-

The days sales outstanding formula shows investors and creditors how well companies' can collect
cash from their customers. Obviously, sales don't matter if cash is never collected. This ratio measures
the number of days it takes a company to convert its sales into cash.
A lower ratio is more favorable because it means companies collect cash earlier from customers and
can use this cash for other operations. It also shows that the accounts receivables are good and won't be
written off as bad debts.
Companies with high days sales ratios are unable to convert sales into cash as quickly as firms with
lower ratios.

C. DEBT MANAGEMENT RATIOS: Debt Management Ratios attempt to measure the firm's use
of Financial Leverage and ability to avoid financial distress in the long run. These ratios are also
known as Long-Term Solvency Ratios. Debt is called Financial Leverage because the use of debt can
improve returns to stockholders in good years and increase their losses in bad years. Debt generally
represents a fixed cost of financing to a firm.
1. Debt to Equity Ratio = Debt
Equity

Debt = Long Term Debt / Borrowed Funds

= Secured Loans and Unsecured loans

Equity = Shareholders Fund / Owned Fund

= Share Capital + Reserves & Surplus
Crores

RATIO

2013-14

Shareholders Fund

= 195.87 + 43856.01
= 44051.88

Debt to Equity Ratio =

Debt
Equity

89.69
44051.88

= 0.002 : 1

2012-13

2011-12

= 295.72 + 32266.53
= 32562.25
=

= 295.72 + 24560.91
= 24856.63

83.10
32562.25

= 0.0026 :1

96.23
24856.63

= 0.0039:1

Debt to Equity Ratio Analysis

0.0039
0.004
0.0035

0.0026

0.003

0.002

0.0025
0.002
0.0015
0.001
0.0005
0
2011-12

Analysis on Annual Report of TCS

2012-13

2013-14

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Analysis:

A ratio of 1 or 1 : 1 means that creditors and stockholders equally contribute to the assets of the
business.
Ratio indicates less contribution from its stockholders and significant contribution from equity towards
generating assets & facilitating funds to ensure operations of business concern. & Less Contributions
from Long terms funds & borrowings adhered for fetching revenues and providing business.

2. Interest Coverage Ratio =

Earning Before Interest & Tax

Interest
Crores

RATIO

2013-14

Interest Coverage Ratio = EBIT

Interest

2012-13

23544.47
23.41

= 1005.74 times

15703.18
30.62

= 512.84 times

2011-12
= 13366.33
16.40
= 815.02 times

Interest Coverage Ratio Analysis

1005.74

1200
815.02

1000
800

512.84

600
400
200
0
2011-12

2012-13

2013-14

Analysis:

It determines the debt servicing capacity of a business enterprise keeping in view fixed interest on
long-term debt.
Higher the ratio better it is.
TCS has an increase in ratio by 492.9 times since last year which shows the degree of protection
creditors have from default on the payment of interest by the company.

D. Asset Management Ratios: Asset management (turnover) ratios compare the assets of a
company to its sales revenue. Asset management ratios indicate how successfully a company is
utilizing its assets to generate revenues.
1. Fixed Assets Turnover Ratio =

Analysis on Annual Report of TCS

Net Sales
Fixed assets

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Crores

RATIO

2013-14

Fixed Asset Turnover =

Net Sales
Fixed Assets

2012-13

= 64672.93
8976.72
= 7.20

2011-12

= 48426.14
6868.13
= 7.05

= 38858.54
5463.44
= 7.11

Fixed Assets Turnover Ratio Analysis

7.2
7.2

7.11

7.15
7.05

7.1
7.05
7
6.95
2011-12

2012-13

2013-14

Analysis: It is a measure of the companys ability to generate net sales from fixed-assets investments
A higher value of this ratio shows that the company has been more effective in using the investment in
fixed assets to generate revenue.
There is a increase in the value of the ratio in 2013-14 as compared to 2012-13.
It means that the efficiency of the firm to generate revenues from investment in fixed assets has gone
down.
2. Total Asset Turnover Ratio =

Net sales
Total Asset
Crores

RATIO

2013-14

Total Asset Turnover =

Net Sales
Total Asset

2012-13

= 64672.93
57604.19
= 1.12

= 48426.14
43012.14
= 1.12

2011-12

= 38858.54
34258.81
=1.13

Total Asset Turnover Ratio Analysis

1.13
1.13
1.128
1.126
1.124
1.122
1.12
1.118
1.116
1.114

1.12

2011-12

Analysis on Annual Report of TCS

2012-13

1.12

2013-14

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Analysis:

If a company can generate more sales with fewer assets it has a higher turnover ratio which tells it is a good
company because it is using its assets efficiently. A lower turnover ratio tells that the company is not using its
assets optimally.

E. Profitability Ratio:- Measure a companys ability to generate earnings relative to sales, assets and
equity. These ratios assess the ability of a company to generate earnings, profits and cash flows relative
to relative to some metric, often the amount of money invested. They highlight how effectively the
profitability of a company is being managed.

1. Operating Margin Ratio =

Operating Income X 100

Net sales
Crores

RATIO

2013-14

Operating Margin Ratio =

Operating Income
Net Sales

X 100

2012-13

2011-12

= 23544.47 X 100
64672.93

= 15703.18 X 100 = 13366.33 X 100

48426.14
38858.54

= 36.40 %

= 32.42%

= 34.39%

Operating Margin Ratio Analysis

36.40%
37.00%
36.00%
35.00%
34.00%
33.00%
32.00%
31.00%
30.00%

34.39%
32.42%

2011-12

2012-13

2013-14

Analysis: The operating profit margin ratio is a key indicator for investors and creditors to see how businesses
are supporting their operations
A higher operating margin is more favorable compared with a lower ratio because this shows that the
company is making enough money from its ongoing operations to pay for its variable costs as well as
its fixed costs.
2. Profit Margin Ratio =

Net Profit X
Revenue

100
Crores

RATIO

Profit Margin Ratio =

Net Profit X 100
Revenue

2013-14

2012-13

2011-12

= 18474.92 X 100
64672.93

= 12786.34 X 100
48426.14

= 10975.98 X 100
38858.54

= 28.56%

= 26.40%

= 28.24%

Analysis on Annual Report of TCS

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Profit Margin Ratio Analysis

28.56%

28.24%

29.00%
28.50%
28.00%
27.50%

26.40%

27.00%
26.50%
26.00%
25.50%
25.00%
2011-12

2012-13

2013-14

Analysis:

The profit margin ratio directly measures what percentage of sales is made up of net income. In other
words, it measures how much profits are produced at a certain level of sales.
Profit margin is an indicator of how efficient a company is and how well it controls its costs. The
higher the margin is, the more effective the company is in converting revenue into actual profit.

3. Return on Assets Ratio =

Net Income
Total Assets

100

Crores

RATIO

2013-14

Return on Assets Ratio =

Net Income x 100
Total Assets

2012-13

= 18474.92 x100
57604.19

= 12786.34 x 100
43012.14

= 32.07 %

= 29.72%

2011-12

= 10975.98
100
34258.81

= 32.03%

Return on Assets Ratio Analysis

33.00%

32.03%

32.07%

32.00%
31.00%

29.72%

30.00%
29.00%
28.00%
2011-12

Analysis on Annual Report of TCS

2012-13

2013-14

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Analysis:

It only makes sense that a higher ratio is more favorable to investors because it shows that the
company is more effectively managing its assets to produce greater amounts of net income.
A positive ROA ratio usually indicates an upward profit trend as well. ROA is most useful for
comparing companies in the same industry as different industries use assets differently. For instance,
construction companies use large, expensive equipment while software companies use computers and
servers

4. Return on Equity Ratio =

Net Income
X 100
Shareholder Equity

RATIO

2013-14

Return on Equity Ratio =

Net Income X 100
Shareholder Equity

Crores

2012-13

= 18474.92 X 100
44051.88

= 12786.34
32562.25

= 41.89 %

= 39.20 %

2011-12

X 100 = 10975.98
24856.63

100

= 44.15%

Return on Equity Ratio Analysis

44.15%
45.00%
44.00%

41.89%

43.00%
42.00%
41.00%

39.20%

40.00%
39.00%
38.00%
37.00%
36.00%
2011-12

2012-13

2013-14

Analysis:

This ratio indicates the return which the management is realising from shareholder's equity and shows
how effectively it is been utilised.
Higher the ratio the better is Return on equity.
This year TCS' ratio has increased by 2.69 % which is a good sign for the company which indicates co.
Has increased its sahre capital.

F. MARKET VALUE RATIO: An equation that compares the current stock price to
a financial indicator on the company's financial statements. The most often used indicator is a
company's earnings per share.
1. Earning Per Share =

Analysis on Annual Report of TCS

Net Profit After Tax Preference Dividend

No. Of Equity Shares

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 Crores

RATIO

2013-14

2012-13

2011-12

Earning Per Share =

= 18474.92 - 19
= 12786.34 22
= 10975.98 - 24
Net PAT Pref. Dividend
195,87,27,979
195,72,20,996
195,72,20,996
No. Of Equity Shares
= 0.000009422 per share = 0.000006521 per share = 0.000005595 per share

Earning Per Share Analysis

0.000009422
0.00001
0.000009
0.000006521

0.000008
0.000007

0.000005595

0.000006
0.000005
0.000004
0.000003
0.000002
0.000001
0
2011-12

2012-13

2013-14

Analysis:

This ratio indicates per share earning of a Company in a particular year. It also helps in evaluating the
prevailing market share in the light of profit earning capacity.
In this Higher the ratio the better is the EPS of company.
TCS has increased its EPS by 0.03 % which is a good sign for the company.

2. Dividend Per Share = Equity Dividend Paid

No. Of Equity Shares
Crores

RATIO

Dividend Per Share =

Equity Dividend Paid
No. of Equity Shares

2013-14

= 3608.63
195,87,27,979

2012-13

3608.63
195,72,20,996

2011-12

3608.63
195,72,20,996

= 0.000001842 per share = 0.000001843 per share = 0.000001843 per share

Analysis on Annual Report of TCS

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Dividend Per Share Analysis

0.000001843

0.000001843

1.843E-06
1.843E-06

0.000001842

1.842E-06
1.842E-06
2011-12

2012-13

2013-14

Analysis: Objective of computing this ratio is to measure the dividend distributed per equity share.
In this Higher the ratio the better is the DPS.
In this Ratio we can analyse, TCS has not able to increase its Equity Dividend but not even reduced it
as almost same no. Of people invested in company , so TCS is in stable position.
3. Dividend Payout Ratio =

Dividend Per Share x 100

Earning Per Share
Crores

RATIO

2013-14

2012-13

2011-12

Dividend Payout Ratio =

Dividend Per Share x 100
Earning Per Share

= 0.000001842 x 100
0.000009422

= 0.000001843 x 100 = 0.000001843

0.000006521
0.000005595

= 19.55 %

= 28.26 %

x 100

= 32.94%

Dividend Payout Ratio Analysis

32.94%
28.26%

35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

19.55%

2011-12

2012-13

2013-14

Analysis : This ratio indicates the percentage of earnings that the company has distributed in the form of
dividends.
As compared to last year TCS' percentage of Dividend Payout ratio has Decreased by 8.71 % .
A low ratio may indicate the company is using much of its earnings to reinvest in the company in order
to grow further.

Analysis on Annual Report of TCS

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4. P/E Ratio = Share Price

EPS
TCS share price as of 7th May, 2014 is Rs 2,166. Its EPS for 2013-14 is Rs. 27.
Trailing EPS for 12 months is Rs. 108.
P/E Ratio = Share price / EPS
= 2166 = 20
108
Means, TCS Share Price is 20 times priced to annualized EPS.

TREND ANALYSIS FOR LAST THREE YEARS

Revenue and Net Income, EPS Growth Rate , Sales/ Revenue/ Top line
In Billions

Revenue or turnover or top line is income that a company receives from its normal business activities.
Revenue Growth is used to measure how fast a company's business is expanding. The figure shows the annual
rate of increase/decrease in a company's revenue or sales growth in terms of percentage change from the
previous year.
An ideal company should have an steady upward trend. Year-over-year performance is frequently used by
investors seeking to gauge whether a company's financial performance is improving or worsening.

Analysis on Annual Report of TCS

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BIBLIOGRAPHY
Websites:-

on.tcs.com/AnnualReport2014
economictimes.indiatimes.com Markets Stocks
profit.ndtv.com/topic/tcs-annual-report
www.moneycontrol.com
www.tcs.com/.../Annual%20Reports/TCS_Annual_Report_2012-2013

Books:-

Ratio Analysis M.F Morley

Ratio Analysis and Financial Statement Analysis Dr. B.C.M Patnaik

Analysis on Annual Report of TCS

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