Research Report

Tata Consultancy
Services

SUWANSH SRIVASTAVA
PGDM-BFS, IMT Ghaziabad
pgp19suwanshsrivastava@imt.ac.in
Contents

1. Company Overview 01/12

2. Shareholding Pattern 02/12

3. Leadership Team 03/12

4. The Pandemic Effect 05/12

5. SWOT Analysis
06/12
a. Strength
07/12
b. Weakness
08/12
c. Opportunity
09/12
d. Threats
10/12
6. Competitive Analysis
11/12
7. Way Forward
12/12
 Company Overview
TCS is part of Tata group which is
India's largest multinational business
group. It offers a consulting-led,
cognitive powered, integrated portfolio
of business, technology and
engineering services and solutions in 46
countries.

TCS is ranked among the top ten global

2037.60
IT service providers. After 50 years of its
establishment , TCS has been
recognized among the top 3 brands in
IT services globally and also the fastest
₹
growing brand by value in the sector CURRENT MARKET PRICE
globally, growing 14.4% year-on-year. NSE

TCS is the largest Indian company in

terms of market capitalization. Its
headquarters are located in Mumbai,
India.

TCS has also earned its place in leading

sustainable indices such as MSCI global
sustainability index and the FTSE4Good
emerging Index

01/12
Shareholding Pattern
Others
MF
3.1%
Insurance Co 2.3%
4.8%

Total DII
7.8%

FII/FPI
14.1%

Promoters
Pledged 64.5%
2.6%

Source: Annual Report 02/12

2019-20
Leadership Team

03/12
Leadership Team

04/12
 The Pandemic Effect
COVID-19
More than 50% of the revenue of TCS comes from the Clients from USA and the company was getting

benefited from the depreciation of rupee since it charges most of its clients is US$. But those gains were

offset by loss of billings due to lockdown in India and other developed markets.

"The pandemic completely reversed the positive momentum that we had started
seeing in some of our biggest verticals in the first half of the quarter"
- Rajesh Gopinathan, CEO&MD

BFSI(-1.3%)
Due to supply side problems and lower client rate approvals , there is considerable pressure on

BFSI, which ultimately resulted in -1.3% YoY growth

Lower BFSI revenue was also due to delay in shifting to remote working model specifically in this

vertical.

Largest business for TCS and its top clients are spread across North America, UK and Europe.

Life Sciences & Health Care(+16.2%)

Company's growth was mainly driven by this vertical in the latest quarter

Relatively less impacted due to Covid-19

TCS even expanding their healthcare team by opening new offices in Wilmington, NC

Communications & Media (+9.3%)

Mixed effect since shift to digital it has postively impacted the carriers while closure of media

houses, studios and theme parks has negatively affected the revenues

05/12
 SWOT Analysis
Strengths
TCS Brand Valuation

TCS brand value has been rising consistently

from last ten years. Its value grew by 476% from

2010-2020, which is the highest growth in the IT

services industry.

Good Financial Performance over last few years

Revenue of TCS has been increasing at over 15% CAGR from last 12

years whereas operating profit as well as EPS are also on the positive

trend

Revenue Trend
200,000

6%
R 10.
CAG
150,000

100,000

50,000

0
FY16 FY17 FY18 FY19 FY20

06/12
 SWOT Analysis
Strengths
Diversified Segmental Performance
Diversified segments ensure that TCS maintains its growth rate and doesn't gets affected by

slowdown in one particular segment or geographical disruption.

Regular Dividends
TCS has been consistently paying high dividends from last 5 years with rising dividend yields.

During last year ending at March 2020 TCS declared dividends amounting to Rs.73/ share

resulting in dividend yield of 3.5%

Digital Leadership ( FY20: 33%)

According to CFO, at least one

large multi-million-dollar deal was

signed while both parties were

under lockdown at the end of

March. A lot of such future orders

will use some of the company’s most

well-known product and platforms

led byTCS BaNCS (core banking

software), Ignio (software to drive

digital transformation) and

Mastercraft(optimizes IT service

delivery)

07/12
 SWOT Analysis
Weakness
Declining BFSI segment performance
BFSI segment is facing pressure mainly due to the supply side and lower client approval rate due

to work from home. BFSI segment growth rate has declined by 1.3% YoY

Declining Revenue growth 

One major area for concern is

declining revenue growth

relative to competitors like

HCL Technologies. Revenue

growth rate has declined in

FY20 mainly due to supply

side factors in BFSI which

hopefully will improve by SWBS

model. But the demand

related problems arent

expected to improve soon

08/12
 SWOT Analysis
Opportunity
Digital Technologies (IoT/AI/ML/Cloud)

1. Expected increase in demand for AI product, Ignio as more companies shift to WFH model. 

a. Ignio is part of TCS-owned Digitate and helps companies reduce outages by identifying

potential hotspots for failure in their networks.

2. The scope and demand for such ‘self-healing’ software products wiill enhance due to new work

arrangements caused by the pandemic

3. AI-powered solution TCS WaferWise to detect wafer anomaly in semiconductor manufacturing

which will automatically detect defects, improves product quality, drives up throughput, and

enhances business growth

a. TCS WaferWise is a cloud-based solution that leverages custom AI models to automatically

detect and classify anomalies by analyzing nano-scale images generated during the

semiconductor manufacturing process.

“We had hoped that it (revenue from Ignio)

will cross $100 million this year (FY20) but it's
just short of it. It is still doing quite well. Its
relevance will increase significantly as we go
into a distributed operating model.”
- Rajesh Gopinathan, CEO&MD

Possibility of heightened M&A activities

1. The company is open to the idea of picking up the right asset at the right price

2. TCS completed its biggest acquisition during the global financial crisis (Buyout of Citigroup

Global Services in 2008) and they will be wiiling to capitalize on any such opportunity since

during crisis valuation of company falls.

3. They have a strong balance sheet which enables them to participate in such opportunities

4. TCS has generated cash flows worth $4.97 billion and has generated more than 100% free

cash flows to shareholders in past three years

5. They are expected to invest steadily in businesses and maintain judicial use of cash.

09/12
 SWOT Analysis
Threats
Inadequate Disclosure Warning
SEBI has issued a warning to TCS for not adequately disclosing the damages in the 2016 Epic

Systems' case to investors. The disclosure did not mention that a penalty of $940 million was

imposed on TCS as part of the verdict. In the financial results declared two days later, $940

million, was shown as damages awarded by the Jury verdict, as part of contingent liabilities (under

'Notes to Accounts').

Volatile Global Political and Economic Scenario

Technology spending has always shown strong correlation with GDP growth. The company derives its

chunk of reserves from customer's discretionary spending which is majorly dependent on the global

political and economic scenario. Highly Volatile Economic conditions comprising of Trade tensions,

post- Brexit uncertainty, US presidential elections and impact of the Covid-19 pandemic on the

global economy will shape the future of the company

Cyber Attacks
1. Cyber threats have increased by almost six-times during the COVID-19 pandemic crisis

2. Risk tolerance capabilities of their IT infrastructure should be reassessed by the company.

3. One of the effective ways to tackle the situation is to move towards ‘Zero Trust Approach’. CIOs must

focus on cloud infrastructure with identity providers like Azure or Okta to enable Multi-Factor

Authentication (MFA) as the central point of authentication.

The Pandemic Effect

1. Operations are adversely going to be affected

2. Productivity is going to decrease due to employee stress and impact on emotional well

being

3. Demand for company services may be adversely affected not only in segments such as

travel and hospitality but also other segments due to sharp slowing down of major

economies

4. Increase in relative competitiveness due to most companies looking to improvise their

technological platforms post covid crisis.

10/12
Competitive Analysis

11/12
 Way Forward
COVID-19

1. From the total impact seen in Q4FY20 due to Covid-19 , management

estimates that 80% of the total impact would be on account of demand

issues.

2. The company also believes that the utmost impact in Q1FY21 will be on

the same lines to that of Global Financial Crisis

3. According to N Chandrasekaran, Chairman of Tata Group , in many

sectors , digital channels have gone from being "secondary, nice-to-have

options" to "primary channels", and in some instances, the "only channels"

Verticals & Geography

1. Life Sciences & Communication verticals have relatively been less

affected by this pandemic

2. BFSI continues to decline due to supply side and is not going to recover

soon.

3. TCS will launch Israel's first fully digital bank to transform

its banking sector by building a banking service bureau that would serve

as a shared, plug-and-play, digital banking operations platform

4. Europe continues to perform well in terms of Geography

Employees

1. There would be no new hiring except for the existing offers made in

previous year.There would be no increments in this year

2. Possible suspension of job visas H-1B will force hiring of US citizens and

that would  increase the operating cost and reduce the margin

3. The company is going to honor all the 40,000 campus offers made during

the year and have also assured that it would not layoff staff during these

difficult times

4. Move to WFH resulted in more investment and higher expenses

5. Change of business delivery model rapidly to Secure borderless

workspaces(SWBS) and the management stated that till 2025 up to 75%

of their global workforce will continue to work from home.

12/12
Thank you