Tata Consultancy Services Ltd.

Included in: BSE100, BSE200, SENSEX, NIFTY 50, BSE 500

BSE: 532540 NSE: TCS

Employees: over 500000 employees

Location: Mumbai, Maharashtra, India

Established on 1st April 1968, Pune

Organisation Introduction: Tata Sons Ltd.'s subsidiary established Tata Consultancy

Services in 1968. They later created a division called TCS to manage the required (EDP)
electronic data processing needs and offer management related consulting services. Tata
Sons Ltd. owns 70% of TCS as of 2017. According to market capitalization, TCS is among
one of India's largest corporations. TCS is leading global provider of business solutions and
IT services is TCS Ltd. The company provides numerous business solutions and outsourcing
IT services. Tata Consultancy Services is currently ranked as-one-of the most-valuable IT
services brand-in the world.

As part of one of its earlier contracts, TCS provided bureau services to an Indian unit trust
and punched card services to TICSO, a related business (now Tata Steel). Additionally, TCS
provides engineering, business process, and IT infrastructure services. Additionally,
worldwide consulting services for industry and solutions that leverage assets. They offer a
range of services, and their areas include manufacturing, retail, distribution, telecom,
banking, financial services, and insurance. The business is a part of the Tata Group, one of
the most prestigious business conglomerates and most prestigious brands in India. In the
year 1971, they began their first overseas assignment. Their first task was to set up the
business for management consulting services and create a computerized inventory control
system. Within a few years of its founding, TCS was expanding. After seven years of
operation, TCS' export earnings surpassed $1 million.

Additionally, TCS Tata Consultancy Services has acquired 16 organizations The newly
established National Stock Exchange's core trading platform was established by TCS in
1992, which revolutionized India's capital markets. By revenue, it ranks as the ninth-largest
provider of IT services worldwide. TCS ranked 10th in the 2017 Fortune India-500 list. In
April 2018, -TCS is recorded as-the-first Indian IT business to touch-a market valuation of
$100 billion.
Overview of the Management
FOUNDER

J.R.D TATA

COFOUNDERS

TATA SONS FAQUIR CHAND KOHLI

BOARD OF DIRECTORS

INDEPENDENT DIRECTORS

Table 6.1: PROMOTOR HOLDINGS PERCENTAGE TREND FOR LAST 5 QUARTERS

-March’ 2021 -June’ 2021 -September’2021 December’2021 March’2022
72.19% 72.19% 72.19% 72.19% 72.3%

Table 6.2 Pledge as a percentage of promotor shares:

-March’ 2021 -June’ 2021 -September’2021 December’2021 March’2022

0.47% 0.47% 0.47% 0.47% 0.48%
A slight increase in promotor holdings for the last quarter of FY2021-22 is a positive outlook
for investors, However, there is also increase in the percentage of promotor holding pledged.

Figure 2: Promotor holdings and pledge for TCS

72.19% 72.19% 72.19% 72.19% 72.30%

80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00% 0.47% 0.47% 0.47% 0.47% 0.48%
0.00%
Mar-21 Jun-21 Sep-21 Dec-21 Mar-22

Key Corporate Actions since 2020:

Table 7: Dividends for TCS

DATE DIVIDEND TYPE DIVIDEND PER SHARE

25 May 2022
th
-Final-dividend INR 22 per share
19th January 2022 -Interim--dividend INR-7 per share
14th October 2021 -Interim- dividend INR-7 per share
15th July 2021 -Interim--dividend INR-7 per share
25th May 2021 --Final dividend INR 15 per share

BONUS or SPLITS: N.A. (No bonus or splits)

FUNDAMENTAL ANALYSIS FOR TCS

Table 8: KEY FINANCIAL INDICATORS FOR TCS
Data source: Money Control

8.1 Revenue (Consolidated Figures In crores)

2022 2021 2020

191754 164177 156949

Revenue has increased by over INR 27500 crores in FY 2022 which is nearly 16.7%
increase over FY 2021. While the revenue increased by INR 7228 crores in 2021 which was
over 4.6% over the FY 2020.

8.2 Net Profit (In crores)

2022 2021 2020

38449 32562 32447

Net Profit has increased by over INR 5880 crores in FY 2022 which is nearly 18% increase
over FY 2021. While the net profit increased by INR 115 crores in 2021 which was over
0.3% over the FY 2020. Therefore, the percentage increase in net profit in 2022 has
declined in comparison to 2021.

8.3 ROE (expressed as a percentage)

2022 2021 2020

42.99 37.52 38.44

The return on equity has increased over 5% in FY 2022 which is a positive outlook for the
company. Return on equity is a metric used to gauge a corporation's profitability and the
efficiency of its management of the business (ROE). A company with a higher ROE and
better ROE is considered to be converting its equity financing well into profits.

8.4 Asset Turnover (Sales/Total assets)

2022 1.39
2021 1.27
 2020 1.25
2019 1.23
2018 1.06
2017 1.03
2016 1.10
2015 1.16
2014 1.12
2013 1.12

The asset turnover ratio which is primarily used to determined how better a company uses
its assets to generate revenue. For TCS the company has reported highest asset turnover
ratio for the decade in the year 2022 whereas, the lowest asset turnover ratio for the past
decade was in year 2017. The average asset turnover ratio for the past decade is close to
1.173 which is fairly good as compared with industry standards.

8.5 Net profit margin (Net profit/ Total Revenue) *100

2022 23.81
2021 22.77
2020 25.33
2019 24.40
2018 25.92
2017 25.51
2016 26.87
2015 26.17
2014 28.56
2013 26.40

The net profit margin ratio is considered as the preferable significant indicator to measure a
company’s overall profitability. For TCS the company has reported highest net profit margin
for the last decade in year 2014 whereas, the lowest net profit margin for the past decade
was in year 2021. The average net profit margin ratio for the past decade is close to 25.574
which is a good indicator for investors.

8.6 Current Ratio (Current Assets/ Current Liabilities)

2022 2.49
 2021 2.92
2020 3.30
2019 4.18
2018 4.85
2017 6.40
2016 4.72
2015 2.46
2014 2.84
2013 2.43

The current ratio is considered as the indicating measure of a company's short-term

solvency. For TCS the company has reported highest current ratio for the last decade in year
2017 which was too high as per industry standards, whereas the lowest current ratio for the
past decade was in year 2013. The average current ratio for the past decade is close to
3.659 which is a good indicating the company has maintained sufficient liquidity to meet the
financial obligations.

8.7 Quick ratio (Current Assets-Inventory)/Current Liabilities

2022 2.48
2021 2.92
2020 3.30
2019 4.18
2018 4.85
2017 6.39
2016 4.72
2015 2.45
2014 2.84
2013 2.43

The quick ratio is also considered as the indicating measure of a company's short-term
solvency. For TCS the company has reported highest quick ratio for the last decade in year
2017 which was too high as per industry standards, whereas the lowest quick ratio for the
past decade was in year 2013. The average quick ratio for the past decade is close to 3.626
which is a good indicating the company has maintained sufficient highly liquid assets to meet
the financial obligations.
8.8 Return on Assets (Net Income/ Total Assets)

2022 31.49
2021 28.30
2020 31.68
2019 30.21
2018 27.72
2017 26.35
2016 29.80
2015 30.53
2014 32.07
2013 29.72

The return on assets ratio is also considered as the indicating measure of a company's
profitability against the total assets that it has. For TCS the company has reported highest
return on assets ratio for the last decade in year 2014, whereas the lowest return on assets
ratio for the past decade was in year 2018. The average return on assets ratio for the past
decade is close to 29.78 which is a good indicating the company has maintained consistent
profitability against its total assets.

TECHNICAL ANALYSIS FOR TCS

Support and Resistance Level for TCS:

Figure 3: One year price chart for TCS

Support Level

At the support level it is expected that some buying interest will come into the stock and the
price will not go below to a particular level. Support level for TCS was close to INR 3390
which was a major support that was tested several times in past one year. This major
support level was broken in between May-June 2022 which was followed by a further
downtrend. Support once broken now, will act as a resistance for the price level.

Resistance Level

At the resistance price level, it is expected that selling will come into the stock and the rise in
price would stop as a result. The price level of approximately INR 3995 is a resistance level
for Infosys as the price has never crossed the resistance level and sellers become more
powerful after this level. The resistance level is also tested at several points before the
market turned bearish. However, resistance once broken will act as a support for the next
price level.

Moving-Averages:

The moving average is a key technical indicator which represents the average- value of a
stock price for over a given time frame. The moving averages are calculated on the closing
price of the candles. Moving averages are significant to find the trend, mark the level of
support and resistance for some stocks.

The figure below shows moving averages applied to the price chart of TCS with a three
months’ time frame. Four Moving averages for a period of 10,20,30 and 50 are applied on
the price chart.

The moving average of 50 denoted with a red line shows average price of INR 3367.26.

The moving average of 30 denoted with a green line shows average price of INR 3290.28.

The moving average of 20 denoted with a blue line shows average price of INR 3281.60.

The moving average of 10 denoted with a brown line shows average price of INR 3242.86.

Figure 4: Moving averages for TCS on 3 months time frame

Since the market is under bearish trend, the current market price is trailing below the 50
period moving average, this rejects our null hypothesis (H0) which states that TCS stock
prices has been dominated by buyers over the past 3 months.

The price trailing below the 50 period moving-average shows that the sellers have been
more dominant in the market for the past few trading sessions.

MACD

MACD also known as Moving average convergence divergence. MACD basically comprises
of two moving averages, convergence and divergence. The black line is represented as the
MACD line, while the line red in colour is representing the Signal line. The signals provided
by MACD are a little delayed hence it is a lagging indicator.

A purchasing signal is indicated when the MACD line crosses over the Signal, and vice
versa.

Figure 5: MACD for TCS for 3 month time frame

In our price chart of TCS, The MACD is above the signal which denotes that buyers lately
are more dominant and are trying to bring a consolidation to the price level. However since
both the MACD and Signal are below 0,this indicates a bearish trend in the market and
rejects our null hypothesis (H0) which states that TCS stock prices has been dominated by
buyers over the past 3 months.

The potential entry signal for buying is only when both MACD and Signal are positive, ie,
above the zero level.

RSI
RSI or relative strength index is used to analyse the momentum and magnitude in price
change. It consists of two price bands (20-80) or (40-60). Either of the two price bands are
used by traders.

A price range of 0-40 denotes a bearish downtrend, while a price range of 80-100 shows a
bullish range. A price band above 60 shows that the stock is in strong uptrend, while if the
RSI value falls below 20, it denotes heaving selling and market is expected to bounce back
from the level.

Figure 6: RSI for TCS for 3 month time frame

The above figure shows RSI for the levels of 40-60. Since the RSI is moving in between 40-
60, this denotes that the market is not having a strong momentum in the price level.
However, the indicator close to the level of 40 denotes the market is in a bearish trend. The
indicator has fallen below the limit of 40 four times in the period of three months which
denotes the bearish sentiment of the stock this helps us to reject our null hypothesis (H0)
which states that TCS stock prices has been dominated by buyers over the past 3 months.

The RSI indicator must be matched with the charts movement before executing a trade.

VOLUME ANALYSIS:
Volume and price of a stock are the two main tools for technical analysis. These are
considered as the leading two indicators. Prices of stocks can be manipulated but volumes
cannot be manipulated, thereby volumes are most relevant and given a lot of significance to
identify breakouts.

Figure 7: Volume analysis for TCS for 3 month time frame

In the price chart of TCS, we can see huge volume of selling volume over the period of last 3
months, which further helps us to reject our null hypothesis (H0) which states that TCS stock
prices has been dominated by buyers over the past 3 months. This kind of huge selling
shows a strong bearish trend. Such high volume of selling is not possible for small scale
retail investors. These huge sellings are generally made by big institutional investors.
However, if there is divergence in price and volume, it may indicate price reversal. The huge
red volume pillars are a clear indication of heavy selling in the market.

FIBONACCI RETRACEMENT
Horizontal lines called Fibonacci retracement levels, which are derived from the Fibonacci
sequence, indicate possible regions of support and resistance. In essence, these are taken
from two significant high and low points. Each level has a percentage associated with it. With
the aid of percentages, the price retracement of a past move is displayed. The levels of the
Fibonacci retracement are 23.6%, 38.2%, 61.8 percent, and 78.6%. Although it's not a
Fibonacci ratio, 50% is also employed.

We can use Fibonacci retracements to determine stop-loss limits, price targets, and entry
orders. The price may move past the retracement levels, which are merely possible points of
support or resistance.

Figure 8: Fibonacci retracements for TCS for 3 month time frame

In our 3 months price chart for TCS, we can see a strong downtrend denoted by 17 candle
bars, followed by a correction at a retracement level of 61.8% and then the stock prices
continue its downtrend. This analysis supports our null hypothesis (H0) which states that
TCS in the past three month has respected the Fibonacci retracement of 61.8%

The Fibonacci level of 61.8% holds true in this case and a trader could set up a short
position after confirmation of this level.