ASSIGNMENT

ON
“ANALYSIS OF CAPITAL STRUCTURE, WACC, AND DIVIDEND POLICY OF
TATA CONSULTANCY SERVICE FOR THE YEAR OF 2018-19, 2019-20, 2020-
21”
GUIDED BY:- DR. DELNAZ DASTOOR
SUBJECT:- CORPORATE FINANCE
SEMESTER:- 2
COLLEGE:- S.R LUTHRA INSTITUTE OF MANAGEMENT
GROUP NO:- 2
DHRUPAL TRIPATHI:- 207500592009
PRACHI TAILOR :- 207500592016
RINKI DALAI:- 207500592060
GOHIL DARSHANSINH:- 207500592064
KRUNAL GURAV:- 207500592065
 ABOUT TATA CONSULTANCY
Industry IT services, IT consulting
Founded 1968; 53 years ago,
Founder Tata Sons
Headquarters Mumbai, Maharashtra, India
Area served Worldwide
Key people Natarajan Chandrasekaran
(Chairman)
Rajesh Gopinathan
(MD & CEO)
Services Outsourcing
Consulting
Managed services
Revenue ₹161,541 crore
(US$23 billion) (2020)
Operating income ₹42,248 crore
(US$5.9 billion) (2020)
Net income ₹32,340 crore
(US$4.5 billion) (2020)
Total assets ₹120,899 crore
(US$17 billion) (2020)
Total equity ₹1,150,000 crore
(US$160 billion) (2020)
 EXAMINATION OF CAPITAL STRUCTURE: IMPACT OF
DEBT/EQUITY RATIO ON EARNING PER SHARE AND
RETURN ON EQUITY

THE DEBT-TO-EQUITY RATIO

• Debt and equity compose a company’s capital structure or how it finances its operations.
• The debt-to-equity ratio can be used as a measure of the risk that a business cannot repay its financial
obligations.
EARNING PER SHARE
• Earnings per share or EPS is an important financial measure, which indicates the profitability of a
company. It is calculated by dividing the company’s net income with its total number of outstanding
shares.
RETURN ON EQUITY
• The Return on Equity ratio essentially measures the rate of return that the owners of common stock of a
company receive on their shareholdings. Return on equity signifies how good the company is in
generating returns on the investment it received from its shareholders.
 EXAMINATION OF CAPITAL STRUCTURE: IMPACT
OF DEBT/EQUITY RATIO ON EARNING PER
SHARE AND RETURN ON EQUITY

Formulas Net
Debt equity ratio = long term debt / Income
shareholder’s fund (equity + other
equity) long term debt shareholder’ after Total Number of
Earnings per share = Net Income Year (Cr.) s fund (Cr.) Tax(Cr.) Outstanding Shares
after Tax – preference dividend /Total 2018-19 1367 78,898 30065 378,97,49,350
Number of Outstanding Shares
Return on Equity = Net Income or
2019-20 6234 74368 33260 375,23,84,706
Profits/Shareholder’s Equity 2020-21 5697 74794 30960 374,01,10,733
EXAMINATION OF CAPITAL STRUCTURE: IMPACT OF DEBT/EQUITY RATIO ON
EARNING PER SHARE AND RETURN ON EQUITY

DEBT
DEBT–– EARNIN
EARNIN RETUR
RETUR
EQUITY
EQUITY GGPER
PER NNON ON
Year
Year RATIO
RATIO SHARE
SHARE EQUITY
EQUITY
2018-19
2018-19 0.017
0.017 79.34
79.34 38.11%
38.11%
2019-20
2019-20 0.084
0.084 88.64
88.64 44.72%
44.72%
2020-21
2020-21 0.076
0.076 82.778
82.778 41.39%
41.39%
 INTERPRETATION
In the year of 2018-19 TCS company was using RS.1367 Cr. long term debt funds and 78,898 cr. Equity funds and the debt-to-equity ratio was 0.017 which was less
than 1. And profit after tax was 30065 cr. And outstanding shares was 3,78,97,49,350 and earning per share was 79.34 Rs. And return on equity was 38.106%.
In the year of 2019-20 TCS company increased their long-term debt 1367 cr. (2018-2019) To 6234 Cr. And decreased equity funds from 78,898 Cr. (2018-2019) To
74368 Cr. And debt to equity ratio increased from 0.017(2018-2019) to 0.084 because company increased long term debt funds. And in 2019-20 year earning per
share price also increased from 79.34 (2018-2019) to 88.64 because of long term debt increased. Return on equity % also increased from 38.106% (2018-2019) to
44.72% because of only and only company increased their long-term debt funds. So, we can say that there is a positive relationship between long term debt and
earning per share and return on equity.
In the year of 2020-2021 TCS company reduced their long-term debt fund from 6234 Cr. (2019-20) To 5697 Cr. And equity fund increased from 74368 Cr. (2019-20)
To 74794 Cr. And debt equity ratio decreased from 0.084 (2019-20) to 0.076. in the year of 2020-21 earning per share of the company is reduced from 88.64 Rs.
(2019-20) To 82.778 Rs. And return on equity also reduced from 44.72% (2019-20) to 41.39%. as when company reduce their long-term debt funds earning per share
and return on equity reduced every time.
As here we can interpret that when company increase their long-term debt funds company’s earning per share and return on equity increase and we can say that there
is a positive impact of debt equity ratio on earning per share and return on equity.
 
 ESTIMATION OF THE COST OF EACH
SOURCE OF CAPITAL AND COMBINED
WACC
 The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which
each category of capital is proportionately weighted. All sources of capital, including common stock,
preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.

Formulas
Cost of equity = profit after tax / profit
profit
equity * 100 after
aftertaxtax financial
financialcost
cost
Cost of debt = financial cost * (1-tax) Year
Year (Cr.)
(Cr.) equity
equity(Cr.)
(Cr.) (Cr.) (Cr.) taxtaxrate
rate debt
debtfunds
funds(Cr.)
(Cr.)
/ debt funds * 100 2018-19
2018-19 30065
30065 78,898
78,898 170
170 26.14%
26.14% 1367
1367
WACC = W1 * (COST OF 2019-20
2019-20 33260
33260 74368
74368 743
743 20.79%
20.79% 6234
6234
EQUITY) + W2 * (COST OF 2020-21
DEBT)
2020-21 30960
30960 74794
74794 537
537 24% 24% 5697
5697
 ESTIMATION OF THE COST OF EACH SOURCE OF CAPITAL
AND COMBINED WACC
(2018-2019) & (2019-2020)
2018 – 2019 2019 – 2020
PARTICU AMOU WEIG COST WA
LARS NT HT CC
(CR.)
Equity 78,898 0.983 0.3811 0.37
funds 46
Debt funds 1367 0.017 0.0918 0.00
5 156
Total 80265 1 0.3761 0.37
6 616
WACC FOR THE YEAR OF 2020 – 2021

PARTIC AMOUN WEIGH COST WAC

ULARS T (CR.) T C
Equity 74,794 0.93 0.4139 0.3849
funds 27
Debt 5697 0.07 0.07164 0.0050
funds 15
Total 80,491 1 0.48554 0.3899
42
 INTERPRETATION

 In the year of 2018-19 TCS company used 78,898 Cr. Total equity funds and 1367 Cr. Long term
debt funds so using formula of cost of debt and cost of equity both sources cost is identified and
weight of each source is identified and then cost of each source is multiply with weight of each
source. Then we added multiplied value. In 2018-19 TCS company’s weightage average cost of
capital was 37.616%.
 In the year of 2019-20 TCS company increased their long-term debt 1367 Cr. (2018-19) to 6234
Cr. That’s why in this year weightage average of cost of capital has been increased from previous
year 37.616% (2018-19) to 42.01%.
 In the year of 2020-21 TCS company decreased their long-term debt 6234 Cr. (2019-20) to 5697
Cr. And equity fund increased from previous year That’s why in this year weightage average of
cost of capital has been increased from previous year 37.616% (2019-20) to 38.9942%.
 COMPARISON OF THE DIVIDEND POLICY OF TCS FOR
THE YEAR OF (2018-2019), (2019-2020), (2020-2021) BY
ESTIMATING THE DIVIDEND PER SHARE, DIVIDEND
PAY-OUT RATIO AND DIVIDEND YIELD RATIO

DIVIDEND PER SHARE

Dividend per share or DPS is all the dividends that a company has paid out for each of its outstanding shares
during a certain period of time.
DIVIDEND PAY-OUT RATIO
Dividend pay-out ratio defines the relationship between the dividends paid by a company and its net earnings
across a specific period. The ratio is represented in terms of a percentage.
DIVIDEND YIELD RATIO
The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how much a
company pays out in dividends each year relative to its stock price.
 COMPARISON OF THE DIVIDEND POLICY OF TCS
FOR THE YEAR OF (2018-2019), (2019-2020), (2020-
2021) BY ESTIMATING THE DIVIDEND PER
SHARE, DIVIDEND PAY-OUT RATIO AND
DIVIDEND YIELD RATIO

Formulas
Dividend per share = total shares dividend
dividend Market
dividend paid / shares
dividend paid outstanding
outstanding per
per share
share earning
earning per Value Per
outstanding
Dividend pay-out ratio = Year (Rs.)
(Rs.) (No.) (Rs.) share (Rs.) Share
Share (Rs.)
(Rs.)
dividend per share / earning per
2018-19 11,4240000000 378,97,49,350
378,97,49,350 30.14
30.14 79.34
79.34 2000.4
2000.4
share * 100
Dividend yield ratio = Dividend 2019-20 273,92,4083538 3,75,23,84,706 73
73 88.64
88.64 1823.05
1823.05
Per Share / Market Value Per 2020-21 142,12,420,7854
142,12,420,7854 3,74,01,10,733 38
38 82.78
82.78 3177.85
3177.85
Share * 100
 COMPARISON OF THE DIVIDEND POLICY OF TCS FOR THE YEAR OF (2018-2019),
(2019-2020), (2020-2021) BY ESTIMATING THE DIVIDEND PER SHARE, DIVIDEND PAY-
OUT RATIO AND DIVIDEND YIELD RATIO

DIVIDEN
DIVIDEN
DIVIDEN
DIVIDEN D D PAY-
PAY- DIVIDEN
DIVIDEN
DD PER
PER OUT
OUT D
D YIELD
YIELD
Year
Year SHARE
SHARE RATIORATIO RATIO
RATIO
30.14
30.14 RS.
RS.
2018-19
2018-19 // SHARE
SHARE 37.99%
37.99% 1.51%
1.51%
73
73 RS.
RS. //
2019-20
2019-20 SHARE
SHARE 82%
82% 4.00%
4.00%
38
38 RS.
RS. // 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00%

2020-21
2020-21 SHARE
SHARE 45.90%
45.90% 1.20%
1.20% DIVIDEND PAY-OUT RATIO DIVIDEND YIELD RATIO
 INTERPRETATION

 In the year of 2018-19 TCS company paid 11424 Cr. Dividend To their equity shareholders and dividend
per share price was 30.14 Rs. Per share and dividend pay-out ratio was 37.998% and dividend yield
percentage was 1.51%.
 In the year of 2019-20 TCS company paid 273,92,4083538 Cr. Dividend To their equity shareholders and
dividend per share price was 73 Rs. Per share and it was highest compare to previous year (2018-19) and
dividend pay-out ratio was 82% which was highest compare to previous year (2018-19) and dividend
yield percentage was 4.0043% increased from previous year (2018-19).
 In the year of 2020-21 TCS company paid 142,12,420,7854 Cr. Dividend To their equity shareholders and
dividend per share price was 38 Rs. Per share and it was lower compare to previous year (2019-20) and
dividend pay-out ratio was 45.90% which was lower compare to previous year (2019-20) and dividend
yield percentage was decreased from 2019-20 year 1.196%.

 
THANK YOU