FUNDAMENTAL ANALYSIS OF TCS

PRESENTED BY:Kaustav banerjee,mfc part 1Roll-

ECONOMY TODAY

GDP AROUND 7.2 %,EXPECETD TO TOUCH DOUBLE DIGIT BY 2014

BUDGET INDICATES INFALATIONARY TREND BUT EXPECTED TO LOWER DOWN BY MID OF JUNE NEXT YEAR

ECONOMY GROWTH RATE AROUND 9.8%

CONT:

RECOVERY FROM SUB PRIME CRISIS AND ECONOMIC BOOST

EXCISE DUTY HIKED FROM 8 % TO 10 %

BANKING SECTOR REVIVING AND SO IS TELECOM SECTORS

STABLE POLITICAL AND SOCIAL ENVIRONMENT,

AGRICULTURAL AS WELL AS INDUSTRIES ARE SHOWING SIGNS OF GROWTH

INDUSTRY:

1 I.T SECTOR IS ONE OF THE MAJOR CONTRIBUTORS TOWARDS INDIA’S GDP

2.MAJOR PLAYERS ARE TCS ,INFOSYS,WIPRO.HCL WHO SOLELY CONTRIBUTE80% OF TOTAL C ONTRIBUTION

3.TCS RANKED AS THE LEADING I.T COMPANY IN INDIA WITH MAJOR GROWTH PERSPECTIVE

4.A BOOM IN ANY OTHER SECTOR WILL RESULT IN A RESPECTIVE BOOM IN I.T SECTORBECAUSE NO SERVICES CAN BE IMAGINED TODAY WITHOUT TECHNOLOGY ANDSOFTWARE

5.REVIVAL OF COUNTRIES LIKE U.K,USA WILL ALSO RESULT FAVOURABLY FOR I.T GENERATING MORE REVENUE

I.T IN INDIA:

HISTORICAL GROWTH OF I.T IN INDIA

REVENUES FROM ENGEENEERING AND INDUSTRIAL SERVICES

COMPANY ANALYSIS:DRIVING THE I.T INDUSTRY ON FRONT FOOT

1 It was the first company to convince customers that doing projects from India, thousands of miles away from their home bases in the United States and United Kingdom made for a compelling value proposition. 2 proactively set up operations across the globe. Specifically, it entered into markets like Europe, Asia Pacific, Latin America as well as Middle East and Africa.

TCS employees with experience greater than 3 years in last three years 

PROJECTED P/L A/C FOR 31ST MARCH 2010

PARTICULARS

2006 2007 2008 2009 2010(EXP)

TOTAL INCOME

11293.76 15156.52 18979.67 21947.76 27873.65

EXPENDITURE

8219.41 10985.84 13975.81 16808.07 21500

P.B.T 3074.35 4170.68 5003.86 5139.69 6373.65

TAX 637.36

P.A.T 2716.87 3757.29 4508.76 4696.21 5736.29

BAL B/F FROM PREVIOUS YEAR

1005.47 2833.30 4919.99 7347.89 9990.41

PROFIT FOR APPROPIATIONS

3858.50 6590.59 9428.75 12071.10 15726.7

E.P.S 27.76 38.39 46.07 47.91 58.61

Total income raised by 27 % Average growth of past 5 years = 24.5% Economic revival and favourable economic

conditions among countries like u.k. Tcs had undertaken some new projects with

GOVT. OF MAHARASTRA Consistent growth rate even in reciossionary

period hence favourable economic condition will ensure comparatively more growth

However company may not register very high growth in revenue in 2009-2010 ,because fin year has almost come to its end but a high growth rate may be confessed in the year 2010-2011

TOTAL EXPENDITURE HAS BEEN ASSIGNED A GROWTH RATE OF 28%

1)FROM THE PAST RECORDS IT IS SEEN THAT THE COMPANY’S EXPENDITURES IS GROWING AT AN AVERAGE RATE OF 26.6%2)THE INFLATION WAS COMPARATIVELY HIGH IN THE YEAR 2009 INDICATING HIGH LABOUR COSTS AND HIGH OPERATIONAL EXPENDITURES3)NEW PROJECTS UNDERTAKEN WILL BE FAVOURABLE TOWARDSRISE IN EXPENDITURES

PROVISON FOR TAXATION1)TCS MAINTAINS AROUND 9% RATE ON INCOME AS PROVISON FOR TAXATION AND IT IS PROJECTED THAT THE RATE OF PROVISON FOR TAXATION ON TAXABLE INCOME WOULD BE AROUND 10% ,THE CHANGES AND REVISONS MADE IN THE TAXATION POLICY BY F.M PRANAB MUKHARJEE WILL NOT BE REFLECTED IN THE ANNUAL REPORT OF 2010-11 AS BECAUSE TAX IS CALCULATED ON BASIS OF PREVIOUS YEAR.HOWEVER INCREASEIN MAT FROM 15% TO 18% AND EXCISE DUTY FROM 2% TO 10% WILLBE REFLECTED IN THE ANNUAL REPORT FOR THE YEAR 2010-11

Intrinsic value  Intrinsic value =projected eps x projected p/eProjected p/e =15Projected eps =58.61Intrinsic value = 58.61x15 = 879.15Current market price = Rs.840INTRINSIC VALUE > CURRENT MKT VALUE

CONCLUSION If we compare the intrinsic value of tcs and mkt value it is clear that the intrinsic value is more than the market value , the market is favourable and the share price is likely to go more up in future ,hence I suggest the holders of shares of TCS to hold the shares for now.