The I.T. IndustryGroup 7Amit Phadke 07 Chintan Dave 14 Hanu Prateek 21 Mayank Savla 28 Piyush Saraogi 35 Rohit Thakur 42 Shekhar Modi 49

Agenda IT industry Introduction TCS Balance Sheet Summary TCS Profit and loss accounts summary TCS Ratio summary and interpretations Conclusions & Recommendations

Agenda IT industry Introduction TCS Balance Sheet Summary TCS Profit and loss accounts summary TCS Ratio summary and interpretations Conclusions & Recommendations

I.T.!

MAJOR PLAYERSGlobal IBM: USA Cap Gemini: France Hewlett Packard: USA Sodexho Alliance: France Accenture: USA Oracle: USA Indian TCS Infosys Wipro HCL

I.T. in India Establishment of TCS in 1968 Export revenue ~ $59bn, 26% of total exports One of the fastest growing sectors - More than 30% annual growth for past 20 years Software services exports to more than 60 countries, including half of all fortune 500 Source of Bread and butter for 2.5Mn population

Why we chose TCS? TCS is the biggest player in the Indian IT industry Highest Market Cap Most profitable

The CompetitionMarket Cap. (Rs. in Crores)TCS Infosys Wipro HCL Tech Oracle Finance Tech Mahindra Mphasis Mahindra Satyam Patni Computer Financial Tech 231,713.20 148,783.51 90,150.45 30,539.89 17,015.59 9,296.14 8,861.27 8,754.62 4,129.00 3,569.70

Sales Turnover

Net Profit

Total Assets

29,275.41 25,385.00 26,340.70 6,794.48 2,360.51 4,965.49 3,770.09 4,776.10 2,030.61 357.69

7,569.99 6,443.00 4,843.70 1,198.28 967.98 696.72 996.88 -127.6 655.05 91.94

19,620.61 24,501.00 26,065.00 6,333.25 5,150.34 5,190.40 2,909.44 3,423.10 2,968.30 2,455.40

MARKET CAP

*All Values in INR Crores

SALES TURNOVER4,776.10, 4% 3,770.09, 4% 4,965.49, 5% 2,360.51, 2% 6,794.48, 6% 26,340.70, 25% 29,275.41, 28% 2,388.30, 2%TCS Infosys Wipro HCL Tech Oracle Financ

25,385.00, 24%

Tech Mahindra Mphasis Mahindra Satyam Others

*All Values in INR Crores

SALES TURNOVERFY 201011 TCS Infosys Wipro HCL Oracle 29275.41 27501.00 27176.00 14977.3 2,360.51 FY 200910 23222.05 22742.00 24093.3 12048.1 2,212.62 % Change 28.2 20.09 12.80 24.31 6.68

NET PROFITFY 2010- FY 200911 10 7,569.99 5,618.51 6823.00 5332.1 1522.7 967.98 6219.00 4611.60 1291 695.71 % Change 34.73 9.71 15.62 17.94 39.13

All Values in INR Crores

SALES TURNOVERQ1 201011 TCS Infosys Wipro HCL Oracle 10797.0 7485.0 8492.9 4303.5 712.1 Q1 200910 8217.3 6198.0 7190.6 3425.4 650.3 % Change 31.39 20.76 18.11 25.63 9.50

NET PROFITQ1 2010-11 2380.3 1722.0 1339.8 510.9 204.2 Q1 2009-10 1863.2 1488.1 1325.3 341.8 193.3 % Change 27.75 15.72 1.09 49.47 5.62

All Values in INR Crores

Agenda IT industry Introduction TCS Balance Sheet Summary TCS Profit and loss accounts summary TCS Ratio summary and interpretations Conclusions & Recommendations

Summary of Balance SheetTotal assets of TCS show continuous and healthy growth 2010-2011 2009-2010 19,000.36 2008-2009 16,669.60

Total Assets

25,147.27

Total Liabilities Shareholders Equity (Retained earnings)

642.46 24,504.81 (24,209.09) 25,147.27

533.64 18,466.72 (18,171.00) 19,000.36

969.59 15,700.01 (13,248.39) 16,669.60

All Values in INR Crores

A major portion of total liabilities is the Shareholders equity, which in turn comes mostly from Retained earnings

Summary of Balance SheetLiabilities + Shareholders Equity

25,147.27 Crore

19,000.36 Crore

16,669.6 Crore

Assets

Agenda IT industry Introduction TCS Balance Sheet Summary TCS Profit and loss accounts summary TCS Ratio summary and interpretations Conclusions & Recommendations

Summary of Profit and Loss account2010-2011 Rs. in crores Income Expenditure Profit Before Tax Provision for Taxes Net Profit Amount for Appropriation Balance carried to Balance Sheet Earnings per Share (Rs.) 29770.14 21069.71 8700.43 1130.44 7569.99 18028.12 14069.20 46.27 2009-2010 Rs. in crores 23222.05 16851.67 6370.38 751.87 5618.51 15608.92 10458.13 35.67 2008-2009 Rs. in crores 21947.46 16808.07 5139.69 443.48 4696.21 12071.10 9990.41 26.81

Trends in Income, Expenditure and ProfitIncome (Rs. in Crores)30000 29770 30000 25000 21947 20000 20000 16808 15000 15000 16852 15000 30000

Expenditure (Rs. In Crores)

Net Profit (Rs. in Crores)

23222

25000 21070

25000

20000

10000

10000

10000 7569.99 5618.51

5000

5000

5000

4696.21

0 2008-09 2009-10 2010-11

0 2008-09 2009-10 2010-11

0 2008-09 2009-10 2010-11

High Increase in Income

Lesser increase in Expenditure

Increasing Profits

Insights into Profit and Loss account1. Major Source of Income is from IT and Consultancy services. Relatively small contribution from Sale of equipment and software licenses2011 Income from IT and Consulting (% of total) 28,171.26 (94.63%) 2010 22,232.93 (95.74%) 2009 21,535.75 (98.12%)

2. Employee costs are almost 50% of the expenditure 3. Operation Costs and other expenses fell by around 522.73 crores from 2009 to 2010 and increased again by 1831.22 crores from 2010 to 2011 4. Huge increase in income from 2010 to 2011 in comparison with 2009 to 2010 5. Constant weighted average number of shares (195,72,20,996)

Income and Expenditure Distribution2010-114% 2%

2009-103% 1%

2008-094%

Information technology and consultancy services

Sale of equipment and software licenses

94%

96%

96%

Income0% 3% 0% 3% 0%2% Employee costs 44% Operation and other expenses Interest 54% Depreciation and amortisation

48% 49% 50%

47%

Expenses

Agenda IT industry Introduction TCS Balance Sheet Summary TCS Profit and loss accounts summary TCS Ratio summary and interpretations Conclusions & Recommendations

Liquidity Ratios2010-2011 Current Ratio Quick Ratio (Acid Test ratio) Average Collection Period (days) 2.88 2.88 80 2009-2010 1.88 1.88 71 2008-2009 2.26 2.26 79

Interpretations TCS has more than enough current assets to pay-off its liabilities (Current Ratio is well above 1) Being a service oriented industry, the quick ratio has a tendency to follow the current ratio very closely There is some scope for improvement in the average collection period (industry average ~68 days)

Leverage, Valuation, Turnover Ratios2010-2011 Debt Equity (Leverage) Price Earning (Valuation) Inventory Turnover (Turnover) Fixed Assets Turnover (Turnover) 0.01 25.56 1,866.66 6.53 2009-2010 0.01 21.89 1,686.94 6.62 2008-2009 0.04 10.07 760.77 6.64

Interpretations Most of TCS activities are funded through equity rather than debt (Debt-equity ratio is almost 0) Steadily growing PE ratio indicates that customers are willing to pay more for each rupee of earnings, which is a major indication of TCS future growth potential I.T. being a service industry, inventory turnover ratio is very high (as inventory is very low) A Fixed Asset Turnover ratio of over 6.5 implies very efficient use of companys fixed assets

Profitability Ratios2010-2011 Net Profit Margin (in %) Return on Equity (in %) Earnings per Share (Rs.) 24.62 37.00 46.27 2009-2010 23.62 37.91 35.67 2008-2009 23.31 33.48 26.81

Interpretations Net profit margin is next only to Infosys for FY11, which indicates that it is a more profitable company and has better control over its costs as compared to most of its competitors Highest ROE among the large Indian IT firms for FY11 and hence, it has outperformed all its competitors and is most efficient at generating profits with the money the shareholders have invested. EPS has grown at almost 30% annually over the past 2 years, which serves as a major indicator of the continuous improvement in the profitability of the company

Agenda IT industry Introduction TCS Balance Sheet Summary TCS Profit and loss accounts summary TCS Ratio summary and interpretations Conclusions & Recommendations

Recommendations Scope for improvement in Average collection Period TCS should keep a close watch on Infosys and Wipro to maintain its top position Given its strong presence across major global markets, TCS can benefit from the improving demand traction even further. Its growing influence in the domestic market for IT services should be utilized to add to its strength. Market share in the domestic market is only about 10% having a huge scope for expansion Possibilities of expansion in hardware and network communications part of IT Use of currency forward contracts and options to hedge receivables and revenues

Questions?