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SYNOPSIS

• TCS is the largest software company in Asia, having a wide range of offerings.

• Added 37 clients in the financial year FY11.

• During the quarter TCS wins a multi-year, multi-million dollar contract to provide

application support, maintenance and

development services to a world leader in

industrial gases.

• During the quarter TCS wins a multi-year deal to provide end-to-end IT

infrastructure services from Royal

Haskoning.

• During the quarter du, the integrated telecom service provider in the United

Arab Emirates Signs a five years

Agreement with TCS.

• During the quarter TCS had launched iON the first-of-its-kind fully integrated

information technology solution for Small

and Medium Business (SMB).

• Total head count of the company as on Mar. 31, 2011 stood at 198,614 with

utilization rate at 82.4%.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 373245.10 117823.60 90680.40 46.33 25.04

FY 12E 440429.22 137952.31 105953.46 54.14 21.43

FY 13E 524110.77 164016.92 126731.66 64.75 17.91

Stock Data:

Sector: IT

Face Value Rs. 1.00

52 wk. High/Low (Rs.) 1,247.00/692.00

Volume (2 wk. Avg.) 5,84,000

BSE Code 532540

Market Cap (Rs.In mn) 2270352.00

Share Holding Pattern

1 Year Comparative Graph

TCS Ltd BSE SENSEX

C.M.P: Rs. 1160.00 Target Price: Rs. 1322.00 Date: April 28th 2011 BUY

TATA CONSULTANCY SERVICES Ltd Result Update: Q4 FY 11

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Tata Consultancy

Services Ltd 1160.00 2270352.00 38.68 30.22 10.13 2000.00

Infosys Technologies 2941.70 1688579.70 112.22 26.21 5.93 500.00

HCL Technologies 515.30 353904.00 15.32 33.69 7.17 200.00

Wipro Technologies 448.15 1099658.7 19.74 22.71 6.32 300.00

Investment Highlights

Q4 FY11 Results Update

During the quarter, the company disclosed a Consolidated profit of Rs. 26228.50

million as against of Rs.20013.9 million for the quarter ended March 31, 2010. Net

sales are increased by 31% to Rs. 101574.90 million from Rs. 77381.7 million in

the same quarter previous year. In the same period, consolidated total income of

the company was at Rs.104010.70 million, a rise of 31% over the prior year period.

Company EPS is stood at Rs.13.26 for the quarter ended March 2011.

Quarterly Results - Consolidated (Rs in mn)

As at 11-Mar 10-Mar %Change

Net Sales 101574.90 77381.7 31

Net Profit 26228.50 20013.9 31

Basic EPS 13.26 10.23 30

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FY11 Performance in line with expectation The Company’s Top line has increased 24% to Rs.373245.10mn from Rs.300289.20mn of FY10. Bottom line for the year increased 30% to Rs.90680.40mn. from Rs.70006.40mn of FY10. These numbers are in line with our expectation. Earnings per share of the company for the year stood at Rs.46.33 per share. Expenditure of the company for the year stood at Rs.261461.50mn, which is around 23% higher than FY10. Interest increased 64%YoY to Rs.264.80mn, and depreciation also increased 11%YoY to Rs.7352.68mn.

TCS Secures multi year contract from Air Liquide

TCS has entered into a multi-year, multi-million dollar contract to provide

application development and maintenance services to Air Liquide USA LLC, a

subsidiary of Air Liquide Group, the world leader in gases for industry, health

and the environment.

TCS provides core banking system to CUA

Tata Consultancy Services BaNCS has entered into an agreement to deliver

CUA’s new core banking system. CUA, Australia’s largest customer-owned

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financial institution. CUA will revolutionize its core banking system and back

office processes over the next two years to provide greater flexibility and

integration across the business and deliver an enhanced customer experience.

TCS has set up new Learning and Development Center in Hyderabad

Tata Consultancy Services was setting up first learning and development center

for campus trainees in Hyderabad. Equipped to train 6,000 professionals

annually, the new center will offer TCS’ leading edge learning curriculum over a

three-month period to candidates joining TCS straight out of colleges.

TCS sets new benchmark in Quality; First software firm to be assessed at

Level 5 enterprise-wide in software services and development

The company announced that it has been assessed enterprise-wide, at the

highest maturity Level 5 of the Capability Maturity Model® Integration

for CMMI®-DEV (Development) and CMMI®-SVC (Services) models.

With this achievement, TCS sets a new benchmark as the first publicly stated

recipient to achieve a Multiple Simultaneous Appraisal against two

constellations of the CMMI® model. TCS is also the first organization in the

world, to be appraised at Level 5 of the CMMI®-SVC model, which underscores

the maturity of the firm’s fast growing Business Process Outsourcing

(BPO) and Infrastructure Services business

Royal Haskoning signs Multi-Year agreement with TCS

Tata Consultancy Services has entered into an agreement with Royal Haskoning

to provide end-to-end IT infrastructure services, which will be provided from

TCS’ global delivery centers in the Netherlands, Hungary and India. For this

both the companies have signed a multi-year, multi-million IT infrastructure

deal.

Law Society selects TCS as a strategic transformation partner

The Law Society of England and Wales has chosen Tata Consultancy Services

as a strategic transformation partner, following a diligent process of evaluation.

TCS will work with The Law Society initially on a significant system

development project, which aims to create a more effective online service for The

Law Society and its members.

Puducherry selects TCS for its State Data Center project

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Tata Consultancy Services had won a contract for establishing and

managing the State Data Centre (SDC) for the state of Puducherry. The SDC,

which was earlier inaugurated by Sachin Pilot, Honorable Minister of State for

Communications & Information Technology, Government of India is ready for

commissioning.

Nedbank selects TCS BaNCS Securities Processing for Custodial Operations

Nedbank Investor Services (NIS), a division of Nedbank Limited, has selected the

TCS BaNCS suite of products to replace its existing securities and custodial

applications.

iON brings the power of world-class technology to India’s SMBs

TCS has launched iON - the first-of-its-kind fully integrated information

technology solution for Small and Medium Business (SMB). The company’s

portfolio of business solutions for SMBs on the cloud- iON- was launched into

the market in the 4th quarter of FY11. The unique solution stack addresses the

end-to-end technology requirements of small and medium business units. The

solutions have been received well by the market. The company has acquired

225+ customers across India since it was launched in 2011.

du selects TCS as an IT Managed Services partner

Tata Consultancy Services has signed a five-year contract with du, the

integrated telecom service provider in the United Arab Emirates. As an

IT Managed Services partner, TCS will support du in its efforts to enhance

customer excellence and service delivery levels.

TCS BaNCS Launches Mobile Trading in India

TCS BaNCS Securities Trading went operational with its mobile trading

application with a leading financial services provider. With this implementation,

TCS BaNCS becomes one of the first IT solution providers to deploy its mobile

trading solution in India, the bastion of the exchanges until now.

Dividend on Redeemable Preference Shares

TCS has recommended a Dividend of 11 paise on Redeemable Preference Share

of Rs. 1 each at its annual general meeting.

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Company Profile

TCS is part of the Tata group, one of India’s largest industrial conglomerates and most

respected brands. Tata Consultancy Services is an IT services, business solutions and

outsourcing organization that delivers real results to global businesses, ensuring a

level of certainty that no other firm can match. TCS offers a consulting-led integrated

portfolio of IT and IT-enabled services delivered through its unique Global Network

Delivery Model™ (GNDM™), recognized as the benchmark of excellence in software

development. TCS has over 198,500 of the world’s best-trained IT consultants in 42

countries. Revenue of $8.2 billion (fiscal year ending March 31, 2011). TCS has nine

non-executive and three executive board members.

Awards

• TCS mKrishi wins Nasscom Social Innovation Honors 2010

• TCS wins Golden Peacock Award 2010

• TCS wins 2010 Global Most Admired Knowledge Enterprises (MAKE) Individual

Operating Unit Award

Quality Framework: TCS is the world’s first organization to achieve an enterprise-

wide Maturity Level 5 on CMMI® and P-CMM® based on SCAMPISM, the most rigorous

assessment methodology.

Subsidiaries

TCS has 20 directly-held and 37 indirectly-held subsidiaries.

Company Services are as follows

TCS offers a wide range of services in many industries such as

� Banking & Financial Services

� Energy, Resources & Utilities

� Government

� Life Sciences and Healthcare

� High Tech

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� Insurance

� Manufacturing

� Media & Information Services

� Retail & Consumer Products

� Telecom

� Travel, Transportation & Hospitality

Services Offerings

TCS offers a wide range of IT services, outsourcing and business solutions.

� Services

• IT Services

• IT Infrastructure Services

• Enterprise Solutions

• Consulting

• Business Process Outsourcing

• Platform BPO Solutions

• Business Intelligence & Performance Management

• Engineering & Industrial Services

• Small and Medium Business

• Connected Marketing Solutions

� Software

• TCS BaNCS

• TCS Technology Products

• Other Products

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inancials Results

12 Months Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) FY10 FY11 FY12E FY13E

Description 12m 12m 12m 12m

Net Sales 300289.20 373245.10 440429.22 524110.77

Other Income 2720.70 6040.00 6704.40 7307.80

Total Income 303009.90 379285.10 447133.62 531418.57

Expenditure -213343.70 -261461.50 -309181.31 -367401.65

Operating Profit 89666.20 117823.60 137952.31 164016.92

Interest -161.00 -264.80 -278.45 -292.37

Gross profit 89505.20 117558.80 137673.86 163724.54

Depreciation -6608.90 -7352.60 -8234.91 -9058.40

Profit Before Tax 82896.30 110206.20 129438.94 154666.14

Tax -11969.70 -18308.30 -22134.06 -26447.91

Profit After Tax 70926.60 91897.90 107304.89 128218.23

Minority Interest -920.20 -1217.50 -1351.43 -1486.57

Net Profit 70006.40 90680.40 105953.46 126731.66

Equity capital 1957.20 1957.20 1957.20 1957.20

Reserves 181710.00 242090.90 348044.36 474776.02

Face Value 1.00 1.00 1.00 1.00

Total No. of Shares 1957.20 1957.20 1957.20 1957.20

EPS 35.77 46.33 54.14 64.75

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Quarterly Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) 30-Sep-10 31-Dec-10 31-Mar-11 30-Jun-11E

Description 3m 3m 3m 3m

Net sales 92863.90 96633.50 101574.90 108685.14

Other income 707.50 1942.10 2435.80 2387.08

Total Income 93571.40 98575.60 104010.70 111072.23

Expenditure -65102.20 -67636.10 -70645.40 -76296.97

Operating profit 28469.20 30939.50 33365.30 34775.26

Interest -152.80 -48.70 -36.50 -34.68

Gross profit 28316.40 30890.80 33328.80 34740.58

Depreciation -1724.60 -1883.90 -2128.80 -2277.82

Profit Before Tax 26591.80 29006.90 31200.00 32462.77

Tax -4601.40 -5041.40 -4637.50 -5680.98

Profit After Tax 21990.40 23965.50 26562.50 26781.78

Minority Interest -298.30 -266.40 -334.00 -350.70

Net Profit 21692.10 23699.10 26228.50 26431.08

Equity capital 1957.20 1957.20 1957.20 1957.20

Face Value 1.00 1.00 1.00 1.00

Total No. of Shares 1957.20 1957.20 1957.20 1957.20

EPS 11.08 12.24 13.26 13.50

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Key Ratios

Particulars FY10 A FY11 A FY12 E FY13 E

EBIDTA % 30% 32% 31% 31%

PAT % 24% 25% 24% 24%

P/E ratio (x) 32.43 25.04 21.43 17.91

ROE - % 38% 37% 30% 27%

ROCE - % 45% 45% 37% 32%

EV/EBIDITA (x) 17.04 19.64 18.43 17.30

Debt Equity Ratio 0.002 0.002 0.001 0.001

Book Value (Rs.) 93.84 124.69 178.83 243.58

Price/Book Value 8.32 9.30 6.49 4.76

Charts:

Netsales & PAT

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P/E Ratio(X)

EV/EBITDA(x)

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P/BV(x)

Outlook and Conclusion

At the current market price of Rs.1160.00, the stock is trading at 21.43 x FY12E and 17.91 x FY13E respectively.

Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.54.14 and Rs.64.75 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 22% over 2010 to 2013E respectively.

On the basis of EV/EBITDA, the stock trades at 18.43 x for FY12E and 17.30 x for FY13E.

Price to Book Value of the stock is expected to be at 6.49 x and 4.76 x respectively for FY12E and FY13E.

TCS sets new benchmark in Quality; First software firm to be assessed at Level 5 enterprise-wide in software services and development

TCS wins a multi-year, multi-million dollar contract to provide application support, maintenance and development services to a world leader in industrial gases.

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TCS wins a multi-year deal to provide end-to-end IT infrastructure services from Royal Haskoning.

TCS had launched iON - the first-of-its-kind fully integrated information technology solution for Small and Medium Business (SMB).

The company had won a contract for establishing and managing the State Data Center (SDC) for the state of Puducherry.

Law Society of England and Wales selects TCS as a strategic transformation partner.

We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.1322.00 for Medium to Long term investment.

Industry Overview

Sector structure/Market size

The Indian information technology industry has played a key role in putting India on

the global map. Thanks to the success of the IT industry, India is now a power to

reckon with. According to the National Association of Software and Service

Companies (NASSCOM), the apex body for software services in India, the revenue of

the information technology sector has risen from 1.2 per cent of the gross domestic

product (GDP) in FY 1997-98 to an estimated 5.8 per cent in FY 2008-09.

India's IT growth in the world is primarily dominated by IT software and services such

as Custom Application Development and Maintenance (CADM), System Integration, IT

Consulting, Application Management, Infrastructure Management Services, Software

testing, Service-oriented architecture and Web services.

As per NASSCOM's latest findings:

• Indian IT-BPO sector grew by 12 per cent in FY 2009 to reach US$ 71.7 billion in

aggregate revenue (including hardware). Of this, the software and services

segment accounted for US$ 59.6 billion.

• IT-BPO exports (including hardware exports) grew by 16 per cent from US$ 40.9

billion in FY 2007-08 to US$ 47.3 billion in FY 2008-09.

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Moreover, according to a study by Springboard Research, the Indian IT services

market is estimated to remain the fastest growing in the Asia-Pacific region with a

CAGR of 18.6 per cent.

Despite the uncertainty in the global economy, the top three IT majors— Infosys, TCS

and Wipro—have seen revenue growth from all important sources of income: from the

North American and European regions, in the financial services vertical and from

application maintenance and development (ADM) offerings between fiscal years 2008

and 2009.

At present, there are 60 million Internet users in the country. According to

Manufacturer’s Association of IT (MAIT), the number of active Internet entities rose to

8.6 million by March 2009 from 7.2 million units in March 2008.MAIT has outlined

'Goal 511', an ambitious target that talks about 500 million Internet users,

100million broadband connections, and 100 million connected devices by 2012.A

latest study by MAIT estimated that the total PC sale in India is likely to grow by 7per

cent in 2009-10, with total sales expected to cross 7.3 million units.

Outsourcing

A research by Gartner forecasts India as the undisputed leader in the outsourcing

space in the year 2008. India's most prized resource is its readily available technical

work force. India has the second largest English-speaking scientific professionals in

the world, second only to the US. It is estimated that India has over 4 million

technical workers, over 1,832 educational institutions and polytechnics, which train

more than 67,785 computer software professionals every year. The enormous base of

skilled manpower is a major draw for global customers.

According to NASSCOM, software and services exports (including exports of IT

services, BPO, engineering services and R&D and software products) reached US$ 47

billion in FY 2008-09, contributing nearly 78 per cent to the total software and

services revenue of US$ 59.6 billion.

India continues to be the most preferred destination for companies looking to offshore

their IT and back-office functions. It also retains its low-cost advantage and is among

the most financially attractive locations when viewed in combination with the

business environment it offers and the availability of skilled people, according to

global management consultancy AT Kearney.

India has retained its numerous Uno position even as some other well-established

outsourcing hubs dropped in their attractiveness to be replaced by new emerging

destinations in AT Kearney’s latest ranking of the top outsourcing destinations across

the globe. The top three countries in the 2009 Global Services Location Index (GSLI)

remain the same — India, China and Malaysia.

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Domestic Markets

India's domestic market has also become a force to reckon with, as the existing IT

infrastructure evolves both in terms of technology and depth of penetration.According

to NASSCOM, domestic IT market (including hardware) reached US$ 24.3 billion in

FY 2008-09 as against US$ 23.1 billion in FY 2007-08, a growth of 5.3 per cent.

India Inc's demand for IT services and products has bolstered growth in the domestic

sector with deal sizes going up remarkably and contracts worth US$ 50 million-US$

100 million up for grabs. The market for enterprise networking equipment in India is

estimated to grow from US$ 1 billion in 2008 to US$ 1.7 billion by 2012, recording a

compounded annual growth rate (CAGR) of 15 per cent during this period, according

to a study by Springboard Research.

Investments

• Infosys Technologies Ltd will invest US$ 70 million over the next three quarters of

the current financial year towards increasing its sales and marketing staff

overseas, building new capabilities and hiring local resources for its international

centres.

• The Andhra Pradesh Government expects the IT-related SEZs and Software

Technology Parks of India (STPI) in the State to receive about US$ 3.27 billion

investments in the next five years.

• HCL Technologies has entered into a strategic partnership with South Africa’s

UCS Group. As part of the all-cash deal, HCL will acquire UCS’s enterprise

solutions SAP practice focused on the retail sector for US$ 7.7 million.

Rural Penetration

According to a report of the Internet and Mobile Association of India (IAMAI), rural

India has 3.3 million active internet users. Since rural India was mapped for the first

time, the year-on-year growth of internet users in rural India could not be estimated.

The research also notes there are 5.5 million people who claim to have used Internet

at some point in time.

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Government Initiatives

• The government set up the National Taskforce on Information Technology and

Software Development with the objective of framing a long term National IT Policy

for the country.

• Enactment of the Information Technology Act, which provides a legal framework

to facilitate electronic commerce and electronic transactions.

• The government-led National e-Governance Programme, has played an important

role in increasing internet penetration in rural India.

Road Ahead

The Indian information technology sector continues to be one of the sunshine sectors

of the Indian economy showing rapid growth and promise.

According to a report prepared by McKinsey for NASSCOM, the exports component of

the Indian industry is expected to reach US$ 175 billion in revenue by 2020. The

domestic component will contribute US$ 50 billion in revenue by 2020. Together, the

export and domestic markets are likely to bring in US$ 225 billion in revenue, as new

opportunities emerge in areas such as public sector and healthcare, and as

geographies including BRIC and Japan opt for greater outsourcing.

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________________ ____ _________________________

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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