Financial Analysis on Tata Consultancy Services
Financial Analysis on Tata Consultancy Services

Financial Analysis on Tata Consultancy Services

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  • Pages: 19 (9388 words)
  • Published: October 10, 2017
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FINANCIAL ANALYSIS ON TATA CONSULTANCY SERVICES SUBMITTED TO PROF . D. V.

RAMANA Debasis Sarangi(77) Dhanya K(78) Dinesh Kumar Mandal(80 TABLE OF CONTENTS 1. Acknowledgments………………………………………………………………. 3 2. Executive Summary……………………………………………………………..

. 4 3. Environment Analysis…………………………………………………………..

. 5 4. IT Industry Overview……………………………………………………………6 5. Company Analysis………………………………………………………………10 6. Ratio Analysis…………………………………………………………………..

. 15 Liquidity Ratios……………………………………………………………. 15 Efficiency Ratios……………………………………………………………

19Solvency Ratios…………………………………………………………….. 21 Profitability…………………………………………………………………25 Market Based Returns………………………………………………………34 7DuPont Analysis…………………………………………………………………36 8Economic Value Analysis…………………………………….

. …………………41 9Inter Company Analysis………………………………………………………….

44 10Accounting Policies…………………………………………………………….. 48 11References………………………………………………………………………. 55 1. ACKNOWLEDGEMENTS We would like to take this opportunity to express our gratitude and respect to Prof D V Ramana for all the efforts that he took to make the concepts clear to each and every one of us.Financial Accounting being a totally new subject to many of us, he made sure that we were getting the concepts right every now and then by way of repeated explanations, quizzes and so on.

We would like to thank him once again for his unprecedented dedication and commitment towards the course and the students which made it quite an easy ride for us. 2. EXEC

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UTIVE SUMMARY The project report details the financial analysis done on India’s Largest Software Firm, Tata Consultancy Services. The environment and industry is studied and then the position and the policies of the company.The FSA is primarily done through various ratios which indicate the company’s liquidity, solvency, efficiency, profitability, market returns and the like. A DuPont Analysis is also carried out to estimate the returns on assets, capital employed etc.

An inter-company analysis has also been carried out in which the performance of TCS is compared with the other IT majors, Infosys and Wipro. The comparison is made on the basis of the various ratios that were discussed earlier. The significant accounting policies followed by TCS have also been listed in the report.We have also included the condensed financial statements for the past three years in the report 3.

ENVIRONMENT ANALYSIS FY 2006-07 witnessed a revalidation of the Indian Information Technology – Business Process Outsourcing (IT-BPO) growth story, driven by a maturing appreciation of India’s role and growing importance in global services trade. And this scenario is predicted to continue in the coming years too. We will try to take a look into the major environmental factors that has contributed to this phenomenon are listed belowIndia has successfully leveraged its fundamental advantages of abundant talent, a keen focus on quality and security, lower cost-structure coupled with an enabling business environment to achieve a marked lead in the global outsourcing arena. This is reflected in India’s dominant and growing share of the global pie.

Over FY2001-2006, India’s share in global sourcing has grown from 62 percent to 65 percent for IT and 39 percent to 45 percent for BPO. The visibly higher preference for India is driven by its unmatched superiority when measured across a range of parameters that determine the attractiveness of a sourcing location. Abundant talent: India’s young demographic profile is an inherent advantage. •Quality Education: The quality of education available in India and the technical expertise of Indian Engineers and the fluency in English is a major factor. •Sustained cost competitiveness: The significant and

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sustained cost advantage, attributed to the wide differential in wage-costs and productivity gains achieved by firms in sourcing from India, continues to be a compelling driver of decisions to source services from India. Quality orientation, superior process delivery and a keen emphasis on information-security •Quality business infrastructure: Rapid growth in the quality and scale of Grade A real estate (around 25 million sq ft of real estate space is being added per annum) and telecommunications infrastructure – the key elements of business infrastructure required for running an IT-BPO operation, have been instrumental in supporting the growth of the sector.

Enabling business policy and regulatory environment: The Indian government has encouraged this sector by providing incentives and non-financial assistance, and by creating enabling regulations. 4. IT INDUSTRY OVERVIEW The Indian software industry has grown from a mere US $ 150 million in 1991-92 to a staggering US $ 5. 7 billion (including over $4 billion worth of software exports) in 1999-2000.

No other Indian industry has performed so well against the global competition. The annual growth rate of India’s software exports has been consistently around 30% or more every year.According to a NASSCOM-McKinsey report, annual revenue projections for India’s IT industry in 2008 are US $ 87 billion and market openings are emerging across four broad sectors, IT services, software products, IT enabled services, and e-businesses thus creating a number of opportunities for Indian companies. In addition to the export market, all of these segments have a domestic market component as well.

Other key findings of this report are: •Software & Services will contribute over 7. 5 % of the overall GDP growth of India •IT Exports will account for 35% of the total exports from India •Potential for 2. million jobs in IT by 2008 •IT industry will attract Foreign Direct Investment (FDI) of U. S. $ 4-5 billion •Market capitalization of IT shares will be around U. S.

$ 225 billion The dynamic industrial policy declared in 1996, with comprehensive packages of incentives and concessions, has ensured a productive ground for various industries. The hardware and software industries have now brought about a revolution of sorts under these schemes. Various institutions and computer training centers have contributed to the large number of trained and talented professionals.Over the years, the Indian IT software and services industry has matured, become more refined and moved up the value chain in terms of solutions offered to customers. The customers, from all parts of the globe, have meanwhile continued to flock to India’s corporates for help with their software needs. Major corporations are continuing to rely on Indian software companies for both legacy and new technology solutions.

The wide span of the country’s expertise across myriad technologies and platforms has provided the Indian software engine with awesome power to deal with any kind of IT requirement.The enormous base of skilled manpower — India’s PhDs and computer science graduates — is the envy of virtually every country, and in fact a major draw for global customers. While the industry has been growing at above average growth rates, software development activity is not confined to a

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