Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Submitted by
Vaibhav Chhawchharia
Guide
Prof. Anil Gor
Acknowledgement
I am grateful to Prof. P. L. Arya, Director, N L Dalmia Institute of Management Studies and Research
for giving me the opportunity to do summer project.
I acknowledge with special thanks to the help of my project guide Prof. Anil Gor for his valuable guidance
and assisting me in completion of the project. I also thank him for sharing lots of his knowledge and ideas,
which were useful for my project.
I would also like to thank Mr Manan Shah, Ms Priyanka Shah for all their valuable assistance in the
project work.
Page 2
Contents
TATA CONSULTANCY SERVICES ANALYSIS ..................................................................................................................... 4
History of Company ................................................................................................................................................... 4
Growth of the company .......................................................................................................................................... 11
KEY RATIOS .............................................................................................................................................................. 14
Capital Structure ...................................................................................................................................................... 15
TATA INFOTECH LIMITED ANALYSIS ............................................................................................................................ 16
History of Company ................................................................................................................................................. 16
Growth of the company .......................................................................................................................................... 22
KEY RATIOS .............................................................................................................................................................. 23
Capital Structure ...................................................................................................................................................... 24
SUMMARY OF THE TWO COMPANIES ......................................................................................................................... 25
REASONS FOR MERGER ............................................................................................................................................... 26
AMALGAMATION SCHEME .......................................................................................................................................... 28
POST MERGER BENEFITS ............................................................................................................................................. 31
VALUATION SYNOPSIS ................................................................................................................................................. 40
TATA CONSULTANCY SERVICES LTD. ....................................................................................................................... 40
EVA CALCULATION............................................................................................................................................... 42
TATA INFOTECH LTD. ............................................................................................................................................... 44
EVA CALCULATION:.............................................................................................................................................. 45
CONCLUSION ............................................................................................................................................................... 49
Page 3
Page 4
- Tata Consultancy Services has received the Global Partnership Award 2000 from AIESEC International, the
Rotterdam-based NGO. - The World's leading automotive systems major, Delphi Automotive Systems has entered
into a tie-up with infotech leaders Infosys, TCS and CG Smith for embedded software development for its worldwide
operations.
- The Company has entered into a strategic partnership with the universal description, discovery and integration
project.
2001 - The Company has signed an MoU with the Indian Institute of Technology, Madras to set up a Centre of
Excellence on computational engineering.
- Tata Consultancy Services and hte Institute for Development and Research in Banking Technology have entered
into an agreement ofr deploying a messaging solution for the Indian banking and financial sector.
- Tata Consultancy Services has earmarked a Rs 200-crore corpus for funding research and development
initiatives. This year, the company's focus areas for R&D will be bio-informatics and Net security.
- Software and services major, Tata Consultancy Services it has entered into a partnership with Swedish Bank
Sakndinaviska Enskilda Banken, US-based Ankar Capital and Compas Venture ot develop wealth management
products and services for leading Asian banks.
- The Information technology company of Tata Sons, Tata Infotech may be merged with Tata Consultancy Services,
the software services division of Tata Sons.
- Tata Consultancy Services and Infosys have emerged as the leading Indian software exporters during 2000-01,
clocking exports worth Rs 2,870.26 crore and Rs 1,852.94 crore, respectively.
- Tata Consultancy Services, a global software solutions and consulting services enterprises, has signed up with
Ericsson worldwide to provide cost-effective solutions in telecom through its Global Development Centre in
Hyderabad
- Tata Consultancy Services, the software solutions and consulting services enterprise, has signed an agreement to
provide software solutions to Ericsson World-wide..
- TCS has spread its operations into the Asia-Pacific by setting up a regional headquarters in Singapore to focus
primarily on the emerging infocomm industry in the region.
- TATA Consultancy Services (TCS), the global software solutions and consulting services major, has entered into a
multi-year collaborative agreement with the Hyderabad-based Centre for DNA Fingerprinting and Diagnostics
(CDFD), a leading R&D laboratory under the Department of Biotechnology.
Page 5
- Tata Consultancy Services (TCS), a division of Tata Sons, appears to have initiated the spadework for its
proposed initial public offering (IPO).
- Oracle Software India on September 25 announced Tata Consultancy Services as a member of its mobile partner
initiative programme to offer solutions and services based on Oracle mobile application suites.
- Tata Consultancy Services has announced the opening of a new office in Portland, Oregon. The office has been
opened as part of the company's North American strategy. The $700-million company, with 18,000 employees, has
40 offices in the US alone, and over a hundred worldwide.
2002_ TCS bags order of Rs 500 crore from SBI.
-Mr P K Chakravarty, Company Secretary & Compliance Officer of Tata Construction & Projects Ltd has resigned
from the services of the company wef from the close of office hours on July 31, 2002.
2003 -TCS sets up dedicated department to train its employees to speak at least 1 foreign language
-TCS makes turnkey project for Chennai Telephone call centre
-Tata Consultancy new BPO partner of Aviva
-TCS issues digital certificates to 12 delegates
2004
-Ties up with Bharat Petroleum Corporation Ltd to provide medical advisory and counselling services at Ghar, the
highway retailing initiative of BPCL
- Acquires Singapore Airlines' (SIA) 51 per cent stake in their joint venture, Aviation Software Development
Consultancy India, for Rs 14.03 crore
--Tata Consultancy Services (TCS) and Bharat Heavy Electricals Ltd (BHEL) on April 2 announced the release of
PowerPac-G, a software product that addresses decision support and integrated asset management needs of
power generation plants. TCS and BHEL will jointly market the product in the Indian and global markets, and initial
orders have been firmed up.
-Tata Sons has transferred its entire 51.12 per cent equity stake in CMC to group company Tata Consultancy
services (TCS) for Rs 380 crore at Rs 490.5 a share.
Page 6
-Tata Consultancy Services (TCS) has announced the opening of its 'automotive centre of excellence' in Detroit,
US,
- The company has appointed US-headquartered public relations (PR) agency Fleishman Hillard to handle its
international public relations operations.
-Tata Consultancy Services (TCS) has acquired Phoenix Global Solutions (PGS) from the Phoenix Companies Inc
-TCS enters strategic global OEM partnership with i2
- PNB mandates TCS to deploy HR Solutions
-Tata Consultancy Services (TCS) has joined hands with PeopleSoft to handle a Rs 5-10 crore worth project
mandated by Punjab National Bank (PNB) to implement human capital management and payroll solution.
-Tata Consultancy Services Ltd, the jewel in the Tata group's crown, has a new board of directors. Ratan N Tata,
non-executive chairman of Tata Sons, along with S Ramadorai and Aman Mehta, have joined the board
-Bahrain National Holding (BNH) Company has signed a long-term contract with Tata Consultancy Services (TCS),
to consolidate its position as a preferred insurance service provider.
-eSeva APOnline, a joint venture between the government of Andhra Pradesh and Tata Consultancy Services
(TCS) for government to citizen (G2C) services, has launched a new initiative Home Seva on July 16
-TCS has set up its ninth development centre near Chennai on the Old Mahabalipuram Road, the city's information
technology corridor
- Tata Consultancy Services made its debut on the two premier stock exchanges on August 25, closing around 16
per cent higher than the issue price of Rs 850 per share discovered through book building on a price range of Rs
775 to Rs 900 per share
-Chhattisgarh Infotech and Biotech Promotion Society (CHiPS), joins with TCS to become a digital certificate
issuing authority
-TCS MD gets inaugural award for Indo-US Business Excellence
-TCS sets up office in Brussels
-TCS join hands with US firm to develop a wireless payment platform
-Andhra Pradesh Technology Services (APTS) join hands with TCS to issue digital certificates.
Page 7
Page 8
2006
-Tata Consultancy Services (TCS) got an interior design deal from US airframe manufacturer Boeing Company and
will work closely with its customer to design the interiors of new aircraft.
- Tata Consultancy Services Ltd (TCS) has informed that the Board of Directors of the Company at its meeting held
on November 02, 2006 has appointed Mrs Laura M Cha on the Board of the Company as an Independent Director.
-Tata Consultancy Services Ltd (TCS) has announced that the Company has signed a seven year agreement to
provide a full range of managed IT services to Somerfield, a leading UK-based small-format food retailer, building
on an existing eight-year relationship between the Company and Somerfield.
-TCS signs services contact with United Biscuits.
2007
- Tata Consultancy Services Limited has informed vide its letter dated September 06, 2007 that: the following senior
executives of the Company have today been elevated to the Board of Directors of the Company as Executive
Directors:
(i) Mr. N. Chandrasekaran (ii) Mr. S. Mahalingam (iii) Mr. S. Padmanabhan (iv) Mr. P. A. Vandrevala. Mr. N.
Chandrasekaran will be the Chief Operating Officer of the Company and Mr. S. Mahalingam will continue to be the
Chief Financial Officer.
- Tata Consultancy Services (TCS) has bagged $1.2 billion outsourcing contract from Nielsen partners, the largest
ever-outsourcing deal for any Indian IT player.
-Tata Consultancy Services Ltd has announced that Standard & Poor's Ratings Services has assigned the
Company a corporate credit rating of 'BBB' with a positive outlook.
- Tata Consultancy Services has rolled out a new set of solutions for airlines.
2008
-Tata Consultancy Services Ltd (TCS) on April 05, 2008 has announced that it has signed a new multi-year contract
with Chrysler LLC to provide a comprehensive portfolio of IT services. The scope of this contract integrates the
contract TCS announced in February with Chrysler.
- Tata Consultancy Services (TCS) has signed a five-year global contract with telecom giant Ericsson. TCS will
deliver application maintenance and development services for Ericsson's internal IT operations. TCS will be one of
the two strategic partners responsible for delivering application maintenance services to Ericsson. It will also be a
preferred supplier for application development services.
Page 9
2009
- Tata Consultancy Services (TCS) has bagged a multi-year IT solutions contract from Infineon Technologies AG
(IFX), a semiconductor manufacturer. Under the agreement, TCS will operate and maintain solutions for the
Infineon's Supply Chain Management (SCM) landscape. The Infineon SCM Planning operations will be operated out
of Munich, Germany and Bangalore, India.
- TCS has won an $80 million outsourcing contract from UK's Child Maintenance and Enforcement Commission
(CMEC). The order is first in a series of almost $2-3 billion worth of contracts to be awarded by UK's state-owned
departments.
- Tata Consultancy Services opened a new Global Delivery Center in Buenos Aires, Argentina - the first company to
officially inaugurate its facilities in the new Technology District of the City of Buenos Aires.
- Tata Consultancy Services (TCS) has opened a new global delivery centre in Buenos Aires, Argentina.
Page 10
SALES
200603 (12)
200703 (12)
200803 (12)
200903 (12)
13263.99
18685.21
22619.52
27812.88
41%
21%
23%
4255.4
5059.64
5311.12
42%
19%
5%
VARIANCE
PAT
2996.58
VARIANCE
200603 (12)
200703 (12)
200803 (12)
200903 (12)
PAT
2996.58
4255.4
5059.64
5311.12
42%
19%
5%
28.7%
28.5%
24.2%
0.00356394
-0.009199
-0.148441
VARIANCE
OPM
28.6%
VARIANCE
survive the troughs of the trade cycle. Also firms, which are not profitable but are cash rich, do not survive in the
long term either. Such companies are taken over for their cashflow or by others who believe that they can
improve the profitability of the business. Thus, those companies that do succeed and survive over the long term
have a well-rounded financial profile, and perform well in all aspects of financial analysis. Profitability ratios
reflects the business environment of the time.
The key profitability ratios are:
Return on Total Assets (ROTA)
32%
38.76%
19.10%
Short-term liquidity is the ability of the company to meet its short-term financial commitments. Short-term
liquidity ratios measure the relationship between current liabilities and current assets. Current assets are stocks
and work-in-progress, debtors and cash that would normally be re-circulated to pay current liabilities. The ideal
ratio 1:1. But a very high ratio indicates that the company is unable to manage its cash properly.
The key short-term liquidity ratios are:
Current Ratio
2.26
Quick Ratio
2.26
Long term liquidity or gearing is concerned with the financial structure of the company. Long term liquidity ratios
measure the extent to which the capital employed in the business has been financed either by shareholders
through share capital and retained earnings, or through borrowing and long-term finance. Highly geared
companies
are
risky.
Look
for
a
balance.
The key long-term liquidity ratios are:
Interest Cover
215.59
Page 12
Peer Comparison
20,264.00
5,819.00
126,717.71
22,401.92
4,696.21
112,158.55
Wipro Ltd.
21,507.30
2,973.80
82,824.33
3,768.62
1,101.82
20,030.62
2,212.62
695.71
16,460.24
Page 13
KEY RATIOS
PROFITABILITY RATIOS
2006
2007
2008
2009
OPERATING PROFIT %
28.63%
28.73%
28.47%
24.24%
PBT%
26.43%
26.33%
25.84%
22.11%
PAT%
22.59%
22.77%
22.37%
19.10%
24.72%
25.13%
24.86%
21.12%
ROCE%
53.21%
55.34%
45.26%
38.76%
RONW%
49.95%
48.08%
41.13%
33.83%
EPS
58.72
41.3
48.96
51.23
FA
4.86
4.69
4.67
3.73
INVETORY
164.48
449.16
533.10
759.91
DEBTORS
4.07
4.34
4.20
4.62
INTEREST COVERAGE
384.61
521.57
195.80
215.59
DEBT-EQUITY
0.02
0.06
0.04
0.04
CURRENT
2.25
2.24
2.24
2.26
0.00%
0.00%
0.00%
0.00%
TURNOVER RATIOS
EXPENSE RATIOS
Cost of Traded Software Packages
Page 14
Operating Expenses
26.19%
12.81%
12.68%
10.85%
Employee Cost
35.58%
48.17%
50.45%
52.04%
Power/Electricity Charges
0.57%
0.62%
0.70%
0.71%
6.97%
8.18%
8.33%
8.03%
Miscellaneous Expenses
2.91%
2.71%
2.61%
5.40%
Capital Structure
From Year
To Year
Class Of Share
Authorised Issued
Capital
Capital
(Cr.)
(Cr.)
PaidUp Shares
PaidUp
Face
Capital
Value
(Cr.)
2008
2009
Equity Share
120.00
97.86
978610498
97.86
2007
2008
Equity Share
120.00
97.86
978610498
97.86
2006
2007
Equity Share
120.00
97.86
978610498
97.86
2005
2006
Equity Share
60.00
48.93
489305249
48.93
2004
2005
Equity Share
60.00
48.01
480114809
48.01
2003
2004
Equity Share
40.00
36.44
36440002
10
36.44
Page 15
Government.
- Tata Infotech has tied up with Compaq Computers to provide enterprise class solutions to corporate and
government clients.
- Tata Consultancy Services (TCS), India's leading software house, has taken on board Tata Infotech, SRA Systems
Ltd, Focus and Maxworth Information Technology Ltd (MITL), as the first four business associates to work with it
on the Year 2000 (Y2K) projects.
- United States-based CVD International Inc., is entering into a joint venture with Tata Infotech to manufacture
digital video disc (DVD) players in the latter's Goa-based 100 per cent export-oriented unit (EOU).
- Tata Infotech, the system integration company and the U.S.-based Business Objects, world's premier provider of
integrated enterprise decision support tools, have joined hands to provide the Indian market with top-grade
business intelligent decision support systems (DSS) solutions.
1998
- Tata Infotech has signed a agreement with the Pittsburgh-based SEED Inc to market it `Year 2000 Enterprise'
service in India.
- Tata Infotech Ltd (TIL) has signed an agreement with the UK based Edexcel International to offer Edexcel's
portfolio of qualifications to its students.
- The public sector enterprise Kerala State Electronics Development Corporation Ltd., (Keltron) has entered into a
business tie-up with Tata Infotech for state-of-the-art technology in the field of imaging solutions, geographical
information system, video conferencing, decision support systems and IT consultancy.
- Tata Infotech Ltd's Tulec has entered into a marketing and technical alliance with the University of
Hertfordshire, UK, for providing B.Tech (Hons) degree in information technology in India.
- Tata Infotech Limited has signed an agreement with US-based CBT Systems to introduce the concept of
interactive computer education in the country.
1999
- Nisso Iwai and Tata Infotech (TIL) have signed in agreement for providing software services in Japan. The
Page 18
holdings and J&J group of South Africa, to provide services in the South African market.
- Haryana has tied up with Tata Infotech to introduce computer education in the schools, colleges, polytechnics
and industrial training institutes from the ensuing academic session.
- Tata Infotech Ltd. signed an agreement with the Indian Institute of Technology, Mumbai, renewing the joint
research and development activities for the next three years.
- In order to service better in the US, the company has set up a new intermediate development centre in Chicago
in addition to the existing 11 offices. In its efforts to increase its geographical coverage it signed a MoU with
Consilience Technologies (Pty), South Africa to market and support its products and services in the key sectors
and to facilitate the business of company's Education Service division. The company has set up a subsidiary in
Canada in May 2001 to increase its presence in the North American markets.
- In Oct. 2001, Tata Infotech has signed a Rs 9-crore agreement with Air India to provide comprehensive IT
systems maintenance and facility managementservices for Air India's mission-critical applications. Tata Infotech
Limited plans to set up 850 education centers both in Indiaand overseas by 2004.
2002
-Retrenches few of the employees due to global economic recession and to cut costs.
-Changes in the Directorship of the company: Mr S Gupta resigns from the Board, Mr N A Soonawala resigns from
the BOD, and appoints Mr D B Engineer as the Director.
-Signs a pact with Spectrum Software of Atlanta for marketing and providing product support and training for
Spectrum's products.
-Fortune Informatics Ltd ties up with the company towards former's range of products and solutions.
-Dr Nirmal Jain gives resignation as the Managing Director from the BOD of the company.
-Diebold Incorporation enters into a contract manufacturing agreement with the company, where the company
will manufacture Diebold Automated Teller Machine in India.
-Forges an alliance with University of Mumbai to offer various career oriented courses in the field of IT.
Page 20
2003
-Inducts Charles Antony as Chief Operating Officer in place of Mr Nirmal Jain.
-Tata Teleservices and Tata Infotech inpact to set up wireless application laboratory at IIT-Mumbai.
-Ties up with SAS India Ltd to provide customer analytics and organizational intelligence solutions.
2004
-Tata Infotech Limited has informed that Mr. S Ramadorai has resigned as a Director from the Board of Directors
of Tata Infotech Ltd
-Former IDFC MD selected as additional director on Tata Infotech board
-Tata Infotech Ltd has informed that the BoD have appointed two senior executives of the company as Additional
Directors and Wholetime Directors wef July 1, 2004
Page 21
YEAR
200303 (12)
200403 (12)
200503 (12)
SALES
458.86
607.71
959.85
32%
58%
4255.4
5059.64
42%
19%
VARIANCE
PAT
2996.58
VARIANCE
YEAR
200303 (12)
200403 (12)
200503 (12)
PAT
2996.58
4255.4
5059.64
42%
19%
12.65%
11.58%
0.596979257
-0.084160642
VARIANCE
OPM
VARIANCE
7.92%
Page 22
KEY RATIOS
PROFITABILITY RATIOS
2003
2004
2005
OPERATING PROFIT %
7.92%
12.65%
11.58%
PBT%
4.64%
9.62%
9.88%
PAT%
6.52%
9.35%
8.31%
9.60%
12.32%
9.83%
ROCE%
15.55%
37.76%
36.43%
RONW%
13.95%
22.73%
27.20%
EPS
15.31
29.22
41.34
FA
8.16
9.41
16.87
INVETORY
14.61
27.29
28.89
DEBTORS
3.60
4.71
4.74
INTEREST COVERAGE
23.64
150.85
55.19
DEBT-EQUITY
0.05
0.00
0.07
CURRENT
2.22
1.77
2.14
24.5%
22.4%
39.3%
Operating Expenses
5.8%
7.2%
4.6%
TURNOVER RATIOS
EXPENSE RATIOS
Page 23
Employee Cost
25.9%
22.3%
17.5%
Power/Electricity Charges
0.9%
0.7%
0.5%
31.5%
31.3%
24.3%
Miscellaneous Expenses
6.8%
4.5%
3.3%
Capital Structure
From Year
To Year
Class Of Share
Authorised Issued
Capital
Capital
(Cr.)
(Cr.)
PaidUp Shares
PaidUp
Face
Capital
Value
(Cr.)
2004
2005
Equity Share
19.00
18.38
18380880
10
18.38
2003
2004
Equity Share
19.00
18.38
18380880
10
18.38
2002
2003
Equity Share
19.00
18.38
18380880
10
18.38
2001
2002
Equity Share
19.00
18.38
18380880
10
18.38
2000
2001
Equity Share
19.00
18.38
18380880
10
18.38
1999
2000
Equity Share
19.00
18.38
18380880
10
18.38
1997
1999
Equity Share
12.50
12.25
12253920
10
12.25
1995
1997
Equity Share
7.00
6.13
6126960
10
6.13
1994
1995
Equity Share
7.00
6.13
6126960
10
6.13
1993
1994
Equity Share
7.00
6.13
6126960
10
6.13
1992
1993
Equity Share
7.00
6.13
6126960
10
6.13
Page 24
1989
1992
Equity Share
5.00
4.38
4376400
10
4.38
1987
1989
Equity Share
5.00
4.38
4376400
10
4.38
1985
1987
Equity Share
5.00
3.13
3126000
10
3.13
1977
Tata Burroughs formed after a collaboration venture is signed between the Tata
Group and Burroughs
1987
1991
TCS becomes first Software Company to cross Rs 100 crore in turnover. An era in
Software begins
1996-99 Tata Unisys gives up Unisys stake to become Tata Infotech. Tata Technologies
Tata IBM Reason for the merger:
Page 25
Over the past few years, ever since it had broken away from the Unisys partnership, TIL had been engaged in a
series of restructuring and refocusing initiatives in a bid to restore its lost sheen.
The increased profitability has been attributed to its focus on systems integration and manufacturing operations.
TIL hit the jackpot in its contract manufacturing activities with three awardsExcellence in Exports Award
(MAIT), the Contract Manufacturing Export Award (ESC), and Supplier Excellence Award (Unisys Plymouth
coming its way during the year.
Diebold and TIL entered into a contract manufacturing agreement, under which TIL manufactured Diebold ATMs
in India for distribution in the country, and South and South-East Asia.
TCS acquired Tata Infotech (TIL) Limited and merged TIL into TCS Limited especially as the former was seen to be
on shaky ground with an unclear agenda but had a lot of outsourcing business.
TIL was a software services company like TCS with operations in the UK, U.S, and Australia among others.
Merger scheme:
Merger was proposed to be effective from April 1, 2005. It was approved by boards of TCS and TIL on July 16,
2005. Scheme came into effect from February 1, 2006
Page 26
80.64% in TCS
TCS : 80.52%
Shareholders of TIL holding 2 equity shares of INR10 got 1 equity share of Re. 1 in the merged entity. The
share exchange ratio was jointly arrived at by BSR & CO. and Bansi Mehta & Co. Assets, liabilities and reserves
as on April 1, 2005 were taken at the book value. All reserves were transformed to General reserve account
except balance of Profit and Loss account carried to the P&L of the company. Difference between the amount
issued as share capital and the amount of share capital of Transferor Company adjusted to General reserve.
Post merger, TCS became the first IT Company in India with sales of over INR.100 billion.
Page 27
AMALGAMATION SCHEME
TATA INFOTECT LTD.
50.45
Investments
66.50
15.39
157.17
Less: Loans
0.17
289.34
(23.72)
258.14
Page 28
Equity shares; Par value Rs.10; authorized 19,000,000 shares; issued and fully paid
183.8
up 18,380,880 shares
Equity shares held by a controlled Trust: 342,753 fully paid up equity shares
1.4
Additional paid-in-capital
35.7
Retained earnings
3,062.20
12.2
Total
3,292.50
Page 29
Net income of TIL for the period of April 1, 2005 to January 31, 2006
Reduced by distribution of dividends (including dividend tax) till January 31, 2006
Balance of shareholders equity as on January 31, 2006 after allocation to Tata Sons Ltd., its
controlled entities and minority shareholders stands at nil.
Rs.2,962.6 million of additional paid in capital arising in the course of allotment of TCS shares to Tata Sons
Ltd. and minority shareholders of TIL
Intangible assets worth Rs.11.0 million aroused out of the acquisition of TIL
Customer relationships
Technology related
Goodwill recognized on amalgamation of TIL was Rs.1, 783.1 million.
Page 30
Financial gains:
In fiscal 2006, companys revenues grew by 24.49%
International revenues of the company grew by 28.25%
Net income grew by 35.51% in fiscal 2006
Goodwill recognized on amalgamation of TIL was Rs.1, 783.1 million.
Tax benefit of TILs tax losses in India and Overseas will become available to Tata Consultancy Services
Limited.
Page 31
Q1 FY2006
Q2 FY2006
Q3 FY2006
US
GAAP
Consolidated
TCS
Revenue
Million)
(Rs.
TIL
Merged
TCS
TIL
Merged
TCS
TIL
Merged
Operating Income
7,423.4 269.8
7,736.0
8,003.8 263.2
8,168.6
8,820.7 293.8
9,034.9
% of Revenue
27.4
26.6
27.1
25.9
27.0
26.2
7,872.9
8,091.6 427.5
8,420.5
8,619.2 336.7
8,876.3
% of Revenue
27.8
27.0
27.4
26.7
26.4
25.7
Net Income
6,186.7 246.2
6,475.6
6,733.7 268.2
6,903.4
7,318.9 265.7
7,505.0
% of Revenue
22.8
22.2
22.8
21.9
22.4
21.7
Net Income
6,186.7 242.2
6,471.7
6,733.7 264.3
6,899.5
7,318.9 262.7
7,502.0
% of Revenue
22.8
22.2
22.8
21.9
22.4
21.7
EPS
12.9
13.2
14.0
14.1
15.2
12.8
14.8
11.7
11.5
11.9
19.4
12.2
12.0
13.6
15.6
12.3
12.2
15.3
Company
Date
No. of shares
Market price
outstanding
TCS
31-Mar-05
480114809
1432.05
68754.84
TIL
31-Mar-05
18380880
472
867.58
TCS
31-Mar-06
489305249
1915.5
93726.42
MARKET CAPITALISATION:
The market cap of TCS increased from 68754.84 in 2005 to 93726.42 in 2006.
Date
TCS
TIL
31-Mar-05
1432.05
472
1-Apr-05
1450.95
529.25
19-Apr-05
1208.7
466.75
20-Apr-05
1116.2
442.9
18-Jul-05
1322.2
638.45
Page 33
1-Aug-05
1252.2
610.9
31-Aug-05
1404.85
679.85
30-Dec-05
1702.85
823.5
2-Jan-06
1687.6
819.7
31-Jan-06
1670.4
804.75
1-Feb-06
1666.65
805.05
15-Feb-06
1619.35
794.95
16-Feb-06
1629.15
804.05
27-Jul-06
1899.7
28-Jul-06
928.45
29-Sep-06
1022.05
When the merger news was announced the share price increased for both TCS and TIL, in April 2005.Later the
share price declined to 1200 levels from 1450, when the board confirmed the merger plan, the share price
increased from 1116 to 1322. Post merger in 2006 the share prices increased. On 16 th feb equity was issued.
Page 34
TCS could expand its customer base and penetrate deep into these key geographies.TIL provide Horizontal
expansion of scope to TCS
Post merger market penetration in India and Europe increased.
Geography %
Q4
2006
FY
Q3 FY 2006
Q3 FY 2006
FY 2006 FY 2005
58
59.8
59.55
59.02
59.5
Europe
24.3
22.2
23.16
22.42
23.2
India
11.5
11.9
11.22
12.52
11.7
Others
6.2
6.1
6.06
6.05
5.6
Total
100
100
100
100
100
Page 35
Page 36
Scaling of operations
Global Network Delivery Model gained scale and maturity
Focus on increasing offshore component in existing relationships.
Opportunities for offshore leverage with new customers
Revenue (%)
FY 2005
Incl. TIL
Excl. TIL
61.4
62.52
61.3
Delivery Location*
Onsite
59.03
58.26
GDC
3.72
3.12
Offshore
37.25
38.62
38.6
37.48
38.7
51.7
49.4
48.4
50.2
48
48.3
50.6
51.6
49.8
52
Contract Type
Page 37
Particular
Q4 FY 2006
Q3
2006
FY
Q3 FY 2006 FY 2006 FY 2005
Incl. TIL
Excl. TIL
Active Clients
748
766
677
929
621
New Clients
89
88
83
330
246
94.9
94.8
95.2
95.1
5.1
5.2
4.8
4.9
Page 38
Human Resources
TCS absorbed 3,462 employees of TIL there were no lay offs.
Enhanced capabilities due to divers skill set of employees
Revenue Breakup
IP Revenue (%) Q4 FY 2006 Q3 FY 2006
FY 2006
FY 2005
Incl. TIL
Excl. TIL
41.80
41.80
42.30
41.20
38.40
Manufacturing 16.40
17.70
18.10
17.20
19.30
Telecom
15.40
14.90
15.10
16.40
4.30
3.90
4.60
4.00
Retail
& 6.40
Distribution
6.20
6.30
6.60
6.80
Transportation 3.70
3.10
3.10
3.60
4.20
Energy
Utilities
& 3.00
2.30
2.40
2.50
3.00
Others
9.90
9.20
9.00
9.20
7.90
TOTAL
100
100
100
100
100
BFSI
14.30
Page 39
VALUATION SYNOPSIS
TATA CONSULTANCY SERVICES LTD.
Years
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
PERIOD 0
10
11
NOPAT
4981
5329
5703
6843
8212
9854
18026.4
RR
53%
53%
53%
55%
55%
55%
53%
52%
50%
49%
47%
47%
FCFF
2316
2478
2652
3079
3695
4434
5372
6345
7305
8191
8940
9476.434
ROC
39%
13%
13%
36%
36%
36%
36%
34%
33%
31%
28%
13%
0.888 0.788
0.7
0.621
0.551 0.489
0.434
0.386
0.342
0.304
0.27
7%
20%
20%
20%
14%
12%
9%
6%
6%
DF
G
26%
WACC
0.126502
7%
PV OF FCFF
24906.8625
PV OF TERMINAL VALUE
43300.75432
EV
68207.61682
ADD CASH
2,141.88
1,614.41
EV
17%
71963.90922
Page 40
LESS DEBT
563.21
Equity value
71,400.70
No of Outstanding Shares
197.86
360.8647
YEAR
2009
2010
2011
2012
FCFF
-2259.18277
2617.32755
2583.521565
2316.4742
wacc
12.65%
12.65%
12.65%
12.65%
df
0.887704078
0.788018531
0.699527264
0.6209732
3303
42355.102
45657.831
ADD CASH
79.210
421.540
EV
46158.581
LESS DEBT
203.010
Equity value
45955.571
No of Outstanding Shares
197.860
232
Page 41
EVA CALCULATION
YEAR
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
INVESTED
CAPITAL
(BEGNING)
12,85
3
15,704
18,755
22,519
27,036
32,456
38,633
45,501
52,941
60,793
68,859
NOPAT
5,330
5,703
6,844
8,212
9,855
11,550
13,213
14,746
16,043
17,006
18,026
FCFF
2,479
2,652
3,080
3,696
4,435
5,372
6,346
7,305
8,191
8,940
9,476
RR
2,851
3,051
3,764
4,517
5,420
6,178
6,867
7,440
7,852
8,066
8,550
WACC%
12.65
12.65
12.65
12.65
12.65
12.65
12.65
12.65
12.65
12.65
12.65
CAP CHARGE
1625.
9
1986.6
2372.5
2848.7
3420.1
4105.7
4887.2
5755.9
6697.1
7690.5
8710.8
ECO PROFIT
3704.
1
3716.5
4471.1
5363.7
6434.8
7444.2
8325.9
8989.9
9346.3
9315.6
9315.6
DF
0.9
0.8
0.7
0.6
0.6
0.5
0.4
0.4
0.3
0.3
0.3
BV 0
12852.6476
32978.24376
PV OF TERMINAL VALUE
PV OF FCFF 11 YR ONWARDS
142499.4901
LESS BV END YR 10
68859.38802
Page 42
PV OF EVA IN YEAR 10
73640.10206
PV TERMINAL VALUE(TODAY)
22376.72546
FIRM VALUE
68207.61682
ADD CASH
2,141.88
1,614.41
EV
71963.90922
LESS DEBT
563.21
FCFE
No of Outstanding Shares
71,400.70
197.86
eva
nopat
capital charge
eva
360.8647
T1
T2
T3
T4
2006
2007
2008
2009
2,890.4570
4,033.3820
4,355.2978
4,981.2614
672.40
857.88
1,159.86
1,554.63
2,218.05
3,175.51
3,195.44
3,426.63
8834.471719
34373.95264
43208.42436
Page 43
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
NOPAT
81.25
105.63
137.32
178.51
232.06
301.68
377.71
454.76
525.70
582.48
617.43
654.47
RR
70.15%
82.36%
82.36%
82.36%
82.36%
82.36%
73.25%
64.14%
55.03%
45.92%
36.82%
36.82%
FCFF
24.25
18.63
24.22
31.49
40.94
53.22
101.04
163.07
236.39
314.98
390.11
413.52
ROC
36.43%
36.43%
36.43%
36.43%
36.43%
36.43%
36.00%
35.21%
34.10%
32.67%
30.91%
16.30%
0.86
0.74
0.64
0.55
0.47
0.40
0.35
0.30
0.26
0.22
0.19
0.3
0.3
0.3
0.3
0.3
0.252
0.204
0.156
0.108
0.06
0.06
DF
G
0.38
WACC
16.30%
PV OF FCFF
436.64267
PV
OF
VALUE
TERMINAL
887.33039
EV
1323.9731
ADD CASH
20.5186
55.5
EV
1399.9917
LESS DEBT
21.16
Equity value
1378.8317
No
of
Shares
Outstanding
1.838
750.18044
Page 44
EVA CALCULATION:
YEAR
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
INVESTED
CAPITAL
(BEGNING)
223.06
310.06
423.15
570.17
761.29
1,009.76
1,286.43
1,578.12
1,867.43
2,134.93
2,362.25
NOPAT
105.63
137.32
178.51
232.06
301.68
377.71
454.76
525.70
582.48
617.43
654.47
FCFF
18.63
24.22
31.49
40.94
53.22
101.04
163.07
236.39
314.98
390.11
413.52
RR
86.99
113.09
147.02
191.13
248.46
276.67
291.69
289.31
267.50
227.31
240.95
WACC%
16.30
16.30
16.30
16.30
16.30
16.30
16.30
16.30
16.30
16.30
16.30
CAP
CHARGE
36.35
50.53
68.96
92.92
124.07
164.56
209.65
257.19
304.34
347.93
384.98
ECO
PROFIT
69.27
86.79
109.55
139.14
177.61
213.15
245.11
268.51
278.14
269.49
269.49
DF
0.8598
0.739
0.635
0.546
0.470
0.4041
0.347
0.298
0.2569
0.220
0.189
BV 0
223.0614
735.535105
PV OF TERMINAL VALUE
PV OF FCFF 11 YR ONWARDS
4015.85758
Page 45
LESS BV END YR 10
2362.24558
PV OF EVA IN YEAR 10
1653.612
PV TERMINAL VALUE(TODAY)
365.376547
FIRM VALUE
1323.97305
ADD CASH
20.52
55.50
EV
1399.99165
LESS DEBT
FCFE
No of Outstanding Shares
Value per share
21.16
1,378.83
1.838
750.1804
---T1
--T2
---T3
Eva
2003
2004
2005
Nopat
31.2312124
57.1992
81.2521
capital charge
31.0495417
24.6173
32.9043
Eva
0.18167075
32.5819
48.3478
T0
1399.992
Page 46
SYNERGY:
---T1
--T2
---T3
TATA INFOTECH
2003
2004
2005
NOPAT
31.2312
57.19919
81.25211092
CAPITAL CHARGE
31.0495
24.61726
32.9042945
EVA
0.18167
32.58193
48.34781643
T0
1399.99
1659.18
T1
T2
T3
T4
2006
2007
2008
2009
NOPAT
2890.46
4033.382
4355.297765
4981.26
CAPITAL CHARGE
672.404
857.8757
1159.862193
1554.63
EVA
2218.05
3175.506
3195.435572
3426.63
3059.18
43208.4
Synergy
40149.2
Page 47
Thus it clearly shows that Company is gaining profit due to the merger.
After regression what are the weightage of various parameters in EVA?
Operating Expenses
0%
Employee Cost
6%
ROC
99%
d/e
0%
0%
operating profit
0%
Page 48
CONCLUSION
This merger has resulted in a profitable to the company TCS as it was just the two company from the same parent
company got merged.
It has added a lot of Eva to the company during the period of 2006-2009
years
2006
2007
2008
2009
Eva
2218.053368
3175.506253
3195.435572
3426.62873
EVA
4000
3000
2000
EVA
1000
0
2006
2007
2008
2009
After which the sales are still growing at a CAGR of 28% while the various expense are almost in same proportion
of the sales
Net profit is also growing at a CAGR of 21% which is very good for the company.
Page 49