FUNDAMENTAL & TECHNICAL ANALYSIS OF

TATA CONSULTANCY SERVICES

VIJAY SITAwy5RAM POTE

ROLL NO: HPGD/JA14/0195
SPECIALIZATION : FINANCE

WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT & RESEARCH

Year of Submission: December, 2016

SUBMITTED TO:
WELINGKAR INSTITUTE OF MANAGEMENT
MUMBAI-400050
IN PARTIAL FULFILLMENTOF THE HPGD COURSE UNDER
THE UNIVERSITY OF MUMBAI

A PROJECT REPORT
ON
FUNDAMENTAL & TECHNICAL ANALYSIS OF
TATA CONSULTANCY SERVICES

SUBMITTED BY
VIJAY POTE
(FINANCE)
ROLL NO - 0195
BATCH 2014 2016

WELINGKAR INSTITUTE OF MANAGEMENT

MUMBAI-400050
IN PARTIAL FULFILLMENTOF THE HPGD COURSE UNDER
THE UNIVERSITY OF MUMBAI

DECLARATION

I VIJAY POTE, Hereby declare that the project report titled

FUNDAMENTAL & TECHNICAL ANALYSIS OF TATA CONSULTACY SERVICES is
my work submitted in partial fulfilment of the requirement for Post Graduate Degree of
WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT & RESEARCH, MUMBAI
and not submitted for the award of any degree, diploma, fellowship or any similar titles or prizes.

Date: 16/012/2016
Place: Mumbai
Signature

WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT & RESEARCH

FINANCE

CERTIFICATE
This is to certify that the project titled FUNDAMENTAL & TECHNICAL ANALYSIS OF
TATA CONSULTANCY SERVICES has been successfully completed by VIJAY POTE under
my guidance during the Second year i.e. 2014 - 2016 in partial fulfillment of his/ her course,
MMS under the University of Mumbai through the MET Institute of Management, Bhujbal
Knowledge Centre, General Arun Kumar Vaidya Chowk, Bandra Reclamation, Bandra
(W.), Mumbai 400 050.
Name of Project Guide: DR. NIRMALA JOSHI
Address of Guide: _________________________________________________
__________________________________________________
__________________________________________________
Telephone No.:

__________________________________________________

Signature of Project Guide : ___________________________

Date:

_______________________

MET Institute of Management

MMS [Semester IV] [Batch 2014 2016]
FINANCE
SYNOPSIS

Name of the Student

: Vijay pote

Course and Year

: MMS 2014-16

Period of Project
Research

: Semester IV

Area of Project
Research

: Equity

Name of the Guide

: Dr. Nirmala Joshi

Title of the Project

: Fundamental and Technical Analysis of

TCS

Project Details
[A] Objective of Study

: To evaluate the current situation of

the company by Fundamental
analysis.
To determine the future direction of
the stocks by Technical analysis.
Secondary objective is to learn about
the company, selection of an
5

investment and the Indian stock

market.

B] Research
Methodology

: Primary data
Discussion with an expert.
Secondary data
Annual report study
Company website
Relevant books.

[C]Expected results of
the study

To predict the investors position ( buy ,

sell or hold)

Prof.Dr. Nirmala Joshi

KshitijGokhale

(Internal Guide)

Dr.SangeetaTandon
(MMS Coordinator, METIM)

Dr. Vijay Page

(Director General, METIM)

ACKNOWLEGMENT

I express my sincere gratitude to my guide and mentor Dr. Nirmala Joshi, for guiding me right
from the inception of the project till the successful completion. I sincerely acknowledge her for
extending her valuable assistance and support without any hesitation and guiding me with her
insights from time to time.

I would like to thank Dr. Sangeeta Tandon, MMS course coordinator for extending her support
from time to time and being there for the students whenever they needed her.

INDEX

Contents
CERTIFICATE..............................................................................................................4
SYNOPSIS................................................................................................................5
FUNDAMENTAL ANALYSIS OVERVIEW.................................................11
What is Fundamental Analysis?..........................................................................11
General Steps to Fundamental Evaluation........................................................11
Economic Forecast.................................................................................................11
Group Selection......................................................................................................11
Narrow Within the Group.....................................................................................12
Company Analysis.................................................................................................12
Business Plan..............................................................................................................12
Management...............................................................................................................12
Financial Analysis......................................................................................................13
Putting it All Together...........................................................................................13
Strengths of Fundamental Analysis...................................................................13
Long-term Trends.......................................................................................................13
Value Spotting............................................................................................................13
Business Acumen.......................................................................................................13
Knowing Who's Who.................................................................................................14
Weaknesses of Fundamental Analysis...............................................................14
Time Constraints........................................................................................................14
Industry/Company Specific........................................................................................14
Subjectivity.................................................................................................................14
Analyst Bias...............................................................................................................14
9

Definition of Fair Value..............................................................................................15

TATA CONSULTANCY SERVICES: OVERVIEW......................................16
Members of the board...........................................................................................16
Capital Structure.....................................................................................................17
Areas of Business...................................................................................................18
Acquisitions.............................................................................................................19
Awards, Recognitions& Achievements.............................................................20
Corporate Social Responsibility.........................................................................22
Facts and Figures....................................................................................................23
FINANCIALS.........................................................................................................24
Ratio Analysis.........................................................................................................24
COMPARISON WITH PEER COMPANIES.................................................35
TECHNICAL ANALYSIS OVERVIEW..........................................................36
What is Technical Analysis?................................................................................36
The Basis of Technical Analysis.........................................................................36
Price Discounts Everything........................................................................................36
Prices Movements are not Totally Random................................................................36
Moving Average Convergence Divergence......................................................38
Resistance And Support........................................................................................40
Types Of Charts......................................................................................................41
Technical Analysis.................................................................................................45
CONCLUSION......................................................................................................47

10

FUNDAMENTAL ANALYSIS OVERVIEW

What is Fundamental Analysis?

Fundamental analysis is the examination of the
underlying forces that affect the well being of the economy, industry groups, and companies. As
with most analysis, the goal is to derive a forecast and profit from future price movements. At the
company level, fundamental analysis may involve examination of financial data, management,
business concept and competition. At the industry level, there might be an examination of supply
and demand forces for the products offered. For the national economy, fundamental analysis
might focus on economic data to assess the present and future growth of the economy. To forecast
future stock prices, fundamental analysis combines economic, industry, and company analysis to
derive a stock's current fair value and forecast future value. If fair value is not equal to the current
stock price, fundamental analysts believe that the stock is either over or under valued and the
market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice
of the random walkers and believe that markets are weak-form efficient. By believing that prices
do not accurately reflect all available information, fundamental analysts look to capitalize on
perceived price discrepancies.

General Steps to Fundamental Evaluation

Even though there is no one clear-cut method, a breakdown is
presented below in the order an investor might proceed. This method employs a top-down
approach that starts with the overall economy and then works down from industry groups to
specific companies. As part of the analysis process, it is important to remember that all
information is relative. Industry groups are compared against other industry groups and
companies against other companies. Usually, companies are compared with others in the same
group. For example, a telecom operator (Verizon) would be compared to another telecom operator
(SBC Corp), not to an oil company (ChevronTexaco).

11

Economic Forecast
First and foremost in a top-down approach would be an overall
evaluation of the general economy. The economy is like the tide and the various industry groups
and individual companies are like boats. When the economy expands, most industry groups and
companies benefit and grow. When the economy declines, most sectors and companies usually
suffer. Many economists link economic expansion and contraction to the level of interest rates.
Interest rates are seen as a leading indicator for the stock market as well. Below is a chart of the
S&P 500 and the yield on the 10-year note over the last 30 years. Although not exact, a
correlation between stock prices and interest rates can be seen. Once a scenario for the overall
economy has been developed, an investor can break down the economy into its various industry
groups.
Group Selection
If the prognosis is for an expanding economy, then certain
groups are likely to benefit more than others. An investor can narrow the field to those groups
that are best suited to benefit from the current or future economic environment. If most
companies are expected to benefit from an expansion, then risk in equities would be relatively
low and an aggressive growth-oriented strategy might be advisable. A growth strategy might
involve the purchase of technology, biotech, semiconductor and cyclical stocks. If the economy is
forecast to contract, an investor may opt for a more conservative strategy and seek out stable
income-oriented companies. A defensive strategy might involve the purchase of consumer staples,
utilities and energy-related stocks.
To assess a industry group's potential, an investor would want to
consider the overall growth rate, market size, and importance to the economy. While the
individual company is still important, its industry group is likely to exert just as much, or more,
influence on the stock price. When stocks move, they usually move as groups; there are very few
lone guns out there. Many times it is more important to be in the right industry than in the right
stock! The chart below shows that relative performance of 5 sectors over a 7-month time frame.
As the chart illustrates, being in the right sector can make all the difference.

12

Narrow Within the Group

Once the industry group is chosen, an investor would need
to narrow the list of companies before proceeding to a more detailed analysis. Investors are
usually interested in finding the leaders and the innovators within a group. The first task is to
identify the current business and competitive environment within a group as well as the future
trends. How do the companies rank according to market share, product position and competitive
advantage? Who is the current leader and how will changes within the sector affect the current
balance of power? What are the barriers to entry? Success depends on an edge, be it marketing,
technology, market share or innovation. A comparative analysis of the competition within a sector
will help identify those companies with an edge, and those most likely to keep it.
Company Analysis
With a shortlist of companies, an investor might analyze the
resources and capabilities within each company to identify those companies that are capable of
creating and maintaining a competitive advantage. The analysis could focus on selecting
companies with a sensible business plan, solid management and sound financials.
Business Plan
The business plan, model or concept forms the bedrock upon which
all else is built. If the plan, model or concepts stink, there is little hope for the business. For a new
business, the questions may be these: Does its business make sense? Is it feasible? Is there a
market? Can a profit be made? For an established business, the questions may be: Is the
company's direction clearly defined? Is the company a leader in the market? Can the company
maintain leadership?
Management
In order to execute a business plan, a company requires topquality management. Investors might look at management to assess their capabilities, strengths
and weaknesses. Even the best-laid plans in the most dynamic industries can go to waste with bad
management (AMD in semiconductors). Alternatively, even strong management can make for
extraordinary success in a mature industry (Alcoa in aluminum). Some of the questions to ask
might include: How talented is the management team? Do they have a track record? How long
have they worked together? Can management deliver on its promises? If management is a
problem, it is sometimes best to move on.

13

Financial Analysis
The final step to this analysis process would be to take apart the financial
statements and come up with a means of valuation. An investor will learn what works best and
develop a set of preferred analysis techniques. There are many different valuation metrics and
much depends on the industry and stage of the economic cycle. A complete financial model can
be built to forecast future revenues, expenses and profits or an investor can rely on the forecast of
other analysts and apply various multiples to arrive at a valuation. Some of the more popular
ratios are found by dividing the stock price by a key value driver.
Putting it All Together
After all is said and done, an investor will be left with a handful
of companies that stand out from the pack. Over the course of the analysis process, an
understanding will develop of which companies stand out as potential leaders and innovators. In
addition, other companies would be considered laggards and unpredictable. The final step of the
fundamental analysis process is to synthesize all data, analysis and understanding into actual
picks.
Strengths of Fundamental Analysis
Long-term Trends
Fundamental analysis is good for long-term investments based on very
long-term trends. The ability to identify and predict long-term economic, demographic,
technological or consumer trends can benefit patient investors who pick the right industry groups
or companies.
Value Spotting
Sound fundamental analysis will help identify companies that
represent a good value. Some of the most legendary investors think long-term and value. Graham
and Dodd, Warren Buffett and John Neff are seen as the champions of value investing.
Fundamental analysis can help uncover companies with valuable assets, a strong balance sheet,
stable earnings, and staying power.
Business Acumen
One of the most obvious, but less tangible, rewards of fundamental
analysis is the development of a thorough understanding of the business. After such painstaking
research and analysis, an investor will be familiar with the key revenue and profit drivers behind
14

a company. Earnings and earnings expectations can be potent drivers of equity prices. Even some
technicians will agree to that. A good understanding can help investors avoid companies that are
prone to shortfalls and identify those that continue to deliver. In addition to understanding the
business, fundamental analysis allows investors to develop an understanding of the key value
drivers and companies within an industry. A stock's price is heavily influenced by its industry
group. By studying these groups, investors can better position themselves to identify
opportunities that are high-risk (tech), low-risk (utilities), growth oriented (computer), value
driven (oil), non-cyclical (consumer staples), cyclical (transportation) or income-oriented (high
yield).
Knowing Who's Who
Stocks move as a group. By understanding a company's business,
investors can better position themselves to categorize stocks within their relevant industry group.
Business can change rapidly and with it the revenue mix of a company. This happened to many of
the pure Internet retailers, which were not really Internet companies, but plain retailers. Knowing
a company's business and being able to place it in a group can make a huge difference in relative
valuations.
Weaknesses of Fundamental Analysis
Time Constraints
Fundamental analysis may offer excellent insights, but it can be extraordinarily
time-consuming. Time-consuming models often produce valuations that are contradictory to the
current price prevailing on Wall Street. When this happens, the analyst basically claims that the
whole street has got it wrong. This is not to say that there are not misunderstood companies out
there, but it is quite brash to imply that the market price, and hence Wall Street, is wrong.
Industry/Company Specific
Valuation techniques vary depending on the industry group and
specifics of each company. For this reason, a different technique and model is required for
different industries and different companies. This can get quite time-consuming, which can limit
the amount of research that can be performed. A subscription-based model may work great for an
Internet Service Provider (ISP), but is not likely to be the best model to value an oil company.

15

Subjectivity
Fair value is based on assumptions. Any changes to growth or multiplier
assumptions can greatly alter the ultimate valuation. Fundamental analysts are generally aware of
this and use sensitivity analysis to present a base-case valuation, an average-case valuation and a
worst-case valuation. However, even on a worst-case valuation, most models are almost always
bullish, the only question is how much so. The chart below shows how stubbornly bullish many
fundamental analysts can be.
Analyst Bias
The majority of the information that goes into the analysis comes from the
company itself. Companies employ investor relations managers specifically to handle the analyst
community and release information. As Mark Twain said, there are lies, damn lies, and
statistics. When it comes to massaging the data or spinning the announcement, CFOs and
investor relations managers are professionals. Only buy-side analysts tend to venture past the
company statistics. Buy-side analysts work for mutual funds and money managers. They read the
reports written by the sell-side analysts who work for the big brokers (CIBC, Merrill Lynch,
Robertson Stephens, CS First Boston, Paine Weber, DLJ to name a few). These brokers are also
involved in underwriting and investment banking for the companies. Even though there are
restrictions in place to prevent a conflict of interest, brokers have an ongoing relationship with the
company under analysis. When reading these reports, it is important to take into consideration
any biases a sell-side analyst may have. The buy-side analyst, on the other hand, is analyzing the
company purely from an investment standpoint for a portfolio manager. If there is a relationship
with the company, it is usually on different terms. In some cases this may be as a large
shareholder.
Definition of Fair Value
When market valuations extend beyond historical norms, there
is pressure to adjust growth and multiplier assumptions to compensate. If Wall Street values a
stock at 50 times earnings and the current assumption is 30 times, the analyst would be pressured
to revise this assumption higher. There is an old Wall Street adage: the value of any asset (stock)
is only what someone is willing to pay for it (current price). Just as stock prices fluctuate, so too
do growth and multiplier assumptions. Are we to believe Wall Street and the stock price or the
analyst and market assumptions?
16

It used to be that free cash flow or earnings were used with a multiplier to arrive at a fair value.
In 1999, the S&P 500 typically sold for 28 times free cash flow. However, because so many
companies were and are losing money, it has become popular to value a business as a multiple of
its revenues. This would seem to be OK, except that the multiple was higher than the PE of many
stocks! Some companies were considered bargains at 30 times revenues.
Fundamental analysis can be valuable, but it should be approached with caution. If you are
reading research written by a sell-side analyst, it is important to be familiar with the analyst
behind the report. We all have personal biases, and every analyst has some sort of bias. There is
nothing wrong with this, and the research can still be of great value. Learn what the ratings mean
and the track record of an analyst before jumping off the deep end. Corporate statements and
press releases offer good information, but they should be read with a healthy degree of skepticism
to separate the facts from the spin. Press releases don't happen by accident; they are an important
PR tool for companies.

17

TATA CONSULTANCY SERVICES: OVERVIEW

Tata Consultancy Services (TCS) is an IT services, consulting and business solutions organisation
that delivers real results to global businesses, ensuring a level of certainty no other firm can
match. TCS offers a consulting-led, integrated portfolio of IT, BPO, infrastructure, engineering
and assurance services. This is delivered through its unique Global Network Delivery Model TM,
recognised as the benchmark of excellence in software development.
A part of the Tata group, Indias largest industrial conglomerate, TCS has over 318,000 of the
worlds best-trained consultants in 46 countries. The company generated consolidated revenues of
US $13.4 billion for the year ended March 31, 2014, and is listed on the National Stock Exchange
and Bombay Stock Exchange in India.
Tata Consultancy Services Limited was founded in 1968 by a division of Tata Sons Limited. Its
early contracts included punched card services to sister company TISCO (now Tata Steel),
working on an Inter-Branch Reconciliation System for the Central Bank of India, and providing
bureau services to Unit Trust of India.
In 1979, TCS delivered an electronic depository and trading system called SECOM for the Swiss
company SIS SegaInterSettle; it also developed System X for the Canadian Depository System
and automated the Johannesburg Stock Exchange. It associated with a Swiss partner, TKS
Teknosoft, which it later acquired
In 1981, TCS established India's first dedicated software research and development centre, the
Tata Research Development and Design Centre (TRDDC) in Pune. In 1985, it established India's
first client-dedicated offshore development centre, set up for clients Tandem. TCS later (1993)
partnered with Canada-based software factory Integrity Software Corp, which TCS later acquired.
In anticipation of the Y2K bug and the launch of a unified European currency, Euro. Tata
Consultancy Services created the factory model for Y2K conversion and developed software tools
which automated the conversion process and enabled third-party developer and client
implementation.
On 25 August 2004, TCS became a publicly listed company.
In 2005, TCS became the first India-based IT services company to enter the bioinformatics
market. In 2006, it designed an ERP system for the Indian Railway Catering and Tourism
Corporation. By 2008, its e-business activities were generating over US$500 million in annual
revenues
TCS entered the small and medium enterprises market for the first time in 2011, with cloud-based
offerings. On the last trading day of 2011, it overtook RIL to achieve the highest market
capitalisation of any India-based company. In the 2011/12 fiscal year, TCS achieved annual
revenues of over US$10 billion for the first time
In May 2013, TCS was awarded a six-year contract worth over 1100 crores to provide services
to the Indian Department of Posts. In 2013, the firm moved from the 13th position to 10th
position in the League of top 10 global IT services companies and in July 2014, it became the first
Indian company with over Rs 5 lakh market capitalization.
In Jan 2015, TCS ended RIL's 23-year run as most profitable firm.

18

19

20

Members of the board

Cyrus Mistry

Chairman, Non-Independent, Non-Executive

N Chandrasekaran

CEO, M.D., Non-Independent, Executive

Aarthi Subramanian

Global Head of Delivery Excellence Group, Non-Independent, Executive

Aman Mehta

Independent, Non-Executive

VenkatramanThyagarajan

Independent, Non-Executive

Prof. Clayton M.
Christensen
Dr. Ron Sommer

Independent, Non-Executive

Dr. Vijay Kelkar

Independent, Non-Executive

Ishaat Hussain

Non-Independent, Non-Executive

Phiroz A Vandrevala

Non-Independent, Non-Executive

O. P. Bhatt

Independent, Non-Executive

Independent, Non-Executive

Capital Structure
TCS has an Authorised Share Capital of 4,250,500,000 Equity Shares of Re. 1 each,
1,050,250,000 Redeemable Preference Shares of Re. 1 each totalling to Rs. 5,300,750,000.
The Issued, Subscribed and Paid Up Capital of TCS is 1,958,727,979 equity shares of Re.1 each
fully paid up.
1,000,000,000 Preference Shares were redeemed in 2014 for Re. 1 each

21

Areas of Business
Services

TCS helps clients optimise business processes for maximum efficiency and galvanise their IT
infrastructure to be both resilient and robust. TCS offers the following solutions:

Assurance services.

BI and performance management.

Business process services.

Consulting.

Digital enterprise.

Eco-sustainability services.

Engineering and industrial services.

Enterprise security and risk management.

Enterprise solutions.

iON - small and medium business.

IT infrastructure services.

IT services.

Platform solutions.

Supply chain management.

Industries
TCS has the depth and breadth of experience and expertise that businesses need to achieve
business goals and succeed amidst fierce competition. TCS helps clients from various industries
solve complex problems, mitigate risks and become operationally excellent. Some of the
industries it serves are:
22

Banking and financial services.

Energy - oil and gas, oil field services and renewable.

Government.

Healthcare.

High tech.

Insurance.

Life sciences.

Manufacturing.

Media and information services.

Resources - metals, mining and construction.

Retail and consumer products.

Telecom.

Travel, transportation and hospitality.

Utilities.

Software

Digital software and solutions.

TCS BaNCS.

TCS MasterCraft.

TCS technology products.

23

Acquisitions
NAME
CMC Limited

ACQUISITION DATE
2001 October

Airline Financial Support

Services India (AFS)
Phoenix Global Solutions

2004 January

Swedish Indian IT Resources

AB (SITAR)

2005 May

Pearl Group

2005 October

Financial Network Services

(FNS)

2005 October

Comicrom

2005 November

Tata Infotech

2006 February

TCS Management
TKS-Teknosoft

2006 November
2006 November

2004 May

NOTES
Gets Embedded Expertise
& good Domestic customer
reach. CMC Amalgamated
with TCS on April 28,
2015.
BPO expertise in Airline
and Hospitality sector
Acquire expertise in
insurance-domain
consulting
Acquire blue-chip European
customers like Ericsson,
IKEA, Vattenfall and
Hutchison; SITAR was
TCS exclusive partner in
Sweden and a nonexclusive partner in
Norway.
Acquired life and pension
outsourcing business from
Pearl Group; Domain
knowledge of life and
pension underwriting
business.
TCS acquired core banking
solution product (BANCS)
and access to 116 customers
in 35 countries; FNS was an
existing partner for TCS.
Entry into Latin America;
Access to payment
processing platform.
The merger of Tata Infotech
added 15 new Fortune 500
clients and enhanced TCS
systems integration and
infrastructure service
capabilities.
Access to Australian clients
Expand product portfolio by
acquiring rights to Quartz
24

Citigroup Global Services

Limited

2008 December

Supervalu Services India

2010 September

Computational Research
Laboratories

2012 August

Alti SA

2013 April

and ownership of Alpha and

e-portfolio, enhanced
presence in Switzerland and
France
TCS acquired key Banking
and Financial Services
(BFS) domain knowledge.
TCS had a deal with
Supervalu to have their
Software Outsourcing to
TCS and acquired
Supervalu India.
Acquire expertise in High
Performance Computing
(HPC) applications and
Cloud services
Access to blue-chip French
and European clients in
banking, luxury,
manufacturing and utilities
sectors

Awards, Recognitions& Achievements

2016
In Europes fast-paced digital economy, TCS retains #1 ranking for customer satisfaction
TCS certified the Top Employer in Latin America for the second consecutive year
TCS Certified as a Top Employer in United States for the Second Consecutive Year
25

TCS recognized as Superbrand in the UK

TCS recognized as UKs #1 Top Employer for the second consecutive year
TCS rated as the worlds most powerful brand in IT Services
TCS Recognized as a Global Leader in Microsoft Enterprise Applications Implementation by
IDC MarketScape

2015
TCS Recognized as a Leader in Application Testing Services for Second Consecutive Year by
Gartner
TCS Recognized as a Leader in Life Sciences Clinical and R&D IT by Everest Group
TCS Wins Prestigious Oracle Excellence Award for Specialized Partner of the Year Telecommunications
Leading Digital and Business Solutions Provider TCS Announces Plans to Expand in Ireland
TCS Wins Gold, Silver and Bronze Stevie at 2015 American Business Awards
TCS Wins Business Transformation Award from Pegasystems
TCS launches Center of Excellence (CoE) for Next Gen Technology Solutions
TCS Wins 2015 SAP Pinnacle Award
TCS Recognized as a Top 100 Brand in the US by Brand Finance
TCS China Awarded at Global CEO Innovation Summit 2015

2014
TCS Recognized as a Leader in Banking Business Process Outsourcing (BPO) by Everest Group
TCS BaNCS wins Global Custodian award for Best Custody second time in a row
TCS wins Leading Vendor Award for Quality Assurance Services
26

TCS BaNCS rated Best in Class for Design and Security and Enterprise Support in Online
Banking Solutions Report
TCS Wins Australian Service Excellence Award
Gartner Recognizes TCS as a Leader in its Magic Quadrant for Worldwide SAP Application
Management Service Providers
Tata Consultancy Services Ranked Number One of Top 100 Companies in Asia in Sustainability
Ranking
TCS Recognized With Two Prestigious Oracle Excellence Awards

Corporate Social Responsibility

At TCS, sustainability is seen as a state of being in balance between Corporate Economic
Responsibility (CER) and Corporate Social Responsibility (CSR).
The guiding principle of TCS Corporate Social Responsibility programs is Impact through
Empowerment, where empowerment is a process of strengthening the future today, so that risks
are minimized, value created and certainty is experienced. We strive to ensure that the
communities engaged through our CSR initiatives also experience certainty in their lives.
27

The core areas for TCS CSR programs are education, health and environment. The choice of
education as a theme flows from TCS being in the knowledge domain. Similarly, attention to the
cause of health acknowledges that health is a vital precondition for promoting social good.
Concern for the environment is in line with our belief that this global cause demands our attention
to ensure a sustainable and productive planet. These themes are established centrally for adoption
or adaptation across all geographies.
TCS Approach
TCS has chosen the following channels to drive its CSR initiatives:

Developing innovative solutions to address large-scale societal problems by utilizing our

IT core competence.

Volunteering for projects that address the felt need of communities in which TCS
operates, while aligning with the core themes of TCS CSR.

Participating in community development program championed by our clients.

Partnering with select non-government and civil society organizations and other
government bodies.

Supporting large-scale causes such as disaster relief or any other cause as determined by
the Corporate CSR Council.

TCS Initiatives

Region
India

Sustainable Community Initiatives

Adult Literacy Programs
University Alliances
28

TCS BPO Employability

Program
Academic Interface Program
mKRISHI
WebHealthCenter
Mansuki
TCS Maitree village
development initiative
TCS Maitrees Advanced
Computer Training Center
Med Mantra
InsighT
Empower
CSR Technical Teams support to
social organizations
North America

First Book Club

goIT

UK and Europe

IT Futures
Environmental sustainability and the
ICT industry

Asia Pacific

InsighT- Australia
SINDA Computer Training
Go for IT!
Library Program in China
Operation Smile

Latin America

Environment Leaders

Middle East and Africa

Landmark computer training

Scholarships at CIDA City Campus
City Ambassadors Football Club
Support to Reach for Dreams
29

Facts and Figures

42 partners globally served

22 key programmes globally
58,362 volunteering hours
57,90,650 beneficiaries reached
Rs. 51.39 cr social spend

FINANCIALS

Ratio Analysis
PROFITABILITY RATIOS

30

RETURN ON EQUITY (%)

Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company
(or more specifically, its management team) is managing the equity that shareholders have
contributed to the company.
In other words, Return on equity (ROE) is the amount of net income returned as a percentage of
shareholders equity. Return on equity measures a corporation's profitability by revealing how
much profit a company generates with the money shareholders have invested.

ROE is expressed as a percentage and calculated as:

ROE =

Net Income
Shareholders Equity

31

RoE (%)
43
42
41
40
39
38
37

March, 2013

March, 2014

March, 2015

RoE (%)

Interpretation
Return on Equity shows the amount of net income earned as a percentage of the capital invested
by the shareholders in the company. As seen with TCS, the ratio is increasing over the last 3
years. It grew from 39.38% for the year ended March 2013 to 41.93% for the year ended March
2014. There was a slight increase to 42.40% for the year ended March 2015.

32

NET PROFIT MARGIN (%)

Profit margin is part of a category of profitability ratios calculated as net income divided by
revenue, or net profits divided by sales. Net income or net profit may be determined by
subtracting all of a companys expenses, including operating costs, material costs (including raw
materials) and tax costs, from its total revenue. Profit margins are expressed as a percentage and,
in effect, measure how much out of every dollar of sales a company actually keeps in earnings.
Net margin is the ratio of net profits to revenues for a company or business segment - typically
expressed as a percentage that shows how much of each dollar earned by the company is
translated into profits.

Net margins can generally be calculated as:

Net Profit Margin =

Net Profit

X100

Sales

Net Profit Margin (%)

29
28.5
28
27.5
27
26.5
26
25.5
25
24.5

March, 2013

March, 2014

March, 2015

Net Profit Margin (%)

Interpretation
33

The Net Profit Margin tells you what percentage of sales is the net profit of the company. TCS
has a healthy Net Profit Margin over the last 3 years. It has gone down a little for the year ended
March 2015 to 26.17% from 28.56% for the year ended March 2014.
RETURN ON CAPITAL EMPLOYED (%)
Return on capital employed or ROCE is a profitability ratio that measures how efficiently a
company can generate profits from its capital employed by comparing net operating profit to
capital employed.
ROCE is a long-term profitability ratio because it shows how effectively assets are performing
while taking into consideration long-term financing.

ROCE is calculated as:

ROCE =

EBIT
Capital Employed

ROCE (%)
42
41
40
39
38
37
36

March, 2013

March, 2014

March, 2015

ROCE (%)

Interpretation
Return on Capital Employed shows you how much returns the company has earned, prior to
paying off of interest and tax expenses. This return is then compared with the capital that is
employed for the running of business. Higher the ratio tells you that the capital that is employed
34

in the business is put to effective use. The ROCE for TCS has grown consistently over the past 3
years going to 41.32% for the year ended March 2015 from 40.74% for the year ended March
2004.
RETURN ON ASSETS (%)
The return on assets ratio, often called the return on total assets, is a profitability ratio that
measures the net income produced by total assets during a period by comparing net income to the
average total assets. In other words, the return on assets ratio or ROA measures how efficiently a
company can manage its assets to produce profits during a period.
Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
ROA gives an idea as to how efficient management is at using its assets to generate earnings.
The formula for return on assets is:
ROA =

Net Income
Total Assets

RoA (%)
32.5
32
31.5
31
30.5
30
29.5
29
28.5

March, 2013

March, 2014

March, 2015

RoA (%)

Interpretation

35

The return on assets ratio tells you how efficiently the assets are being used by a company for the
generation of income. Higher the ratio, better utilised the assets are by the company. TCS has had
a little dip in the RoA for the year ended March 2015 going to 30.53% from 32.07% for the year
ended March 2014. Over the last 3 years, it has been steady around 30%
DEBT EQUITY RATIO (Times)
The debt to equity ratio is a financial, liquidity ratio that compares a company's total debt to total
equity. The debt to equity ratio shows the percentage of company financing that comes from
creditors and investors. A higher debt to equity ratio indicates that more creditor financing (bank
loans) is used than investor financing (shareholders).
Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by
dividing a companys total liabilities by its stockholders' equity. The D/E ratio indicates how
much debt a company is using to finance its assets relative to the amount of value represented in
shareholders equity.
The formula for Debt Equity Ratio is:
Debt Equity Ratio =

Debt
Equity

Debt Equity Ratio

0.01
0.01
0.01
0.01
0
0
0

March, 2013

March, 2014

March, 2015

Debt Equity Ratio

Interpretation
36

The debt equity ratio shows the proportion of debt and equity used by the company to finance
its assets. More the ratio means the company is a highly levered company. The debt equity ratio
for TCS is 0 for the year ended March 2015 and also for the year ended March 2014. This a very
good thing for the investors as it shows that the company has not borrowed money from outside
to finance its assets.
LIQUIDITY RATIOS

CURRENT RATIO (Times)

The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its
short-term liabilities with its current assets. The current ratio is an important measure of liquidity
because short-term liabilities are due within the next year.
This means that a company has a limited amount of time in order to raise the funds to pay for
these liabilities. Current assets like cash, cash equivalents, and marketable securities can easily be
converted into cash in the short term. This means that companies with larger amounts of current
assets will more easily be able to pay off current liabilities when they become due without having
to sell off long-term, revenue generating assets.
The formula for calculating a companys current ratio, then, is:
Current Ratio =

Current Assets
Current Liabilities

Current Ratio
2.9
2.8
2.7
2.6
2.5
2.4
2.3
2.2

March, 2013

March, 2014

March, 2015

Current Ratio

Interpretation
37

Current ratio tells you how secure the company is against short term liabilities. The standard
current ratio is 2:1 meaning for every 1 current liability there has to be 2 current assets to pay the
liability off. The current ratio has come down to 2.46:1 for TCS for the year ended March 2015
from 2.84:1 for the year ended March 2014. Although it has reduced a little it is still above the
standard ratio and this has been the case for the last 3 years.
DIVIDEND PAYOUT RATIO (%)
The dividend payout ratio measures the percentage of net income that is distributed to
shareholders in the form of dividends during the year. In other words, this ratio shows the portion
of profits the company decides to keep to fund operations and the portion of profits that is given
to its shareholders.
Investors are particularly interested in the dividend payout ratio because they want to know if
companies are paying out a reasonable portion of net income to investors.
The dividend payout ratio is the percentage of earnings paid to shareholders in dividends.
Calculated as:
Dividend Payout Ratio =

Dividend
Net Income

Dividend Payout Ratio

90
80
70
60
50
40
30
20
10
0

March, 2013

March, 2014

March, 2015

Dividend Payout Ratio

38

Interpretation
Dividend payout ratio shows how much dividend has been given out to the shareholders of the
company as a percentage of the net income earned. This is a ratio that attracts the shareholders as
it shows how much they will earn as dividends. TCS paid higher dividends for the year ended
March 2015 which was 80.35% as compared to the year before that in which they paid a dividend
of 33.92%.
EARNINGS PER SHARE (Rs.)
Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share
of common stock. Earnings per share serves as an indicator of a company's profitability.
Earnings per share is also a calculation that shows how profitable a company is on a shareholder
basis. So a larger company's profits per share can be compared to smaller company's profits per
share. Obviously, this calculation is heavily influenced on how many shares are outstanding.
Thus, a larger company will have to split its earning amongst many more shares of stock
compared to a smaller company.
Calculated as:
EPS = Net Income Preference Dividends
Number of Shares Outstanding

39

EPS
120
100
80
60
40
20
0

March, 2013

March, 2014

March, 2015

EPS

Interpretation
EPS is one factor that every shareholder keeps an eye on. It shows the earning per share for the
shareholders if all the profits earned by the company were to be distributed among the
shareholders. Earnings per share for TCS have increased over the past 3 years going to Rs. 101.35
per share or the year ended March 2015 from Rs. 97.67 for the year ended March 2014.

40

PRICE EARNING RATIO

The price earnings ratio, often called the P/E ratio or price to earnings ratio, is a market prospect
ratio that calculates the market value of a stock relative to its earnings by comparing the market
price per share by the earnings per share. In other words, the price earnings ratio shows what the
market is willing to pay for a stock based on its current earnings.
Investors often use this ratio to evaluate what a stock's fair market value should be by predicting
future earnings per share. Companies with higher future earnings are usually expected to issue
higher dividends or have appreciating stock in the future.
Calculated as:
P/E Ratio = Market Price of Share
EPS
= 2427.25
101.35
=Rs. 23.95.

41

COMPARISON WITH PEER COMPANIES

Name

RoE

N.P.

ROCE

RoA

Debt

(%)

Margi

(%)

(%)

Equity

Ratio

Payout

(Times

(Times)

(%)

Current Dividend

Infosys

24.38

(%)
23.20

Wipro

23.34

18.55

22.24

14.83

0.21

2.22

34.00

HCL

30.20

19.89

28.92

20.76

0.02

2.32

32.60

Oracle

34.61

30.53

33.56

19.01

1.72

471.75

MphasiS

12.31

11.64

11.43

9.09

0.1

2.60

49.83

Mindtree

26.64

15.05

26.18

20.20

3.06

26.55

KPIT

18.29

7.92

16.73

10.43

0.34

1.54

9.16

TCS

42.40

26.17

41.32

30.53

0.01

2.46

80.35

24.36

18.66

3.05

41.14

*Comparison with the year 2015.

42

TECHNICAL ANALYSIS OVERVIEW

What is Technical Analysis?

Technical Analysis is the forecasting of future financial price
movements based on an examination of past price movements. Like weather forecasting,
technical analysis does not result in absolute predictions about the future. Instead, technical
analysis can help investors anticipate what is likely to happen to prices over time. Technical
analysis uses a wide variety of charts that show price over time.
Technical analysis is applicable to stocks, indices, commodities, futures or any tradable
instrument where the price is influenced by the forces of supply and demand. Price refers to any
combination of the open, high, low, or close for a given security over a specific time frame. The
time frame can be based on intraday (1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes
or hourly), daily, weekly or monthly price data and last a few hours or many years. In addition,
some technical analysts include volume or open interest figures with their study of price action.
The Basis of Technical Analysis
At the turn of the century, the Dow Theory laid the
foundations for what was later to become modern technical analysis. Dow Theory was not
presented as one complete amalgamation, but rather pieced together from the writings of Charles
Dow over several years. Of the many theorems put forth by Dow, three stand out:

Price Discounts Everything

Price Movements Are Not Totally Random

What Is More Important than Why

Price Discounts Everything

This theorem is similar to the strong and semi-strong forms of
market efficiency. Technical analysts believe that the current price fully reflects all information.
43

Because all information is already reflected in the price, it represents the fair value, and should
form the basis for analysis. After all, the market price reflects the sum knowledge of all
participants, including traders, investors, portfolio managers, buy-side analysts, sell-side analysts,
market strategist, technical analysts, fundamental analysts and many others. It would be folly to
disagree with the price set by such an impressive array of people with impeccable credentials.
Technical analysis utilizes the information captured by the price to interpret what the market is
saying with the purpose of forming a view on the future.
Prices Movements are not Totally Random
Most technicians agree that prices trend. However, most
technicians also acknowledge that there are periods when prices do not trend. If prices were
always random, it would be extremely difficult to make money using technical analysis.
A technician believes that it is possible to identify a trend, invest or trade based on the trend and
make money as the trend unfolds. Because technical analysis can be applied to many different
time frames, it is possible to spot both short-term and long-term trends. The IBM chart illustrates
Schwager's view on the nature of the trend. The broad trend is up, but it is also interspersed with
trading ranges. In between the trading ranges are smaller uptrends within the larger uptrend. The
uptrend is renewed when the stock breaks above the trading range. A downtrend begins when the
stock breaks below the low of the previous trading range.

44

Moving Average Convergence Divergence

Developed by Gerald Appel in the late seventies, the Moving Average Convergence/Divergence
oscillator (MACD) is one of the simplest and most effective momentum indicators available. The
MACD turns two trend-following indicators, moving averages, into a momentum oscillator by
subtracting the longer moving average from the shorter moving average. As a result, the MACD
offers the best of both worlds: trend following and momentum. The MACD fluctuates above and
below the zero line as the moving averages converge, cross and diverge. Traders can look for
signal line crossovers, centerline crossovers and divergences to generate signals. Because the
MACD is unbounded, it is not particularly useful for identifying overbought and oversold levels.

The MACD Line is the 12-day Exponential Moving Average (EMA) less the 26-day EMA.
Closing prices are used for these moving averages. A 9-day EMA of the MACD Line is plotted
with the indicator to act as a signal line and identify turns. The MACD Histogram represents the
difference between MACD and its 9-day EMA, the Signal line. The histogram is positive when
the MACD Line is above its Signal line and negative when the MACD Line is below its Signal
line.
The values of 12, 26 and 9 are the typical setting used with the MACD, however other values can
be substituted depending on your trading style and goals.
45

There are three common methods used to interpret the MACD:

1. Crossovers - As shown in the chart above, when the MACD falls below the signal line, it is a
bearish signal, which indicates that it may be time to sell. Conversely, when the MACD rises
above the signal line, the indicator gives a bullish signal, which suggests that the price of the asset
is likely to experience upward momentum. Many traders wait for a confirmed cross above the
signal line before entering into a position to avoid getting getting "faked out" or entering into a
position too early, as shown by the first arrow.

2. Divergence - When the security price diverges from the MACD. It signals the end of the
current trend.

3. Dramatic rise -

When the MACD rises dramatically - that is, the shorter moving average

pulls away from the longer-term moving average - it is a signal that the security is overbought
and will soon return to normal levels.

Traders also watch for a move above or below the zero line because this signals the position of
the short-term average relative to the long-term average. When the MACD is above zero, the
short-term average is above the long-term average, which signals upward momentum. The
opposite is true when the MACD is below zero. As you can see from the chart above, the zero
line often acts as an area of support and resistance for the indicator.

46

Resistance And Support

Once you understand the concept of a trend, the next major concept is that of support and
resistance. You'll often hear technical analysts talk about the ongoing battle between the bulls and
the bears, or the struggle between buyers (demand) and sellers (supply). This is revealed by the
prices a security seldom moves above (resistance) or below (support).

As you can see in Figure 1, support is the price level through which a stock or market seldom
falls (illustrated by the blue arrows). Resistance, on the other hand, is the price level that a stock
or market seldom surpasses (illustrated by the red arrows).
Why Does it Happen?
These support and resistance levels are seen as important in terms of market psychology and
supply and demand. Support and resistance levels are the levels at which a lot of traders are
willing to buy the stock (in the case of a support) or sell it (in the case of resistance). When these
trendlines are broken, the supply and demand and the psychology behind the stock's movements
is thought to have shifted, in which case new levels of support and resistance will likely be
established.
Round Numbers and Support and Resistance
One type of universal support and resistance that tends to be seen across a large number of
securities is round numbers. Round numbers like 10, 20, 35, 50, 100 and 1,000 tend be important
in support and resistance levels because they often represent the major psychological turning
points at which many traders will make buy or sell decisions.

47

Buyers will often purchase large amounts of stock once the price starts to fall toward a major
round number such as $50, which makes it more difficult for shares to fall below the level. On the
other hand, sellers start to sell off a stock as it moves toward a round number peak, making it
difficult to move past this upper level as well. It is the increased buying and selling pressure at
these levels that makes them important points of support and resistance and, in many cases, major
psychological points as well.
Role Reversal
Once a resistance or support level is broken, its role is reversed. If the price falls below a support
level, that level will become resistance. If the price rises above a resistance level, it will often
become support. As the price moves past a level of support or resistance, it is thought that supply
and demand has shifted, causing the breached level to reverse its role. For a true reversal to occur,
however, it is important that the price make a strong move through either the support or
resistance.

For example, as you can see in Figure 2, the dotted line is shown as a level of resistance that has
prevented the price from heading higher on two previous occasions (Points 1 and 2). However,
once the resistance is broken, it becomes a level of support (shown by Points 3 and 4) by
propping up the price and preventing it from heading lower again.

48

Types Of Charts
There are four main types of charts that are used by investors and
traders depending on the information that they are seeking and their individual skill levels. The
chart types are: the line chart, the bar chart, the candlestick chart and the point and figure chart.

Line Chart
The most basic of the four charts is the line chart because it represents
only the closing prices over a set period of time. The line is formed by connecting the closing
prices over the time frame. Line charts do not provide visual information of the trading range for
the individual points such as the high, low and opening prices. However, the closing price is often
considered to be the most important price in stock data compared to the high and low for the day
and this is why it is the only value used in line charts.

Figure 1: A line chart

49

Bar Charts

The bar chart expands on the line chart by adding several more key
pieces of information to each data point. The chart is made up of a series of vertical lines that
represent each data point. This vertical line represents the high and low for the trading period,
along with the closing price. The close and open are represented on the vertical line by a
horizontal dash. The opening price on a bar chart is illustrated by the dash that is located on the
left side of the vertical bar. Conversely, the close is represented by the dash on the right.
Generally, if the left dash (open) is lower than the right dash (close) then the bar will be shaded
black, representing an up period for the stock, which means it has gained value. A bar that is
colored red signals that the stock has gone down in value over that period. When this is the case,
the dash on the right (close) is lower than the dash on the left (open).

Figure 2: A bar chart

50

Candlestick Charts
The candlestick chart is similar to a bar chart, but it differs in the way that it is visually
constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the
period's trading range. The difference comes in the formation of a wide bar on the vertical line,
which illustrates the difference between the open and close. And, like bar charts, candlesticks also
rely heavily on the use of colors to explain what has happened during the trading period. A major
problem with the candlestick color configuration, however, is that different sites use different
standards; therefore, it is important to understand the candlestick configuration used at the chart
site you are working with. There are two color constructs for days up and one for days that the
price falls. When the price of the stock is up and closes above the opening trade, the candlestick
will usually be white or clear. If the stock has traded down for the period, then the candlestick
will usually be red or black, depending on the site. If the stock's price has closed above the
previous day's close but below the day's open, the candlestick will be black or filled with the
color that is used to indicate an up day.

Figure 3: A candlestick chart

51

Point and Figure Charts

The point and figure chart is not well known or used by the average
investor but it has had a long history of use dating back to the first technical traders. This type of
chart reflects price movements and is not as concerned about time and volume in the formulation
of the points. The point and figure chart removes the noise, or insignificant price movements, in
the stock, which can distort traders' views of the price trends. These types of charts also try to
neutralize the skewing effect that time has on chart analysis.

Figure 4: A point and figure chart

When first looking at a point and figure chart, you will notice a series of Xs and Os.
The Xs represent upward price trends and the Os represent downward price trends. There are also
numbers and letters in the chart; these represent months, and give investors an idea of the date.
Each box on the chart represents the price scale, which adjusts depending on the price of the
stock: the higher the stock's price the more each box represents. On most charts where the price is
between $20 and $100, a box represents $1, or 1 point for the stock. The other critical point of a
point and figure chart is the reversal criteria. This is usually set at three but it can also be set
according to the chartist's discretion. The reversal criteria set how much the price has to move
away from the high or low in the price trend to create a new trend or, in other words, how much
the price has to move in order for a column of Xs to become a column of Os, or vice versa. When
the price trend has moved from one trend to another, it shifts to the right, signalling a trend
change.
52

Technical Analysis

D is the point where the company has given out dividends. If you see properly after the
declaration of dividends, the market has gone is a retracement towards the top side and once the
dividend is given it falls back to its original trend.
The main trend is downtrend only but towards the extreme right of the chart. There
is a formation of a double bottom which is a reversal pattern indicating that now the market will
move to the uptrend which tells the investors to be on the buy side. At the level of Rs. 2400 there
is a strong resistance level as the market has tested this level thrice. So there is consolidation but
due to the reversal pattern there is possibility of the market breaking the resistance and going
upwards.
The market after breaking the resistance at 2400 will go to test the resistance level at 2600 which
is a sufficient amount of profit for the investors.

53

On seeing the weekly chart the market had touched the support level and bounced back up
breaking the previous high of Rs.2391. This also is an indication that market is bullish and that
the buying interest have overwhelmed the selling interest.

54

CONCLUSION
We have seen the meaning and the importance of Fundamental Analysis of a
company and how it is helpful to the investors. It is not only about the ratios that reflect the
performance of the company during the year, but it is also down to the news regarding the
company. Any major events that take place,

any recognitions that the company receives

domestically or globally, any changes that happen at the top level of the board of managers is
equally important. The changes may happen and are bound to happen at one point of a time for
any company but the reason behind it should be the point of scrutiny.
Of course, the financial statements and their study is a very important factor in the
fundamental analysis too. Determining the key ratios and calculation of those ratios and later on
the conversion of the data into presentable format so that the investor can easily understand is
also vital. To choose from a pool of similar companies, it is important to have the data and the
knowledge of the peer companies. Comparison on the basis of ratios could be the factor of
differentiation between two identical companies fundamentally.
We also understood the various aspects of the technical analysis of a stock. Technical analysis is
important to be aware about the exact entry and exit points from the stock. This will help in
earning maximum profits and minimizing losses. Usually, the charts follow a pattern as discussed
earlier and to spot the pattern and take the decision, it is important to have knowledge of reading
of charts.
If the two, fundamental analysis and technical analysis are combined, there could be a greater
chance of making profits on the market.

55