Economic Analysisa

8/3/2019 Economic Analysisa

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ECONOMIC ANALYSISA OF TCS.

POLITICAL EQUATIONB.

GLOBAL RECESSION AND INDIAN ECONOMYC.ECONOMIC GROWTHD.GOVERNMENT POLICYE.BUDGETF.INFRASTRUCTUREG.TAXATION POLICYH.INTEREST RATEI.INFLATION2

INDUSTRY ANALYSISA.

INDUSTRY PERFORMANCE AND PROJECTIONSB.

HISTORICAL GROWTH OF I.T SECTORC.COMPETITIVE STRUCTURED.SURVIVALE.GROWTHF.DEPENDENCE ON KEY FACTORS3

COMPANY ANALYSISA.

COMPANY OVERVIEWB.SYSTEMATIC GROWTH AND NEW VENTURESC.MANAGEMENT TEAMD.P/L A/C FOR THE YEAR ENDED MARCH 31ST2009E.PROJECTED P/L A/C FOR THE YEAR ENDING MARCH 31 ST 2010F

JUSTIFICATIONS FOR PROJECTIONS IN VARIOUS FIGURESG.PROJECTED P/E RATIOH.INTRINSIC VALUE OF SHARE

ECONOMIC ANALYSISThe mood is upbeat and India is well on the path of economic recovery. By being the firstcountry to kick off a calibrated fiscal consolidation ithas demonstrated that the fundamentals of its economy are sound. As the Economic Survey points out the reforms would make India the 4th

fastest growing economy in the next 4 years. What has helped the economy to look up is thebrilliant performance of the industrial sectorwhich has recorded consistent growth this year.Though the negative growth in the export sector has been arrested, it is still not out of thered.Calibrated policy measures are thus in tune with the needs of the economy. The focus nowhas to be on dealing with the double digit foodinflation, which is a source of concern for the timebeing.


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A)POLITICAL EQUATIONPresently India has a stable government at the centre. The Dr. Manmohan Sighn led UPAgovernment is working efficiently for the developmentof country. The various steps taken by thegovernment indicates a steady growth both in agricultural and industrial sector. Currentlyour agricultural growth is about , and industrial growth is about , the GDP is about 7.2%, which

is expected to touch double digit in 2014 15.The stimulus packages announced by thegovernment and exemption of CTT and FBT and decrease in corporate taxes ensured growth of industryin recessional phase. Now, the decision of withdrawing the stimulus in a phased mannerin the last Budget is a encouraging step for thebetterment of the economy.B) GLOBAL RECESSION AND INDIAN ECONOMYThe bad times are gone ,now it is the time to witness the favourable advantages,INDIA hasalmost recovered from the global crisis.Starting fromUS Sub-prime crisis, the World had seen aworst recession after The Great Depression of 1930 s. The Indian stock market have hit by theglobalcrisis. India s growing service sector and manufacturing sector are adversely affected bythis. But, still due to our mixed economy policy andproper steps taken by the government, Indianeconomy is least affected by the global meltdown. While most of the developing countries

arestill recovering from recession, India had almost recovered from the downturn, showing agreat growth prospective in all sectors.C)ECONOMIC GROWTHEconomic growth is a key indicator of development of a country. It shows the efficientutilization of the resources in a optimal way. The growthrate of 9.8% in 2007/08 decreased to6.2% in last fiscal due o global recession. But now with a sign of recovery Indian economy isgrowing at7.2% which is expected to touch double digit in 2014/15. After China, India issecond developing nation in the World. Thus, one can say, theeconomic growth of India is steadyand continuous

GOVERNMENT POLICY

Government policy has a direct impact on the economy. A government that is perceived to bepro-industry will attract investment. Theliberalization policy of Narsimha Rao governmentexcited the developed World and foreign investors to invest in India. The initiatives of formerBJP government in improving infrastructure grabbed the attention of foreign investors.From the last two budget it is quite clear that thepresent government is also focusing oninfrastructure. Stimulus packages, tax cut, monetary & fiscal policy measure taken by thegovernmenthas proved the immense importance of government policy.


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E)BUDGETThe latest budgetary exercise has clearly been an attempt to reconcile two equally pressingconsiderations economic growth and financialconsolidation. While growth is important to havea larger cake to share, financial consolidation is needed to ensure that the gains do notdissipate asa consequence of inflation.

It was in this backdrop that the Finance Minister Mr. Pranab Mukherjee in his budget proposals,tookthe first step towards fiscal consolidation by making a modest beginning in partiallywithdrawing the concessions given in the stimulus packagelast year. The economy then was in aserious downturn and it needed government help to withstand global pressures. The picture todayisdifferent. All indicators point to a reviving economy, much before other world economies. Thecuts in excise duties on all non- petroleumproducts have thus been restored by 2 percent to 10percent, still less than 12 percent earlier. The service tax has not been raised but broadbased.

In his post-budget interviews Mr. Mukherjee has made it clear that while a modest beginning hasbeen made he would consider a fullwithdrawal of the stimulus package only when the economy

attains a growth of 8.5 to 9 percent. According to his own estimates, corroboratedby other surveys, the economy would grow by around 7.2 percent in the current financial yearwhich would go up to 8 to 8.5 percent in 2010-11and reach 9 percent and more in the subsequentyear.

A clear disinvestment plan has also been put in place. The government is confident that itwill beable to raise Rs. 25,000 crore though disinvestment in the current fiscal ending 31 March 2010. Italso envisages to collect Rs.40,000crore through disinvestment in the next fiscal. The 3-Gauction is estimated to bring in about another Rs.35,000 crore.F)INFRASTRUCTUREThe development of a country is dependent on its infrastructure. Industry needs electricity tomanufacture and road to transport goods. Badinfrastructure leads to inefficiencies, poorproductivity, wastage and delays. This is Probably the reason why the last two budgets lay somuchemphasis on infrastructure.G)INTEREST RATEA LOWER INTEREST RATE GENERALLY RESULTS IN STIMULATEDINVESTMENT,ON THE OTHER HAND A HIGH INTEREST RATE RESULTS INHIGHERCOST OF PRODUCTION AND LOWER CONSUMPTION. IN INDIA THEINTEREST RATES ARE REGULATED BY THE RESERVE BANK OF INDIA ANDATPRESENT THE INTEREST RATES ARE LOW AS COMPARED TO LAST YEAR ANDHENCE IT INDICATES INCREASING GROWTH IN THEINVESTMENT,MOREOVERINCREASING COMPETITION AMONG THE COMMERCIAL BANKS HAS ALSOHELPEDH)TAXATION POLICYTax policy has a direct impact on the economy. If tax rates are low, people have more disposableincome, which is a incentive to invest. Therecent tax policy of government, i.e, increase in taxslab, increase in Mat from 15% to 18%, decrease in surcharge from 10% to 7.5%, The cutsinexcise duties on all non- petroleum products have thus been restored by 2 percent to 10 percent,still less than 12 percent earlier. The servicetax has not been raised but broad based.


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The relief given to the middle class by raising income slabs for personal tax and allowing afurthersavings of Rs.20,000 in infrastructure bonds for tax relief, will on the one hand leave moremoney will the people to spend and thus raisedemand and on the other hand provide for bettersavings, given the propensities of an average Indian. This will lead to creation of additionalfunds

for investment.I)INFLATIONInflation has an enormous effect in the economy. Within the country it erodes purchasing power.As a consequence demand falls, which affectsthe industry adversely. What the country iswitnessing today is food inflation primarily due to supply constraints on account of theworstmonsoon in 30 years.

The food inflation is about 17.53% and the WPI- inflation is about 8.25% which may touchdouble digit soon as stated byRBI Deputy Governor.

The increase in excise duty on petroleum prices is no doubt going to increase inflationarypressures but as the Ministerput it the impact will only be marginal which will be absorbed indue course of time

INDUSTRY ANALYSISIn today s competitive global market, adoption of technology has become a fundamental imperative forcorporations to sustaintheir competitive advantage in the marketplace. Faster technology deployment, availability of systems and the irreliability,flexibility to respond to changes in the business environment are essential demands bybusinesses the world over.As individuals, we take many things for certain. Why should IT systems in corporateenvironments be any different?INDUSTRY PERFORMANCE AND PROJECTIONS

Globally technology spending continues to grow even during tough economic times and this is expected tofurther increase once the global economy starts its recovery process. Information Technology (IT) has becomeanintegral part of business operations across industries and is seen by organizations as a primary driver of


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productivity improvement and business transformation that lead to sustained competitive advantages in themarketplace. The IT services segment grew by 9.0% in 2008 to USD 820 billion and is expected to grow at aCompoundedAnnual Growth Rate (CAGR) of 7.1% till 2012, according to a Gartner Dataquest estimate. TheBusiness ProcessOutsourcing sector grew by 11.9% worldwide last year as per NASSCOM strategic review2009.

HISTORICAL GROWTH OF I.T INDUSTRYThe IT revolution started in India in 1980s and since then it is constantly growing. After USA, Indian is second inproducingsoftware. This shows the rapid growth in IT sector in India. The pattern of shareholder, revenue earned anddividend allowed aresignificant. The growth rate of IT industry in 1995 was 1.1%, which is about 8.7% now. Thoughthe sector is affected by theglobal slowdown, but the influence on Indian IT sector is least. Indian It sector has revivedfrom recession and now it is ingrowth phase. The graph shows the pattern of growth in IT sector

productivity improvement and business transformation that lead to sustained competitive advantages in themarketplace. The IT services segment grew by 9.0% in 2008 to USD 820 billion and is expected to grow at aCompoundedAnnual Growth Rate (CAGR) of 7.1% till 2012, according to a Gartner Dataquest estimate. TheBusiness ProcessOutsourcing sector grew by 11.9% worldwide last year as per NASSCOM strategic review2009.

HISTORICAL GROWTH OF I.T INDUSTRYThe IT revolution started in India in 1980s and since then it is constantly growing. After USA, Indian is second inproducingsoftware. This shows the rapid growth in IT sector in India. The pattern of shareholder, revenue earned and


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dividend allowed aresignificant. The growth rate of IT industry in 1995 was 1.1%, which is about 8.7% now. Thoughthe sector is affected by theglobal slowdown, but the influence on Indian IT sector is least. Indian It sector has revivedfrom recession and now it is ingrowth phase. The graph shows the pattern of growth in IT sectorCOMPETITIVE STRUCTUREThere are many players in the IT sector of India, which indicates the competitiveness in the industry. Out of these

TCS, Infosys,Wipro, HCL, Satyam are the major IT giants of the country. While the IT sector contributes about 30%to the GDP, thesecompanies contribute 80% of that. All these companies are MNCs and listed in NASDAQ

SURVIVALEnterprises are embarking on various forward thinking approaches and new technologies. As the global economysloweddown and the macro-economic situation continued to be challenging, IT companies are looking for ways totrim spending andimprove their output. Technology trends in networking market point out toward growth.According to Mr. Naresh Wadhwa,President and Country manager, India & saarc, Cisco, the networking andcommunication market will propel the growth of Indian IT sector. While banking, financial services & insurance andtelecom service provider will remain key adopter in themarket, the government is likely to emerge as a big spenderdue to various e-governance and state wide area network (SWAN),initiatives. Thus, it can be said that the IT industry

will survive in long-run

The Indian IT industry has contributed significantly to the Indian economy,clocking 30 per cent growth year overyear, over the last decade. While today, over two million individuals are directly employed by the industry anotherseven toeight million jobs have been created downstream. With exports of USD 40.4 billion in 2008-09, the industrytoday constitutes 25per cent of the countrys exports. Over the years, this industry has continued to expandgeographically, added new service linesand created new business models. Customers are serviced in over 80countries and significant amount of intellectual property andnew products and solutions have been created by theyoung and bright professionals. In some manners, the IT industry has alsobecome the face of the new vibrantIndia..This growth has been contributed by Indian service providers, multinationals anda large number of the globalcompanies, who set up their research, IT, back-officeoperations and centres of excellence in India. The industry has alarge number of small and medium companies that are creating innovative solutions and newbusiness models.Therecent global crisis which led to an unprecedented economic crisis the world affected the Indian IT sector and helpedtheindustry emerge stronger and operationally more robust. The last two quarter result of all IT companies showed a


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growth. Thegraph below show the market capitalization of IT sector, which clearly indicates the growth prospectiveof IT industry

DEPENDENCE ON KEY ELEMENTS LIKE OIL,FASHION ETC

It can be said that this sector is less dependent on essential commodities like oil. The growing fashion trend will alsohas no directinfluence on the IT industry. Thus on this basis, the IT sector has a competitive advantages upon the othersector

COMPANY ANALYSISCOMPANY OVERVIEW

DRIVING THE I.T INDUSTRY ON FRONT FOOTThe history of TCS has been a story of firsts. It was the first company to convince customers that doing projectsfromIndia, thousands of miles away from their home bases in the United States and United Kingdom made foracompelling value proposition. The business model was built around an India-centric delivery model complementedbyhaving people based at customer sites to ensure seamless delivery of services. As customers expandedglobally,TCS built the capability to leverage its core process and delivery strengths and proactively set up operationsacrossthe globe. Specifically, it entered into markets like Europe, Asia Pacific, Latin America as well as Middle EastandAfrica. TM It has also created a Global Network Delivery Model (GNDM ) which links Mumbai to MontevideoandHangzhou to Hyderabad, and delivers a single service standard globally. TM The GNDM has once again helpedTCSbecome the pioneer in global software development and delivery.Engineering and Industrial Services:

TheEngineering and Industrial Services (EIS)business is an integral element of TCS strategy to provide fullservicesacross the engineering and product development value stream of companies in the manufacturing and hi-techsectors. The EIS portfolio of TCS provides a wide range of R&D and Product Development solutions. Theseend-toend services are New Product Development Solutions, Plant Solutions & Services and Geospatial Solutions.

COMPANY ANALYSISCOMPANY OVERVIEWDRIVING THE I.T INDUSTRY ON FRONT FOOT

The history of TCS has been a story of firsts. It was the first company to convince customers that doing projectsfromIndia, thousands of miles away from their home bases in the United States and United Kingdom made foracompelling value proposition. The business model was built around an India-centric delivery modelcomplemented byhaving people based at customer sites to ensure seamless delivery of services. As customersexpanded globally,TCS built the capability to leverage its core process and delivery strengths and proactively setup operations acrossthe globe. Specifically, it entered into markets like Europe, Asia Pacific, Latin America as wellas Middle East andAfrica. TM It has also created a Global Network Delivery Model (GNDM ) which linksMumbai to Montevideo andHangzhou to Hyderabad, and delivers a single service standard globally. TM TheGNDM has once again helped TCSbecome the pioneer in global software development and delivery.Engineering and Industrial Services:

TheEngineering and Industrial Services (EIS)business is an integral element of TCS strategy to provide fullservicesacross the engineering and product development value stream of companies in the manufacturing and hi-


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techsectors. The EIS portfolio of TCS provides a wide range of R&D and Product Development solutions. Theseend-toend services are New Product Development Solutions, Plant Solutions & Services and Geospatial Solutions.Revenues from Engineering and Industrial Services (EIS)TCS employees with experience greater than 3 years in last three years

Revenues from Engineering and Industrial Services (EIS)TCS employees with experience greater than 3 years in last three years

MARKE T PRESENCE

In terms of geographies the Company continues to grow in multiple geographies, particularly in mature marketslike

North America and Europe including the United Kingdom, The Company has increased its focus on theWesternEuropean markets like Germany, France, Benelux and the Nordic region as well as emerging markets likeLatinAmerica and Asia Pacific regions. The Company has also been investing in emerging markets such as theMiddleEast, Africa and Eastern Europe, identified as future high growth markets. TCS geographical growth strategyhas atwo pronged approach focused on major markets and new growth markets.

RESEARCH AND DEVELOPMENTTCS established the first software R&D centre in Pune, India in 1981 called the Tata Research DesignandDevelopment Centre, mindful of the importance of research to ensure sustained market leadership. Over the lasttwoand a half decades, R&D has evolved in TCS in line with the environment and market conditions withrenewedcustomer focus. As on March 31, 2009, TCS had established 20 R&D Innovation Labs with specific focusontechnologies and verticals. The Company has also established 46 Centers of Excellence (CoEs) in all areasof information technology and business services as well as on partner products. This ensures all ourofferingsincorporate the latest products and services capabilities from the Company and its alliance partners andallows us tobuild new skill sets among the employee base. The network of TCS Innovation Labs work on researchthemesranging from Operational Efficiency, Business Agility and Simplification, to Customer Experience, UbiquityandEnterprise Security. They also explore new areas like Green IT and emerging technologies like CloudComputingandthe evolution of the internet beyond Web 2.0. The Innovation labs work closely with the TCSbusiness units andcustomers across a well-defined set of innovation horizons.


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Dividends declared and proposed bonus issue

For fiscal 2009 the Company declared three interim dividends of Rs.3 each on the equity shares. A final dividendof Rs.5 per equity share has been recommended. On approval of the final dividend, total dividend for fiscal2009

would be Rs.14 per equity share. The total outflow on dividend would stand at 34.13% of the profits of theCompany.Complete details of the dividend paid are available in the directors report. On preference shares adividend of 7% hasbeen proposed. The Directors have recommended issue of bonus shares in the ratio of 1:1subject to the approval of the shareholders .

Vision, Mission and Values

In the last four decades, TCS has established a global reputation for its ability to help customers achieve their businessobjectives by providing innovative, best-in-class consulting, IT solutions and services and making it a joy for allstakeholders to work with the Company. These objectives are underpinned by a robust code of transparency,ethicsand governance based on the Tata Code of Conduct which embodies leadership with trust, integrity andexcellence;

respect for the individual as well as learning and sharing. TCS has pioneered a new level of transparencyand directfocus on quality of customer experience, by building Experience Certainty dashboards for customers toview andcompare quality of delivery vis--vis their quality of experience. These Experience Certainty dashboardshave beensuccessfully piloted in 50 customer accounts across verticals and geographies lastyear where C-level executives atcustomers have on-line real-time access to their relationship metrics. In these timesof uncertainty, TCS transparencyon the Experience Certainty brand promise is being very positively viewedby its customers.


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PROJECT ED P/L A/C FOR 31 ST MARCH 2010

particulars 2006 2007 2008 2009 2010(exp)Total income 11293.73 15156.52 18979.67 21947.76 27873.65expenditure 8219.41 10985.84 13975.81 16808.07 21500pbt 3074.35 4170.68 5003.86 5139.69 6373.65

tax 637.36pat 2716.87 3757.29 4508.76 4696.21 5736.21Bal b/f fromprevious year

1005.47 2833.30 4919.99 7347.89 9990.4

Profit forappropriate

3858.50 6590.59 9428.75 12071.10 15726.7


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JUSTIFICATIONS

TOTAL INCOME HAS BEEN ASSIGNED A GROWTH RATE OF 27%1)FROM THE PAST YEARS IT IS SEEN THAT THE COMPANY IS GROWING AT ANAVERAGE RATE OF 24.5%2)THE RECESSION IS OVER AND GDP IS AT 7.2 % AND IS

EXPECTED TO TOUCH DOUBLE DIGIT BY 2014,THE BANKING SECTOR HASREVIVED ANDSO HAS THE TELECOM SECTOR MOREOVER THE RECOVERY OFCOUNTRIES LIKE U.K FROM THE ADVERSE EFFECT OF GLOBAL MELTDOWNISALSO A FAVOURABLE FACTOR FOR GROWTH OF I.T INDUSTRIES3)T.C.S HADUNDERTAKEN SOME NEW PROJECTS IN THE YEAR 2009 WHICH WILL ALSO BEREFLECTED IN THE TOTAL REVENUE OF T.C.S IN THEYEAR 20104)T.C.S HASMAINTAINED A CONSISTENT GROWTH RATE EVEN IN THE RECESSIONARYPERIOD AND HENCE FAVOURABLE ECONOMY WILLGENERALLY ENSURE EVENMORE GROWTH5)HOWEVER THE GROWTH RATE WILL NOT BE VERY HIGHBECAUSE THE ECONOMY HAS RESCENTLY RECOVERED RECESSION,HENCEGROWTHWILL NOT BE SEEN SO QUICKLY IN THE ANNUAL REPORT OF 2009-

2010,BECAUSE THE THE FINANCIAL YEAR HAS ALMOST COME TO ITS END,OFCOURSE A MUCH BETTER GROWTH RATE COULD BE SEEN IN THE FORTHCOMING YEARS.TOTAL EXPENDITURE HAS BEEN ASSIGNED A GROWTH RATE OF28%1)FROM THE PAST RECORDS IT IS SEEN THAT THE COMPANY SEXPENDITURES IS GROWING AT AN AVERAGE RATE OF 26.6%2)THE INFLATIONWAS COMPARATIVELY HIGH IN THE YEAR 2009 INDICATING HIGH LABOURCOSTS AND HIGH OPERATIONAL EXPENDITURES3)NEW PROJECTS UNDERTAKENWILL BE FAVOURABLE TOWARDS RISE IN EXPENDITURESPROVISON FORTAXATION1)TCS MAINTAINS AROUND 9% RATE ON INCOME AS PROVISON FORTAXATION AND IT IS PROJECTED THAT THE RATE OF PROVISON FORTAXATIONON TAXABLE INCOME WOULD BE AROUND 10% ,THE CHANGES AND REVISONS

MADE IN THE TAXATION POLICY BY F.M PRANABMUKHARJEE WILL NOT BEREFLECTED IN THE ANNUAL REPORT OF 2010-11 AS BECAUSE TAX ISCALCULATED ON BASIS OF PREVIOUSYEAR.HOWEVER INCREASE IN MAT FROM15% TO 18% AND EXCISE DUTY FROM 2% TO 10% WILL BE REFLECTED IN THEANNUAL REPORT FORTHE YEAR 2010-11

JUSTIFICATIONSTOTAL INCOME HAS BEEN ASSIGNED A GROWTH RATE OF 27%1)FROM THE PAST YEARS IT IS SEEN THAT THE COMPANY IS GROWING AT ANAVERAGE RATE OF 24.5%2)THE RECESSION IS OVER AND GDP IS AT 7.2 % AND ISEXPECTED TO TOUCH DOUBLE DIGIT BY 2014,THE BANKING SECTOR HASREVIVED ANDSO HAS THE TELECOM SECTOR MOREOVER THE RECOVERY OFCOUNTRIES LIKE U.K FROM THE ADVERSE EFFECT OF GLOBAL MELTDOWNISALSO A FAVOURABLE FACTOR FOR GROWTH OF I.T INDUSTRIES3)T.C.S HADUNDERTAKEN SOME NEW PROJECTS IN THE YEAR 2009 WHICH WILL ALSO BEREFLECTED IN THE TOTAL REVENUE OF T.C.S IN THEYEAR 20104)T.C.S HASMAINTAINED A CONSISTENT GROWTH RATE EVEN IN THE RECESSIONARY


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PERIOD AND HENCE FAVOURABLE ECONOMY WILLGENERALLY ENSURE EVENMORE GROWTH5)HOWEVER THE GROWTH RATE WILL NOT BE VERY HIGHBECAUSE THE ECONOMY HAS RESCENTLY RECOVERED RECESSION,HENCEGROWTHWILL NOT BE SEEN SO QUICKLY IN THE ANNUAL REPORT OF 2009-2010,BECAUSE THE THE FINANCIAL YEAR HAS ALMOST COME TO ITS END

,OFCOURSE A MUCH BETTER GROWTH RATE COULD BE SEEN IN THE FORTHCOMING YEARS.TOTAL EXPENDITURE HAS BEEN ASSIGNED A GROWTH RATE OF28%1)FROM THE PAST RECORDS IT IS SEEN THAT THE COMPANY SEXPENDITURES IS GROWING AT AN AVERAGE RATE OF 26.6%2)THE INFLATIONWAS COMPARATIVELY HIGH IN THE YEAR 2009 INDICATING HIGH LABOURCOSTS AND HIGH OPERATIONAL EXPENDITURES3)NEW PROJECTS UNDERTAKENWILL BE FAVOURABLE TOWARDS RISE IN EXPENDITURESPROVISON FORTAXATION1)TCS MAINTAINS AROUND 9% RATE ON INCOME AS PROVISON FORTAXATION AND IT IS PROJECTED THAT THE RATE OF PROVISON FORTAXATIONON TAXABLE INCOME WOULD BE AROUND 10% ,THE CHANGES AND REVISONSMADE IN THE TAXATION POLICY BY F.M PRANABMUKHARJEE WILL NOT BE

REFLECTED IN THE ANNUAL REPORT OF 2010-11 AS BECAUSE TAX ISCALCULATED ON BASIS OF PREVIOUSYEAR.HOWEVER INCREASE IN MAT FROM15% TO 18% AND EXCISE DUTY FROM 2% TO 10% WILL BE REFLECTED IN THEANNUAL REPORT FORTHE YEAR 2010-11

PROJECTED P/E AND INTRINSIC VALUE OF SHARE OF TCSIf we have a look at the share prices of TCS from the year 2006,we will notice that the the sharesof tcs which weretraded at around rs.2000 in the market at 31stDecember 2006 had come down tors.840 by 17 march 2010,of course the main factor behind this drastic change in the share price of tcsis the recessionary trend in between2006 to 2009 ,because of which the investors were not infavour of the market and vice versa and the samesituation was prevelant even in case of other

giants like wipro ,Infosys etc, but the economy has hugely recoveredfrom the crisis if we furtherlook at the share chart and p/e of tcs the p/e on 31 st march 2006 was 50 ,on 31 st march2008 it was32.06,on 31 st march 2009 it was 17.58 and on 31 st march 2009 it was 11.27,but if we look at the otheraspectalthough price of tcs fell down to even 400 from 2000 because of recessionary pressure but assoon as themarket has started reviving the price of tcs has again started gaining momentum ,themarket and economy are inbetter condition now and the investors are in favour of market,currently it is traded at rs.840 .on basis of this Iproject the p/e ratio of tcs to be around 16 as on 31 st march2010,

Intrinsic valueIntrinsic value =projected eps x projected p/e

Projected p/e =15Projected eps =58.61

Intrinsic value = 58.61x15 = 879.15Current market price = Rs.840

INTRINSIC VALUE > CURRENT MKT VALUE


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CONCLUSIO NIf we compare the intrinsic value of tcs and mkt value it is clear that theintrinsic value is morethan the market value , the market is favourable andthe share price is likely to go more up infuture ,hence I suggest the holdersof shares of TCS to hold the shares for now

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