Tata consultancy services

Please refer to important disclosures at the end of this report 1

(` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)

Net revenue 10,797 10,158 6.3 8,216 31.4

EBITDA 3,031 3,089 (1.9) 2,415 25.5

EBITDA margin (%) 28.1 30.4 (233)bp 29.4 (132)bp

PAT 2,380 2,381 (0.0) 1,862 27.8

Source: Company, Angel Research

For 1QFY2012, TCS reported strong set of numbers, outperforming our as well as street expectations. The major highlight of the result was the 7.4% qoq volume growth. Management has highlighted robust growth outlook for FY2012, with the deal pipeline being strong and discretionary spend coming in. TCS continues to remain our preferred pick along with HCL Tech in the IT pack. We maintain our Buy rating on the stock.

Quarterly highlights: For 1QFY2012, TCS posted revenue of US$2,412mn, up 7.5% qoq, majorly led by volume growth. This is second best quarter where the company reported qoq incremental revenue of US$168mn (after US$210mn in 2QFY2011). In rupee terms, revenue came in at `10,797cr, up 6.3% qoq. EBITDA and EBIT margin of the company declined by 233bp and 214bp qoq, respectively, due to wage hikes given in 1QFY2012, effective from April 1, 2011. PAT came in at `2,380cr, almost flat qoq despite margin headwinds on the back of higher other income due to forex gain of `79cr on hedges resulting in total income yield of `289cr as against `224cr in 4QFY2011.

Outlook and valuation: Management has highlighted that the demand environment is upbeat and it is chasing 15 large broad-based deals. Management maintained its robust hiring guidance of 60,000 gross additions for FY2012 and expects a like-to-like pricing increase in the far end of FY2012. Even with such aggressive hiring plans, management targets to maintain the utilisation levels excluding trainees at 82–84% in FY2012. Thus, over FY2011–13E, we expect the company’s revenue to post a 21.7% CAGR (INR terms) and a 24% CAGR (USD terms), surpassing the US$10bn revenue mark in FY2012 itself. On the back of 1) strong growth expectations, 2) headroom to scale up utilisations including trainees to 77% by FY2013 and 3) SGA expense optimisation as a strong lever, we expect the company to swiftly counter the headwinds of aggressive wage hike. We expect EBIT margin’s downside to be limited to 108bp yoy and settle at 27% by FY2013. We value TCS at 22x (10% premium to Infosys) FY2013E EPS of `62.2 with a target price of `1,368 and maintain our Buy rating on the stock.

Key financials (Consolidated, IFRS) Y/E March (` cr) FY2009* FY2010* FY2011 FY2012E FY2013E

Net sales 27,813 30,028 37,324 46,395 55,339 % chg 21.9 8.0 24.3 24.3 19.3 Net profit 5,172 6,873 8,715 10,418 12,169 % chg 3.0 32.9 26.8 19.5 16.8 EBITDA margin (%) 25.8 28.9 30.0 29.0 28.9 EPS (`) 26.4 35.1 44.5 53.2 62.2 P/E (x) 42.6 32.0 25.3 21.1 18.1 P/BV (x) 14.1 10.5 8.7 7.0 5.7 RoE (%) 33.0 32.8 34.3 33.3 31.3 RoCE (%) 28.9 28.8 32.0 31.2 30.2 EV/Sales (x) 7.8 7.1 5.7 4.5 3.8 EV/EBITDA (x) 30.3 24.4 19.0 15.7 13.0

Source: Company, Angel Research; Note: * in US GAAP

BUY CMP `1,125 Target Price `1,368

Investment Period 12 months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 74.1

MF / Banks / Indian Fls 8.1

FII / NRIs / OCBs 12.6

Indian Public / Others 5.2

Abs. (%) 3m 1yr 3yr

Sensex (5.5) 3.8 39.7

TCS (6.9) 45.3 192.7

Face Value (`)

IT

Avg. Daily Volume

Market Cap (` cr)

Beta

52 Week High / Low

220,234

0.9

1

1247/738

215,137

BSE Sensex

Nifty

Reuters Code

TCS@IN

18,618

5,600

TCS.BO

Srishti Anand +91 22 3935 7800 Ext: 6820

[email protected]

Ankita Somani +91 22 3935 7800 Ext: 6819

[email protected]

Tata Consultancy Services (TCS) Performance highlights

1QFY2012 Result Update | IT

July 14, 2011

TCS | 1QFY2012 Result Update

July 14, 2011 2

Exhibit 1: 1QFY2012 performance (Consolidated, IFRS)

(` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) FY2011 FY2010 % chg (yoy)

Net revenue 10,797 10,158 6.3 8,216 31.4 37,324 30,028 24.3

Cost of revenue 5,879 5,378 9.3 4,413 33.2 19,937 15,724 26.8

Gross profit 4,918 4,779 2.9 3,804 29.3 17,387 14,303 21.6

SG& A expenses 1,887 1,691 11.6 1,389 35.9 6,189 5,625 10.0

EBITDA 3,031 3,089 (1.9) 2,415 25.5 11,198 8,679 29.0

Dep. and amortisation 205 212 (3.5) 158 30.1 721 721 0.1

EBIT 2,826 2,876 (1.7) 2,257 25.2 10,477 7,958 31.6

Other income 289 224 82 532 226 PBT 3,115 3,100 0.5 2,339 33.2 11,009 8,184 34.5

Income tax 706 677 4.3 448 57.8 2,174 1,209 79.8

PAT 2,408 2,423 (0.6) 1,892 27.3 8,835 6,975 26.7

Earnings in affiliates - - - - - - (0) -

Minority interest 28 42 (33.3) 29 (3.8) 120 102 17.6

Adjusted PAT 2,380 2,381 (0.0) 1,862 27.8 8,715 6,873 26.8

EPS (`) 12.2 12.2 (0.0) 9.5 27.8 44.5 35.1 26.8

Gross margin (%) 45.5 47.1 (150)bp 46.3 (74)bp 46.6 47.6 (105)bp

EBITDA margin (%) 28.1 30.4 (233)bp 29.4 (132)bp 30.0 28.9 110bp

EBIT margin (%) 26.2 28.3 (214)bp 27.5 (130)bp 28.1 26.5 157bp

PAT margin (%) 21.5 22.9 (146)bp 22.4 (97)bp 23.0 22.7 30bp


Exhibit 2: Actual vs. Angel estimates (` cr) Actual Estimate % Var.

Net revenue 10,797 10,547 2.4

EBITDA margin (%) 28.1 27.9 (14)bp

PAT 2,380 2,182 9.1


Robust broad-based growth

For 1QFY2012, TCS reported strong performance with dollar revenue coming at US$2,412mn (vs. our expectation of US$2,361mn), up 7.5% qoq, on the back of robust volume growth of 7.4% qoq. This is second best quarter where the company reported qoq incremental revenue of US$168mn (after US$210mn in 2QFY2011). In rupee terms, revenue came in at `10,797cr, up 6.3% qoq – registering lower growth as against dollar revenue due to 1.0% qoq INR appreciation against USD in 1QFY2012.

In constant currency terms, revenue came in at US$2,383mn. During the quarter, the cross-currency movement benefited USD revenue by 1.3% qoq, derived due to USD depreciation of 1.8%, 5.2% and 5.7% qoq as against the GBP, Euro and AUD, respectively.

The company has closed 10 large deals in 1QFY2012, of which six were from the US, two from Europe and the UK and the rest from emerging economies. Also, management has indicated that currently it is chasing 15 large deals, of which four are from the US, four from the UK, four from Europe and the rest three from emerging markets. These 15 deals span across industry segments – five in BFSI and two each in telecom, manufacturing, utilities, travel, and media and entertainment.


July 14, 2011 3

Exhibit 3: Trend in volume and revenue growth (qoq)


More offshoring of volume (7.5% qoq growth in 1QFY2011) led to considerable rupee revenue growth of 6.3% in 1QFY2012, offsetting the negative effects of a 0.8% qoq decline due to effort mix shift offshore and 0.5% qoq due to pricing. During the quarter, there was a slight dip in pricing due to more work from emerging economies where billing rates are lower than those in emerging economies. Going ahead, the company expects pricing to remain stable. Exhibit 4: Revenue drivers for 1QFY2012


TCS’s performance during the quarter was backed by robust demand across all industry segments. TCS’s anchor industry segment, BFSI, continued to have incremental revenue and reported 5.8% qoq growth. The company’s growth was led by hi-tech, telecom and retail and distribution industry segments, which grew by 15.4%, 14.3% and 11.3% qoq, respectively. Strong growth in telecom came as a positive surprise as posed to peers like Infosys, which are still sluggish in terms of revenue from telecom because Infosys is banking more on developed economies, while TCS is focusing more on emerging economies for the telecom industry segment. Management has indicated that it is witnessing transformation deals in the telecom industry, majorly in emerging economies, and clarified that it is not a one-time event. Other segments such as manufacturing, lifesciences and

8.1

11.2

5.7 2.9

7.4

6.4

11.7

7.0

4.7

7.5

2

4

6

8

10

12

1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

(%)

Volume growth Revenue growth (USD terms)

7.5

0.1

(0.5) (0.8)

6.3

(2)

0

2

4

6

8

(%)

Volume Forex movement Pricing Effort mix shift offshore Total revenue growth


July 14, 2011 4

healthcare, media and entertainment, and transportation grew by 8.9%, 5.4%, 2.8% and 2.0% qoq, respectively. However, the energy and utilities segment’s revenue declined by 11.2% qoq due to base effect of higher growth in 4QFY2011 because of completion of a fixed price project. Exhibit 5: Revenue growth (Industry wise)

% to revenue % chg (qoq) % chg (yoy)

BFSI 43.3 5.8 30.2

Manufacturing 7.6 8.9 38.1

Telecom 11.7 14.3 23.9

Lifesciences and healthcare 5.2 5.4 34.4

Retail and distribution 11.6 11.3 41.8

Transportation 3.7 2.0 60.5

Energy and utilities 3.8 (11.2) 54.8

Media and entertainment 2.2 2.8 55.7

Hi-tech 5.8 15.4 69.5


Service line wise, global consulting, infrastructure management services (IMS) and assurance services emerged as the primary growth drivers posting whopping 12.6%, 12.2% and 12.1% qoq growth, respectively. Application development and maintenance (ADM), business intelligence, engineering solutions and asset-leveraged solutions grew by ~7.5% qoq each. All this signifies that growth was across all service lines; and management has indicated that the demand landscape across all service lines is robust with healthy deal pipelines.

Exhibit 6: Revenue growth (Service wise)

% to revenue % chg (qoq) % chg (yoy)

IT solutions and services ADM 46.2 7.7 29.7

Business intelligence 4.9 7.5 22.0

Enterprise solutions 10.8 7.5 48.2

Assurance services 7.3 12.1 53.4

Engg. and industrial services 4.6 3.0 28.8

IMS 9.5 12.2 46.8

Global consulting 2.2 12.6 40.8

Asset-leveraged solutions 3.6 7.5 30.8

BPO 10.9 1.0 30.8


Geography wise, growth was led by emerging markets such as India, Middle East and Africa (MEA) and Asia Pacific, which grew by 13.6%, 18.2% and 9.0% qoq, respectively. Continental Europe and UK reported growth of 7.5% and 6.1%, respectively. Management indicated that the traction in Europe is increasing with deals majorly coming in for BFSI and retail industry segments.


July 14, 2011 5

Exhibit 7: Revenue growth (Geography wise)

% of revenue % chg (qoq) % chg (yoy)

US 52.9 6.5 29.3

Latin America 3.1 4.1 (3.1)

UK 15.3 6.1 36.2

Continental Europe 9.9 7.5 49.6

India 9.3 13.6 42.1

Asia Pacific 7.3 9.0 66.4

MEA 2.2 18.2 47.9


Hiring spree continues

TCS has been on the hiring spree since 2HFY2010. In 1QFY2012, TCS (excluding subsidiaries) added 9,817 gross employees and 2,542 net employees, taking its total employee base to 1,77,915. For subsidiaries, including CMC, WTI, TCS e-Serve and Diligenta, net employee addition also stood strong at 1,034.

Of the total gross hiring done by the company in 1QFY2012, 75% was of laterals. The total employee base of TCS (consolidated) now stands at 2,02,190. During the quarter, attrition rate increased by 50bp qoq to 13.6% (LTM basis) in TCS Ltd.; whereas, it remained almost flat qoq at 25.5% (LTM basis) in the BPO segment.

Exhibit 8: Hiring and attrition trend 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

TCS Ltd. Attrition - IT services (%) 12.3 13.1 13.2 13.1 13.6

Gross addition 8,464 17,121 16,847 17,512 9,817

Net addition 2,320 10,229 10,827 11,378 2,542

Subsidiaries Attrition – BPO (%) 20.0 22.5 24.7 25.5 25.5

Net addition 951 488 1,670 322 1,034


For 1QFY2012, utilisation level – including and excluding trainees – increased to 76.2% and 83.2% from 75.1% and 82.4%, respectively, in 4QFY2011. For FY2012, management has left its hiring guidance unchanged at 60,000. Further, it guided that gross addition in 2QFY2012 will be at 17,000–20,000, with most of them being freshers. Thus, utilisation, including trainees, will dip in 2QFY2012 due to inclusion of freshers in the system.


July 14, 2011 6

Exhibit 9: Trend in utilisation


Margins decline

TCS’s EBITDA and EBIT margin declined by 233bp and 214bp qoq to 28.1% and 26.2%, respectively, due to wage hikes given in 1QFY2012, effective from April 1, 2011 (12–14% for offshore employees and 2–4% for onsite employees). Going forward, the company expects its margins to increase.

Exhibit 10: Margin profile


EBIT margin had a 215bp negative impact due to wage hikes, along with negative impacts of 9bp and 76bp due to rupee appreciation and SGA increase, respectively. These effects were slightly overshadowed by the positive impact of 115bp and 7bp because of productivity gains and offshore effort shift, respectively. All in all, the company’s EBIT margin declined by 214bp qoq during the quarter.

74.8

77.777.1

75.176.2

82.683.8 83.8

82.483.2

72

74

76

78

80

82

84

86


(%)

Including trainees Excluding trainees

29.429.9

30.2 30.4

28.1

27.528.1 28.3 28.3

26.2

24

25

26

27

28

29

30

31


(%)

EBITDA margin EBIT margin


July 14, 2011 7

Exhibit 11: Factors affecting EBIT margin of 1QFY2012


Client pyramid enhances

Client pyramid during the quarter witnessed significant qualitative improvement, with client additions on the higher side of the revenue brackets. TCS added two new clients in the US$100mn+ bracket and four in each the US$50mn–100mn and US$20mn–50mn brackets. Also, six and four clients came in the US$5mn–10mn and US$1mn–5mn brackets, respectively. In total, 15 clients were added to the US$1mn+ brackets, which is a considerable improvement. Overall, client addition stood decent at 24 in 1QFY2012.

Exhibit 12: Client pyramid 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

US$1mn–5mn 218 228 234 250 254

US$5mn–10mn 69 61 61 65 71

US$10mn–20mn 57 65 63 62 57

US$20mn–50mn 41 41 51 54 58

US$50mn–100mn 17 17 16 19 23

US$100mn plus 7 8 9 8 10

Number of active clients 930 936 959 969 959

Clients added 36 30 35 39 24


Outlook and valuation

Management maintained its hiring guidance at 60,000 gross employee additions in FY2012, with lateral fresher ratio of 50:50. Also, the company has already made offers to 37,000 freshers and expects joining ratio of ~70%, with most of them getting inducted in 2QFY2012 and 3QFY2012. The company bagged 10 large deals in 1QFY2012 and is chasing 15 large broad-based deals, with the nature of deals mostly discretionary. Even with aggressive hiring plans, management targets to maintain utilisation levels excluding trainees at 82–84% in FY2012. The company is proving to be a beneficiary of its domain-focus approach towards BFSI as spending momentum is strong in this vertical. Even when M&A-related work has tapered off, risk compliance and regulatory work is picking

(9)

(251)

7

115

(76)

(214)

(300)

(225)

(150)

(75)

0

75

150

(bp)

Rupee dep/(app) Wage hike Offshore effort shift

Pricing and productivity SGA efficiencies Total impact


July 14, 2011 8

up, which is of bigger size by quantum. Thus, growth momentum for the company is expected to remain intact. According, over FY2011–13E, we expect TCS’s revenue to post a 24% CAGR (USD terms), surpassing even the US$10bn revenue mark in FY2012 itself, after achieving the US$8mn milestone in FY2011.

On the back of tailwinds such as 1) strong growth even on the back of 29% growth in FY2011, 2) headroom to scale up utilisations including trainees to 77% in FY2013 from 76% in 1QFY2012 and 3) SGA expense optimisation as a strong lever, we expect the company to absorb the impact of wage hikes gradually. We expect the EBIT margin’s downside to be limited to 108bp yoy and settle at 27% by FY2013.

The company has been an outperformer in the true sense at the growth as well as profitability fronts. Also, management’s commentary of a robust outlook with a volatile macro environment not yet a concern for the company instills confidence in the company’s outperformance story. Thus, we continue to maintain our target PE of 22x (increasing the valuation gap with Infosys to 10% premium vs. 5% discount a year back). At the CMP, the stock is trading at 18.1x FY2013E EPS. We value TCS at 22x (i.e., at 10% premium to Infosys because of its strong growth momentum, no client-specific issues, absence of organisational restructuring issues and exceptional operational exuberance) FY2013E EPS of `62.2 with a target price of `1,368 and maintain our Buy rating on the stock. Exhibit 13: Key assumptions

FY2012E FY2013E

Revenue growth (USD) 27.5 20.5

USD-INR rate (realised) 44.5 44.0

Revenue growth (`) 24.3 19.3

EBITDA margin (%) 29.0 28.9

Tax rate (%) 22.9 23.0

EPS growth (%) 19.5 16.8


Exhibit 14: Change in estimates

FY2012E FY2013E

Parameter Earlier Revised Variation Earlier Revised Variation

(` cr) estimates estimates (%) estimates estimates (%)

Net revenue 45,584 46,395 1.8 54,509 55,339 1.5

EBITDA 13,214 13,474 2.0 15,656 16,000 2.2

Other income 834 1,120 34.2 1,340 1,082 (19.3)

PBT 13,080 13,688 4.6 15,851 16,001 0.9

Tax 3,008 3,138 4.3 3,804 3,680 (3.3)

PAT 9,951 10,418 4.7 11,898 12,169 2.3



July 14, 2011 9

Exhibit 15: One-year forward PE chart


Exhibit 16: Recommendation summary

Company Reco. CMP Tgt. price Upside FY2013E FY2013E FY2011-13E FY2013E FY2013E

(`) (`) (%) P/BV (x) P/E (x) EPS CAGR (%) RoCE (%) RoE (%)

3iInfotech Neutral 45 - - 0.6 3.8 (4.3) 12.0 15.1

Educomp Buy 388 522 34.5 1.3 7.5 17.7 16.4 17.0

Everonn Accumulate 542 602 11.1 2.6 12.8 27.7 15.5 16.7

HCL Tech Buy 490 591 20.6 3.1 11.6 30.8 18.9 26.9

Infosys Buy 2,741 3,200 16.7 3.9 17.1 15.7 24.7 22.7

Infotech Neutral 140 - - 1.2 8.7 13.0 15.0 13.2

KPIT Cummins Accumulate 181 208 14.9 1.7 10.7 21.9 21.8 17.7

Mphasis Accumulate 439 499 13.7 1.7 9.9 9.2 16.8 16.8

NIIT Buy 55 68 23.7 1.3 8.0 10.9 12.4 16.6

TCS Buy 1,125 1,368 21.6 5.7 18.1 18.4 30.2 31.3

Tech Mahindra Accumulate 751 790 5.3 2.1 13.3 6.8 14.9 15.6

Wipro Buy 412 483 17.4 3.1 14.5 14.5 16.3 21.5


0

300

600

900

1,200

1,500

1,800

Apr

-07

Jul-

07

Oct

-07

Jan-

08

Apr

-08

Jul-

08

Oct

-08

Jan-

09

Apr

-09

Jul-

09

Oct

-09

Jan-

10

Apr

-10

Jul-

10

Oct

-10

Jan-

11

Apr

-11

Jul-

11

(`)

Price 25x 21x 16x 11x 6x


July 14, 2011 10

Profit & Loss statement (Consolidated, IFRS) Y/E March (` cr) FY2009*^ FY2010* FY2011 FY2012E FY2013E

Net sales 27,813 30,028 37,324 46,395 55,339

Cost of revenues 15,078 15,724 19,937 25,246 30,983

Gross profit 12,735 14,303 17,387 21,149 24,356

% of net sales 45.8 47.6 46.6 45.6 44.0

SGA expenses 5,557 5,625 6,189 7,675 8,355

% of net sales 20.0 18.7 16.6 16.5 15.1

EBITDA 7,178 8,679 11,198 13,474 16,000

% of net sales 25.8 28.9 30.0 29.0 28.9

Dep. and amortization 577 721 721 906 1081

% of net sales 2.1 2.4 1.9 2.0 2.0

EBIT 6,601 7,958 10,477 12,568 14,919

% of net sales 23.7 26.5 28.1 27.1 27.0

Other income, net (467) 226 532 1120 1082

Profit before tax 6,134 8,184 11,009 13,688 16,001

Provision for tax 901 1,209 2,174 3,138 3,680

% of PBT 14.7 14.8 19.7 22.9 23.0

PAT 5,233 6,975 8,835 10,550 12,321

Earnings in affiliates (1) (0) - - -

Minority interest 61 102 120 132 152

Adj. PAT 5,172 6,873 8,715 10,418 12,169

Fully diluted EPS (`) 26.4 35.1 44.5 53.2 62.2

Note:* in US GAAP, ^indicates adjusted for 1:1 bonus


July 14, 2011 11

Balance sheet (Consolidated, IFRS) Y/E March (` cr) FY2009*^ FY2010* FY2011 FY2012E FY2013E

Assets Cash and cash equivalents 1,463 1,025 1,554 1,969 2,468

Other current financial assets - 3,653 3,934 4,923 6,170

Accounts receivable 6,153 5,810 8,201 10,169 12,129

Unbilled revenues 1,481 1,201 1,349 1,652 1,971

Other current assets 3,203 2,127 1,449 2,297 3,800

Property and equipment 3,749 4,171 5,200 6,594 7,813

Intangible assets and goodwill 3,419 3,242 3,379 3,400 3,400

Investments 1,727 3,784 1,839 2,270 3,000

Other non-current assets 1,685 2,610 2,575 3,001 3,520

Total assets 22,880 27,621 32,788 40,323 49,344

Liabilities Current liabilities 5,216 5,289 5,834 7,263 8,658

Short term borrowings 516 231 33 2 -

Redeemable preference shares - 100 100 100 100

Long term debt 276 11 6 4 4

Other non-current liabilities 905 673 1,097 1,362 1,350

Minority interest 313 377 315 350 400

Shareholders’ funds 15,655 20,940 25,404 31,243 38,832

Total liabilities 22,880 27,621 32,788 40,323 49,344



July 14, 2011 12

Cash flow (Consolidated, IFRS) Y/E March (` cr) FY2009*^ FY2010* FY2011 FY2012E FY2013E

Pre-tax profit from oper. 6,601 7,958 10,477 12,568 14,919

Depreciation 577 721 721 906 1,081

Exp. (deferred)/written off 61 103 120 133 152

Pre tax cash from oper 7,117 8,576 11,078 13,341 15,849

Other inc./prior period ad (467) 226 532 1,120 1,082

Net cash from operations 6,651 8,802 11,611 14,461 16,930

Tax 901 1,209 2,174 3,138 3,680

Cash profits 5,749 7,593 9,437 11,323 13,250

(Inc)/dec in acc. recv. (763) 343 (2,391) (1,968) (1,960)

(Inc)/dec in unbilled rev. (129) 280 (148) (304) (319)

(Inc)/dec in oth. current asst. (1,664) 1,077 (3,255) (1,838) (2,750)

(Inc)/dec in current liab. 1,589 (212) 347 1,398 1,394

Net trade working capital (967) 1,489 (5,448) (2,711) (3,635)

Cashflow from opert. actv. 4,782 9,081 3,989 8,611 9,615

(Inc)/dec in fixed assets (1,304) (1,142) (1,750) (2,300) (2,300)

(Inc)/dec in investments 923 (5,709) 5,597 (431) (730)

(Inc)/dec in intangible asst. (1,945) 177 (138) (21) -

(Inc)/dec in non-cur.asst. (645) (925) (3,275) (1,164) (1,545)

Cashflow from invt. actv. (2,971) (7,600) 435 (3,916) (4,575)

Inc/(dec) in debt 433 (397) 419 263 (12)

Inc/(dec) in equity (286) 571 328 0 0

Inc/(dec) in minority int. 83 64 (62) 35 50

Dividends (1,613) (2,158) (4,580) (4,580) (4,580)

Cashflow from finan. actv. (1,383) (1,920) (3,895) (4,281) (4,542)

Cash generated/(utilised) 427 (438) 529 415 499

Cash at start of the year 1,035 1,463 1,025 1,554 1,969

Cash at end of the year 1,463 1,025 1,554 1,969 2,468



July 14, 2011 13

Key ratios Y/E March FY2009*^ FY2010* FY2011 FY2012E FY2013E

Valuation ratio(x)

P/E (on FDEPS) 42.6 32.0 25.3 21.1 18.1

P/CEPS 38.3 29.0 23.3 19.4 16.6

P/BVPS 14.1 10.5 8.7 7.0 5.7

Dividend yield (%) 0.7 1.0 2.1 2.1 2.1

EV/Sales 7.8 7.1 5.7 4.5 3.8

EV/EBITDA 30.3 24.4 19.0 15.7 13.0

EV/Total assets 9.5 7.7 6.5 5.2 4.2

Per share data (`) EPS 26.4 35.1 44.5 53.2 62.2

Cash EPS 29.4 38.8 48.2 57.9 67.7

Dividend 8.2 11.0 23.4 23.4 23.4

Book value 80.0 107.0 129.8 159.6 198.4

Dupont analysis Tax retention ratio (PAT/PBT) 0.9 0.9 0.8 0.8 0.8

Cost of debt (PBT/EBIT) 0.9 1.0 1.1 1.1 1.1

EBIT margin (EBIT/Sales) 0.2 0.3 0.3 0.3 0.3

Asset turnover ratio (Sales/Assets) 1.2 1.1 1.1 1.2 1.1

Leverage ratio (Assets/Equity) 1.5 1.3 1.3 1.3 1.3

Operating ROE 33.4 33.3 34.8 33.8 31.7

Return ratios (%) RoCE (pre-tax) 28.9 28.8 32.0 31.2 30.2

Angel RoIC 33.5 41.5 41.1 40.3 39.6

RoE 33.0 32.8 34.3 33.3 31.3

Turnover ratios(x) Asset turnover (fixed assets) 7.4 7.2 7.2 7.0 7.1

Receivables days 81 71 80 80 80



July 14, 2011 14

Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement TCS

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors

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