Appraisal - TCS - Final

 

Financial Analysis of TATA Consultancy Services Presented By Syndicate I Name

PRN

Chaitanya Pande

12020541095

Deepanker Ray

12020541097

Manish Chandra Renu

12020541107

Shaliesh Shalies h Jain

12020541129

Sonal Meshram

12020541132

Paramveer Singh Khosa Sakshi Bateja

12020541151 12020541153

 

RATIO ANALYSIS Ratio analysis is the process of determining and interpreting numerical relationship based on financial statements. It is the technique of interpretation of financial statements with the help of accounting ratios derived from the balance sheet and profit and loss account. E.g. : Profitability Ratios, Liquidity Ratios etc.

 

Liquidity Ratios Definition: A class of financial metrics that is used to

determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company

possesses to cover short-term debts. E.g. : Current Ratio, Quick Ratio, Cash Ratio etc.

 

Liquidity Ratios Ratio   Ratio

Formula  Formula 

2013 2013  

2012  2012 

2011  2011 

Current Ratio 

Total Current Assets/Total Current Liabilities

2.429

1.8715

2.428

Quick Ratio 

(Total (T otal Current AssetsInventory)/Total Current Liabilities

2.428

1.871

2.427

Cash Ratio 

Cash & Cash Equivalents/Total Current Liabilities

1.576

1.402

1.639

 

Profitability Ratios Definition: A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.

E.g. : Gross Profit Ratio, Operating Profit Ratio, Return on Shareholder’ss Fund (ROE), Return on Capital Employed (ROI) Shareholder’

 

Profitability Ratios Ratio  Ratio 

Formula Formula  

2013  2013 

2012 2012  

2011 2011  

Gross Profit Ratio 

(EBITDA/Sales)* 100

32.64

33.87

31.1  31.1 

Operating Profit Ratio 

(EBIT/Sales)*100

31.06

32.213

29.29   29.29

Return on Shareholder’s Fund (ROE) 

(PAT/Shareholde r’s fund)*100

39.27

44.16

38.66

 

Profitability Ratios Ratio  Ratio 

Formula Formula  

2013 2013  

2012  2012 

2011 2011  

Return on Capital Employed

EBIT/Capital Employed*100

47.2

52.64

44.29

(ROCE) 

 

Activity/Turnover Ratios

•

Activity ratios indicate the performance of an organization

•

This indicate the effective effective utilization of the various assets of the organization

•

Most of the ratios falling under this category are based on turnover and hence these ratios are called as turnover ratios

 

Total Assets Turnover Ratio •

•

Indicates efficiency of assets for the purpose of generating revenue Higher ratio indicates company company has a acquired cquired more assets which are productive in nature

NAME NAME  

FORMULA  FORMULA 

RATIO  RATIO  2012-13  2011-12  2010-11 

Total Assets Net Sales/Avg Service Revenue/Avg Turnover Ratio Total Assets total assets 1.25 1.17 1.27 REMARK:- Rate of increase of assets is much more than rat rate e of increase of Sales, hence the ratio is declining

 

Fixed Asset Turnover Ratio •

•

This ratio gives an indication of how efficiently a company uses its fixed assets in doing its business A High fixed asset turnover ratio indicates the capability of the firm to earn maximum sales with the minimum investing in fixed assets

NAME NAME  

FORMULA FORMULA  

RATIO  RATIO  2012-13  2011-12  2010-11 

Fixed assets Net turnover Sales/Avg Service revenue/avg fixed ratio Fixed Assets assets 7.85 7.65 7.14 REMARK:- Rate of increase of net sales is more than rat rate e of increase of revenue, hence the increasing revenue

 

Inventory Turnover Ratio •

•

This financial ratio measures the number of times t imes invent inventory ory is turned over during the year High inventory turnover turnover suggests good levels of liquidity

NAME   NAME

FORMULA FORMULA  

RATIO RATIO   2012-13  2011-12  2010-11 

Cost of goods Sales Revenues/Avg Inventory turnover sold/Avg ratio inventory inventory inven tory 9241.6 8013.5 10903 REMARK:- (I) since the inventory is very less hence high ratio (II) higher ratio is preferred since lesser inventory is good for company

 

Debtors Turnover Ratio • • •

•

Indicates the speed with which amount is collected from debtor debtorss Higher the ratio, better it is Lower ratio ratio indicates inefficient credit sales policy of the management Assessmentt of sales policy of the management can be done Assessmen

NAME  NAME 

FORMULA  FORMULA 

Net Credit sales /Average Service revenue/avg revenue/avg Debtors trade receivables turnover ratio Receivables

RATIO  RATIO  2012-13  2011-12  2010-11 

4.77

5.48

6.09

Debt Collection 365/DTR 365/DTR 76.54 66.64 59.93 Period receivables is REMARK:- (I) Although there is an increase in sales, but the increase in receivables much more than that.so it is bad for the business (II)Because of decline in DTR there is considerable increase in Debt collection period, so the company will have to depend more on recovery which is bad for the company co mpany

 

Working Capital Turnover Ratio •

•

•

Measures efficiency in working capital usage. It establishes relationship between between cost of sales and working capital Positive working capital means that the company is able to pay off its short-term liabilities Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets

NAME  NAME 

FORMULA FORMULA  

RATIO RATIO   2012-13  2011-12  2010-11 

Working Capital Turnover Ratio

Net Service Revenue/ Sales/Working (current assets-current Capital Employed liabilities)

3.50

4.95

3.18

REMARK:- (I) A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise (II)But a very high working capital turnover ratio may also mean lack of sufficientt working capital which is not a good situation sufficien

 

Leverage Ratios •

•

•

•

A leverage ratio is a comparison of a combination of a company's debt, equity, assets and interest payments to ascertain its longterm solvency and ability to meet its financial obligations Leverage refers to the use of loans or other forms of debt to finance acquisitions or investments The goal of using these financing options is to earn a higher rat rate e of return than the rate of interest interest on the loan and amplify gains Companies with a high degree of llever everage age are considered risky and highly vulnerable to economic downturns because they must continue to meet obligations to the debt in spite of poor production or sales

 

Debt/Equity Ratio •

Debt-to-Equity ratio ratio is the ratio of total liabilities of a business to its shareholder’s equity 

•

It is a leverage ratio ratio and it measures the degree to which the assets of the business are financed by the debts and the shareholder’s equity of a business

NAME  NAME 

FORMULA  FORMULA 

RATIO  RATIO  2012-13  2011-12  2010-11 

(Non current

Debt-Equity Debt/Equity liabilities+Current Ratio liabilities) / (Share capital+reserve capital+ reserve & surplus) 0.32 0.37 0.33 REMARK:- Ideal ratio can be 2:1,since it is much less than that, the company can take much more debt to increase the degree of financial leverage

 

Fixed Asset ratio •

•

This ratio establishes the relationship between long term funds (equity plus long-term loans) and fixed assets. It is advised that fixed assets should be purchased out of long term funds only

NAME  NAME 

FORMULA  FORMULA 

Fixed

RATIO  RATIO  2012-13  2011-12  2010-11 

Fixed assets/Non current

Liabilities(long g term Fixed asset assets/long Liabilities(lon ratio term funds borrowin borrowings gs & provisions) 11.36 12.18 18.54 REMARK:- Since this ratio looks bad as the company seems to be using short term funds for its fixed assets but actually the company is using its reserve and surplus to buy those assets

 

Total Debt Ratio •

Debt-to-assets ratio ratio or total debt ratio is the ratio of total liabilities of a business to its ttotal otal assets assets

•

•

It measures the portion of the assets of a business which are financed through debt Total liabilities include both the current and non-current liabilities

NAME NAME  

FORMULA FORMULA  

RATIO  RATIO  2012-13  2011-12  2010-11 

Total debt total debt/total Non current+current ratio assets liabilities/T liabiliti es/Total otal assets 0.24 0.2 0.27 7 0.21 REMARK:- Since the debt is about 1/4th of the total assets, so the company can remove its debt liability very easily

 

Coverage Ratios •

•

It is a measure of a company's ability to meet its financial obligations. In broad terms, the higher the coverage ratio ratio,, the better the ability of the enterprise to fulfill its obliga obligations tions to its lenders.

•

Types:  –

Debt Service Coverag Coverage e Ratio

 –

Interestt Service Interes Ser vice Coverage Ratio

 –

Dividend Coverage Ratio

 –

 –

Total Fixed Charge Coverage Ratio Total Cash Flow Coverage Ratio

 

Debt Service Coverage Ratio •

In corporate finance, debt service coverage ratio ratio is the amount of cash flow available to meet annual interest interest and principal payments on debt, including sinking fund payments.

•

Formula used:  –

(net operating income) / (total debt service)

OR  –

•

•

(Annual Net Income + Amortization/Depreciation + Interest Expense + other non-cash and discretionary discretionary ite items ms (such as n non-contr on-contractual actual managem management ent bo bonuses)) nuses)) / (Principal Repayment + Interest payments + Lease payments)

Values for TCS:

FY 2010-11

FY 2011-12

FY 2012-13

17.184067

18.810358

16.765679

Inference:  –

Value of ratio is well above the ideal value of 1. this means that enough income is being generated in order to service the debt obligations.

 

Interest Service Coverage Ratio •

•

Interest service cover Interest coverage age ratio is used to determine how easily a company can pay interest on outstanding debt. Formula used:  –

•

•

(EBIT) / (Interes (Interestt Expense)

Values for TCS:

FY 2010-11

FY 2011-12

FY 2012-13

433.8041

814.02012

511.84063

Inference:  –

the interest coverage ratio of value well above 1 indicates that the company is generating sufficient revenues to satisfy interest expenses.

 

Dividend Coverage Ratio •

It indicates the capacity of an organization organization to pay dividends out of profit

•

attributable to the share holders. A dividend cover of 3 implies that a company has sufficient earnings to pay dividends amounting to 3 times of the present dividend payout during the period. Formula used:  –

•

•

(Profit after tax - Dividend paid on Irredeemable Preference Shares)/(Dividend paid to Ordinary Shareholders)

Values for TCS:

Inference:  –

FY 2010-11

FY 2011-12

FY 2012-13

2.7626692

2.2431822

2.9695068

Generally, companies would aim to sustain a dividend cover of at least 2 times in order to avail adequate financing through retained earnings while providing a reasonable cash return on shareholder's investment. A high dividend cover here of more than 2 suggests that TCS is retaining a higher portionpayouts of its earnings to meet its financing requirements which may result in higher dividend in the future.

 

Total Fixed Charge Charge Coverage Ratio Ratio •

•

It indicates a firm's ability to satisfy fixed financing expenses, such as interestt and leases. interes Formula used:  –

•

•

(EBIT + fixed charges before tax) / (fixed charged before tax +

interest) Values for TCS:

FY 2010-11

FY 2011-12

FY 2012-13

1.4218029

1.4850458

1.4580297

Inference:  –

A ratio over 1 indicates that TCS is able to pay its fixed charges.

 

Total Cash Flow Coverage Ratio •

•

It is an indicator of the ability of a company to pay inter interest est and principal amounts when they become due. This ratio tells the number of times the financial obligations of a company are covered by its earnings. Formula used:  –

•

(net earnings+depreciation+amortization) earnings+depreciation+amortization) / (total debt)

Values for TCS:

FY 2010-11 132.63226 •

FY 2011-12 103.56166

FY 2012-13 70.141427

Inference:  –

A ratio equal to and one it orcan more than means that the company in cash good financial health meet itsone financial obligations through is the

generated generat ed by operating activities.  

Earnings per Share •

•

The portion of a company's profit allocat allocated ed to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Formula used:  –

•

•

(PAT-Preference dividend) / (no. of shares)

Values for TCS:

FY 2010-11

FY 2011-12

FY 2012-13

433.8041

814.02012

511.84063

Inference:  –

Two companies could generate the same EPS number, but one could do so with less equity (inves (investment) tment) - that company would be more efficient at using its capital to generate income and, all other

things being equal, would be a better company.  

Appraisal Appr aisal Of Management Of Long Term Funding

 

Long Term Funds Shared Capital

The Authorised, Issued, Subscribed and Fully paid-up paid -up share capital comprises of equity shares and redeemable preference shares having a par value of Re. 1 each as follows: As at  at  March 31, 2013   2013 (Rs. Cr)  Cr) 

As at  at  March 31, 2012 (Rs. Cr)  Cr) 

As at  at  March 31, 2011   2011 (Rs. Cr)  Cr) 

225.00

225.00

225.00

100.00

100.00

100.00

325.00   325.00

325.00   325.00

325.00   325.00

195,72,20,996 equity shares of Re. 1 each (March 31, 2012: 195,72,20,996 equity shares of Re. 1 each)

195.72

195.72

195.72

100,00,00,000 redeemable preferenc preference e shares of Re. 1 each (March 31, 2012: 100,00,00,000 100,0 0,00,000 redeemable preference shares of Re. 1 each)

100.00

100.00

100.00

295.72   295.72

295.72   295.72

295.72   295.72

Authorised   Authorised  225,00,00,000 equity shares of Re. 1 each (March 31, 2012: 225,00,00,000 equity shares of Re. 1 each) 100,00,00,000 redeemable preference shares of Re. 1 each (March 31, 2012: 100,00,00,000 100,0 0,00,000 redeemable preference shares of Re. 1 each) Issued, Subscribed and Fully paid up  up  

Share capital is very less as compared to reserves & surplus  

Long Term Term Borrowings Borrowings  Long - term borrowings consist of the following: Long Term borrowings borrowin gs

As at  March 31, 2013  (Rs. Cr) 

As at  March 31, 2012  (Rs. Cr) 

As at  March 31,2011  (Rs. Cr) 

(a) Secured loans 

81.58

93.47

32.33

1.52

2.76

4.00

83.10 

96.23 

36.33 

Long term maturities of obligations under finance Lease (b) Unsecured loans  Other borrowings (from entities other than banks)

Obligations under finance lease are secured secu red against fixed assets obtained under finance lease arrangements. Secured loan and unsecured loan is decreased but in a negligible amount

as compared to reserve and surplus. The company has not taken any more loans as its reserves and surplus are huge.

 

Reserves and Surplus 

General Reserve Foreign Currency Translation Reserve Reserve & Surplus

As at  March 31, 2013  Rs. 5515.11 Cr Rs. 174.61 Cr

As at  March 31, 2012  Rs. 4280.74 Cr Rs. 152.46 Cr

As at  March 31, 2011  Rs. 3183.14 Cr Rs. 101.61 Cr

Rs. 32266.53 Cr (31% increase)

Rs. 24560.91 Cr (27.37% increase)

Rs. 19283.77 Cr (30.11% increase)

The company has huge reserves and surplus

zero debt company It is almost a zero

 

Other Long -Term Liabilities  As at  March 31, 2013  (Rs. Cr) 

As at  March 31, 2012  (Rs. Cr) 

As at  March 31,2011  (Rs. Cr) 

Tr Trade ade Payables 

-

10.63

-

Other Liabilities 

251.87

186.96

129.91

251.87 

197.59 

129.91 

Trade payables are settled as compare to last year & other liabilities are

increased due to capital creditor creditorss

f rom Rs. 31.63Cr to Rs. 54.34Cr in FY 2012-13 It has been increased from

 

Capital Gearing Ratio •

•

•

•

Debt-Equity Ratio= Debt/Equity Debt/Equity (Non-current liabilities + Current liabilities) / (Share capital+ reserve & surplus) Ideal ratio should be less than 1; since it is much less than ideal ratio The company can take much more debt to increase the degree of financial leverage Financial Year  

Debt- Equity Ratio 

FY 2012-13

0.32

FY 2011-12 2011-12

0.37

FY 2010-11 2010-11

0.33

 

Total Debt Ratio •

Total debt ratio= total debt/total assets i.e. (Non-current liabilities +current liabilities)/Total liabilities)/Total assets •

Since the debt is about 1/4th of the total assets, so the company can remove its debt liability very easily

Financial Year 

Total Debt De bt Ratio  

FY 2012-13 FY 2011-12

0.24 0.27

FY 2010-11

0.25

 

Proprietary Ratio ( Shareholders Equity Ratio)    •

•

Proprietary ratio=& shareholders funds/total Capital + Reserve Surplus)/total assets assets i.e. (Share It represents the amount of assets a ssets on which shareholders have a residual claim. The higher the ratio, ratio, the more shareholders may receive. Financial Year  

Proprietary(Shareholders Equity) Ratio 

FY 2012-13

0.76

FY 2011-12

0.73

FY 2010-11

0.75

 

Degree of Financial Financi al Leverage Leverage (DFL)  •

Degree of Financial Leverage= EBIT/EBT

•

i.e. (EBT + Interest)/EBT

•

It represents that higher the interest higher is degree of

•

financial leverag leverage e Since DFL is 1.00 from past financial years, it indicates that the company has not taken any advantage advantage of the financial leverage Financial Year  

DFL 

FY 2012-13

1.00

FY 2011-12

1.00

FY 2010-11

1.00

 

Degree of Operation Leverage (DOL)  •

•

Degree of Operation Leverage (DOL) = Contribution/Operating C ontribution/Operating Profit

There is no mentioning of variable cost in annual reports

Financial Year 

DOL 

FY 2012-13 FY 2011-12

Nil Nil

FY 2010-11

Nil

 

Appraisal of Investment Decision

 

Assets  As at March 31, 2013 5059.48

March 31, 2012 4012.16

March 31, 2011 3363.78

44.80

51.46

58.40

1763.85

1399.82

1072.86

8141.87

5463.44

4495.04

Deferred tax assets (net)

310.22

139.74

52.03

Long-term loans and advances

5234.13

4332.81

2864.09

Non-Current Assets

20690.66

17723.02

15472.33

Total Assets

43012.14

34258.81

26042.81

Tangible assets Intangible assets Capital work in progress Fixed Assets

 

Current Assets 

2013  2013 

2012 

2011

348.65

538.24

337.58

Trade receivables

11202.32

9107.72

4806.67

Cash and bank balances

4054.16

3280.07

3120.52

Short term loans and advances

4911.48

1648.72

1369.05

Other current assets

682.34

389.43

94.92

23508.64

16535.79

15428.04

Particulars  

Current investments

Total Current Assets  Assets 

 

Proportion of fixed assets = Fixed assets/ Total assets 

Particulars 

2013 

2012 

2011 

Fixed Assets/ Total Assets  Assets  

0.19

0.16

0.17

2013 

2012 

2011 

0.55

0.48

0.59

Proportion of current assets = Current assets/ Total assets 

Particulars  Current Assets/ Total Assets   Assets

 

Current Ratio  Current ratio = Total current assets/ Total current liabilities

Year  2011

Calculation   15428.04 / 6353.18

Current Ratio  2.429

2012

16535.79 / 8835.48

1.8715

2013

23508.64 / 9676.91

2.428

 

Quick Ratio  Quick ratio = (Current Assets  – Inven Inventory)/Current tory)/Current liabilities

Year 

Calculation 

Quick Ratio 

2011

15428.04 / 6353.18

2.427

2012

16535.79 / 8835.48

1.871

2013

23508.64 / 9676.91

2.428

 

Fixed Asset Turnover Ratio  Fixed Asset Turnover Ratio = Net Sales/Average Fixed Assets Fixed asset Turnover

Year 

Calculations 

2011

29275.41/4098.14

7.14

2012

38104.23/4979.24

7.65

2013

48426.14/6165.78

7.85

Ratio 

 

•

•

•

•

Current Ratio is well above the standard ratio of 2:1 hence Margin of Safety for the liabilities is sufficient and the company is in a healthy position to pay its current liabilities out of its current cur rent assets. Quick Ratio has increased in 2012-13 compared to 2010-11 which means, cash or cash equivalent are more and, if there is any favorable Investment opportunity, opport unity, company would be able to capitalize on it. The fixed-asset turnover ratio measures a company's ability to generate generat e net sales from from fixed-asset fixed-asset investments investments A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate generat e revenues. In other words, the fixed assets are adequately being utilized to generate sales for the company

Investments are justified.

 

Financial Highlights  •

Company rewar rewarded ded their shar with with regularRs dividend and paid total dividend of shareholders Rs 22 2eholders 2 per share including 13 proposed as final dividend •

•

Company added 80 new customers across globe making active customer base to 1156 Company acquired Computational Research Laboratories Limited (CRL)

•

The Company had 58 subsidiaries as on March 31, 2013

•

No public deposits accepted by the company and hence no

interestt on public deposits was outstanding interes  

Appraisal of Working Capital

Management

 

WORKING CAPITAL CAPITAL Working Capital = Current Assets – Current Liabilities 2013-2012

2012-2011

2011-2010

Current Assets (A)

23508.64

16535.79

15428.04

Current Liabilities (B)

9676.91

8835.48

6227.76

Working Capital (A-B)

13831.73

7700.31

9200.28

Rs Crore

Year

has shown a steady increase in its working working Capital from y year ear   The company has 2012 to 2013 assets have risen on account of increase increase in current investments investments   The current assets and trade receivables. receivables. substantially risen on account of ri rising sing of   The current liabilities have also substantially short term borrowings.

 

CURRENT RATIO RATIO Current Ratio= Total Current Assets / Total Current Liabilities 2013-2012

2012-2011

2011-2010

Total Current Assets (A)

23508.64

16535.79

15428.04

Total Current Liabilities (B)

9676.91

8835.48

6227.76

Current Ratio (A/B)

2.4293

1.8715

2.4773

Rs Crore

Year

satisfactory  Current Ratio of 2:1 is considered satisfactory  Higher value of current ratio is indication of margin of safety that TCS has  The firm is in a good position to pay back its liabilities from its current

assets  Also FY 2012-2013, the trade receivables amounts to Rs 11202.32 crore, which is much higher than its combined total current liabilities

 

QUICK RATIO  – Inventory) Quick Ratio= (Total Current Assets Total Current Liabilities 2013-2012

2012-2011

2011-2010

Total Current Assets (A)

23508.64

16535.79

15428.04

Total Current Liabilities (B)

9676.91

8835.48

6227.76

6.34

4.14

64.7

2.4286

1.8710

2.4773

Rs Crore

Year

Inventory (C) Quick Ratio {(A-C)/B}

represent a satisfact satisfactory ory current financial Quick Ratio of 1:1 is considered to represent condition difference in value of current and quick ratio. This is There is very small evident difference because TCS has very little inventory th e company is experiencing top-line Increasing quick ratio for TCS indicates that the

growth, quickly converting receivables receivables into cash, and easily able to cover its financial obligations  

WORKING CAPIT CAPITAL AL TURNOVER RATIO RATIO Working Capital Turnover Ratio = Net Sales/ Net Working Capital 2013-2012

2012-2011

2011-2010

Total Current Assets (A)

23508.64

16535.79

15428.04

Total Current Liabilities (B)

9676.91

8835.48

6227.76

Net Sales (C)

48426.14

38858.54

29770.14

3.50

5.04

3.23

Rs Crore

Year

Working Capital Turnover {C/(A-B)}

However working capital  Net Sales has increased over the period of analysis. However has shown rise, which is more in proportion to sales d eclined from 2012-2011 to 2013-2012, which indicates that  This ratio has declined company was not able to use its working capital for generating sales

conversion on of working capital into sales  TCS has much lower time period of conversi  

ASSET TURNOVER RA RATIO TIO Asset Turnover Turnover Ratio = Net Sales/ T Total otal Assets 2013-2012

2012-2011

2011-2010

Total Current Assets (A)

23508.64

16535.79

15428.04

Total Non Current Assets (B)

19503.5

14575.94

10906.98

Net Sales (C)

48426.14

38858.54

29770.14

1.12

1.24

1.13

Rs Crore

Year

Asset Turnover {C/(A+B)}

 Asset turnover measures a firm's efficiency at using its assets in

generating sales or revenue - the higher the number the better Turnover in FY2013 from FY 2012 owing  There is a minor decrease in Asset Turnover to increase in the Total assets of the company

Compared with Infosys (1.2 FY 2013 12), TCS is maintaining same industry

standard  

Appraisal of Working Capital FY 2011-2010 : 1) TCS' working capital management has consistently lagged its primary peer, Infosys, particularly over the financial year 2010 - 11. On an average, Infosys' Operating Cash Flow (OCF) had been 134% as against TCS' 99% since FY09 to FY11 2) TCS attributedsuch thisas toIndia the increased geographies and Latinproportion America of revenue from 3) Much of the work done in India relates to servicing the government sector, where the cash cycles tend to be longer 4) Debtor days declined during 2010-11, but were still higher than Infosys.

FY 2012-2011 1) In FY12, debtor and unbilled revenue days rose significantly to 103 days from 93 days in FY11 and taxes paid also surged nearly 80% YoY. 2) This was the key reason for the slow 6% YoY growth in OCF, despite a

healthy 29% 29 % Y YoY oY growth in EBIT EBIT..  

Appraisal of Working Capital FY 2013-2012 : 1) TCS’ working capital management improved in FY13 compared with FY12 because of better debtor management. The IT major’ major ’s debtor days witnessed an improvement from 86 days in FY12 to 82 days in FY13. On the unbilled revenue front, unbilled revenue days rose slightly to 18 from 17 in FY12.

2) Thus, overall debtor and unbilled revenue days declined from 103 in FY12 to 100 in FY13, the key reason for improved working capital management. 3) Thus, in FY13, significant improvement in working capital management ensured that healthy EBIT growth also translate translated d into strong OCF growth.

 

Appraisal Of Overall Financial Management Of Tata Consultancy Services

 

Revenue  growth CAGR ofshowing 26.27%6 fold increase in 9yrs   Realization and offshore leverage   Exchange rate fluctuation • •

•

 

Financial Performance Performance

Growth of 24.97%

EBITDA

PBT

Growth of 29.92

PAT

DIVIDEND

EPS

Growth of 33.65%

Gross Dividend paid was to the tune of Rs 5,024.06 crores

Growth of 33.77%

 

Critical Analysis-EBITD Analysis-EBITDA A  •

EBITDA as a percent percentage age of revenue(in crores) Year

2013

2012

EBITDA/Revenue

Rs 18,039.91

Rs 14,435.31

There is a decrease of 0.88% mainly because •

•

Increase in Employee and BA related costs by 1.23% Increase in operation and other expenses by 0.37%

 

Effect Of High WC, In Business

In ancrores additional amount Rs used 1,766.54 crores (RsFY2013, 3,458.36 in fiscal 2012)ofwas in working capital to meet the expanding business requirements.

 

Strategic Stra tegic Alliances and Subsidiaries •

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In fiscal 2013 TCS acquired Computational Research Laboratories Limited for Rs 162.62 crores TCS has 54 Subsidaries and 4 subsidaries were set up in the year 2012  –

(i) Tata Consultancy Services Qatar S.S.C.

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(ii) Nippon TCS Solution Center Limited

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(iii) Tata Consultancy Services Osterreich GmbH

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(iv) Tata Tata Consultancy Services Danmark ApS

 

Financial Performance on Ratio Basis    Current ratio -2.429 •

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Higher current ratio implies healthier short term liquidity comfort level

Company has not been facing liquidity problems to meet its short term objectives

 Debt/equity ratio- 0.32% •

Thiscompany ratio indicates indicat es the proportion the to finance its assets of equity and debt used by •

TCS’s long term debt to equity ratio for FY 2013 is 0.32 and its average average long term debt to equity ratio over the last 5

financial years has been 0.003 times which indicates that the

Company is operating with very low levels of debt  

 Return on Capital Employed (ROCE)-47.2% •

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Amount of profit which the company generates generates on mo money ney invested inves ted by the equity shareholders. Also called as ‘Return on inves i nvestment’ tment’  

There is a slight drop in the ratio value which indicat indicates es there is a marginal reduction in the returns available to the firm, yet overall figures figures still holds good for the firm

 Operating profit ratio-31.06% •

Tells the overall profitability of the company

 

 •

 Quick Ratio -2.428% Indicates companies ability to pay out quick liabilities from quick assets

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Indicates o

Liquidity position o Short term financial position •

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Ability to meet commitments without delay It has increased from 1.871% to 2.428% indicating the capacity of the company to pay out obligations