Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

An Emerging Opportunity for Investors
India's Lithium Megatrend




**Important: We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
**By submitting your email address, you also sign up for Profit Hunter, a daily newsletter from Equitymaster
covering exciting investing ideas and opportunities in India.


AD
  • Home
  • Views On News
  • Nov 30, 2021 - If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today

Nov 30, 2021

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today

Tata Consultancy Services (TCS) needs no introduction.

The company is the biggest software services company in India operating through more than 250 offices across 46 countries.

Its reputation for customer-centricity, domain depth, and execution excellence have made it the preferred partner to leading corporations across the world.

The company has also been one of the largest wealth creators for investors. Let's take a look...

TCS vs Nifty

If you had invested Rs 1 lakh in TCS 10 years ago, your investment would be worth Rs 6.32 lakh today.

This is a whopping 532% return in 10 years. Nifty 50 on the other hand would have given you a return of 266.1% during the same time period.

chart

The stock has also performed consistently since it listed on the exchanges.

From the time TCS listed on the bourses in 2004, its shares have given a 2,689.7% return. On the other hand, the Nifty 50 has given a return of 991.3%.

As you can see, the company's share price has grown exponentially, giving investors a much better return than the market.

Better returns than its peers

If there is one company that TCS is constantly compared to, it is Infosys.

Both TCS and Infosys offer traditional and digital IT services to their clients and are actively competing for market share in the IT industry.

So how did shares of TCS perform against Infosys?

In the last 10 years, TCS shares have given a 532% return whereas Infosys has given a return of 409%.

chart

Why did TCS perform better?

TCS is one of the largest Indian companies in the IT service outsourcing business. The company's ability to capture the demand for digital IT services effectively has led to an increase in its market share over its competitors.

It also has an added advantage of having access to the largest talent pool in India with the lowest attrition rate in the industry. Infosys, on the other hand, has among the highest attrition rates in the industry.

Low attrition rate can actually help TCS capitalise on the growing demand for IT in the post pandemic era.

TCS is also successfully adding clients in their above US$20 m, US$50 m, and US$100 m revenue buckets. In the last quarter of the financial year 2021, TCS secured 30 deals, whereas Infosys could close only nine deals.

The company's financial statements are also pretty strong. Its ability to successfully complete deals is clearly reflected in their increasing revenues and profit margins. TCS is also leading in terms of profit margins when compared to Infosys.

Robust financial profile

The topline and bottomline of TCS grew at a CAGR of 16% and 13.8% in the last 10 years respectively. The ten-year average net profit margin of the company stands at 21.9%.

Financial services, retail, communication, manufacturing, and life science and healthcare are the key business verticals contributing to the revenue and profit growth.

Shareholders of TCS have not only gained through capital appreciation but also by receiving regular dividends.

The company has been consistently paying dividends to its shareholders in the last 10 years. The 10-year average dividend per annum that TCS paid out is Rs 41.2.

Whereas, the average dividend payout ratio per annum is 43.9% for the past 10 years.

Moreover, TCS bought back shares worth Rs 304.6 bn in three different transactions in the last few years.

Hence the company has been actively returning shareholders' funds either through dividends or buybacks.

TCS growth story

TCS was already a 36 year old company when it decided to go public in 2004. A company that had humble beginnings as a management and technology consultancy in 1968, has now grown into one of the leading global IT services companies.

In 1971, the company had won the first overseas assignment and by 1976, its export revenues crossed the US$1 m mark.

By 2002, TCS already had a global presence and signed its first US$100 m deal, making it the largest contract ever won by a software company in India.

In 2009, it became one of the top 10 global IT service providers in terms of revenue, margins, employees and market capitalisation.

As of 31 March 2021, the company has 100+ clients with each generating revenue of US$50 m.

The company has some of the biggest conglomerates in their client base. To name a few, the company serves Google, Amazon, Azure, Oracle, IBM, and Apple.

TCS is also one of the leading IT companies employing more than 450,000 people across 46 different countries with industry low attrition levels.

During its 53 years of existence, the company has won various awards for its leadership in business, intellectual property, and sustainability.

Key challenges

Though TCS is one of the leading companies in the IT services business, it faces intense competition from its peers in the IT industry.

The slowdown in the demand for traditional IT services is also affecting the company.

Even though the company's digital IT services are growing at a fast pace, intense competition can lead to lower market share.

TCS draws majority of its revenue from the financial services sector. And in terms of geography, most of the revenues come from the US.

Such high concentration can affect the revenues of the company if there are any macroeconomic changes.

Future prospects look bright

Despite the challenges, TCS is one of the leading companies in the Indian IT industry.

Though the revenues have slowed down in the first wave of the pandemic, the company's financials saw a quick turnaround by the end of the year.

The pandemic has increased the demand for digital transformation and TCS was quick to capture the demand and secure the highest number of deals in the March quarter 2021.

The total contract value (TCV) of their order book was at an all-time high at US$31.6 bn in the financial year 2021.

With a strong deal pipeline, and growing demand for outsourcing and transformation services, TCS is expecting good growth.

To know more about the company, check out TCS financial fact sheet and quarterly results.

For a sector overview, read our IT sector report.

You can also compare TCS with its peers:

TCS vs Infosys

TCS vs HCL Tech

TCS vs Wipro

Since IT stocks interest you, check out Equitymaster's powerful stock screener to find the best IT companies in India.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Equitymaster requests your view! Post a comment on "If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today". Click here!

1 Responses to "If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today"

Sathish Kumar

Jun 24, 2023

I need full details

Like 
  
Equitymaster requests your view! Post a comment on "If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today". Click here!