TCS 2020-21 Annual Report Analysis

Wed, 31 Mar

TCS has announced its results for the year ended March 2021. Let us have a look at the detailed performance review of the company during FY20-21.

TCS Income Statement Analysis

• Operating income during the year rose 4.6% on a year-on-year (YoY) basis.
• The company's operating profit increased by 7.6% YoY during the fiscal. Operating profit margins witnessed a fall and down at 27.6% in FY21 as against 26.8% in FY20.
• Depreciation charges increased by 15.2% and finance costs decreased by 31.1% YoY, respectively.
• Other income declined by 31.8% YoY.
• Net profit for the year grew by 0.4% YoY.
• Net profit margins during the year declined from 20.7% in FY20 to 19.8% in FY21.

TCS Income Statement 2020-21

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*	% Change
Net Sales	Rs m	1,569,490	1,641,770	4.6%
Other income	Rs m	45,920	31,340	-31.8%
Total Revenues	Rs m	1,615,410	1,673,110	3.6%
Gross profit	Rs m	421,090	453,280	7.6%
Depreciation	Rs m	35,290	40,650	15.2%
Interest	Rs m	9,240	6,370	-31.1%
Profit before tax	Rs m	422,480	437,600	3.6%
Tax	Rs m	98,010	111,980	14.3%
Profit after tax	Rs m	324,470	325,620	0.4%
Gross profit margin	%	26.8	27.6
Effective tax rate	%	23.2	25.6
Net profit margin	%	20.7	19.8

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TCS Balance Sheet Analysis

• The company's current liabilities during FY21 stood at Rs 342 billion as compared to Rs 271 billion in FY20, thereby witnessing an increase of 26.2%.
• Current assets rose 10% and stood at Rs 993 billion, while fixed assets fell 1% and stood at Rs 275 billion in FY21.
• Overall, the total assets and liabilities for FY21 stood at Rs 1,268 billion as against Rs 1,181 billion during FY20, thereby witnessing a growth of 7%.

TCS Balance Sheet as on March 2021

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*	% Change
Networth	Rs m	841,260	864,330	2.7
Current Liabilities	Rs m	270,600	341,550	26.2
Long-term Debt	Rs m	0	0	0.0
Total Liabilities	Rs m	1,180,710	1,268,280	7.4
Current assets	Rs m	902,370	992,800	10.0
Fixed Assets	Rs m	278,340	275,480	-1.0
Total Assets	Rs m	1,180,710	1,268,280	7.4

TCS Cash Flow Statement Analysis

• TCS's cash flow from operating activities (CFO) during FY21 stood at Rs 388 billion, an improvement of 19.9% on a YoY basis.
• Cash flow from investing activities (CFI) during FY21 stood at Rs -81 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY21 stood at Rs -326 billion, an improvement of 18% on a YoY basis.
• Overall, net cash flows for the company during FY21 stood at Rs -18 billion from the Rs 14 billion net cash flows seen during FY20.

TCS Cash Flow Statement 2020-21

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-20	Mar-21
Cash Flow from Operating Activities	Rs m	323,690	388,020	19.9%
Cash Flow from Investing Activities	Rs m	85,650	-81,290	-
Cash Flow from Financing Activities	Rs m	-399,150	-326,340	-
Net Cash Flow	Rs m	14,220	-17,880	-

Current Valuations for TCS

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 88.0, an improvement from the EPS of Rs 86.5 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 3,177.6, stands at 35.7 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 13.5 times, while the price to sales ratio stands at 7.2 times.
• The company's price to cash flow (P/CF) ratio stood at 25.2 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*
Sales per share (Unadj.)	Rs	418.3	443.8
TTM Earnings per share	Rs	86.5	88.0
Diluted earnings per share	Rs	88.7	89.0
Price to Cash Flow	x	18.5	25.2
TTM P/E ratio	x	20.6	35.7
Price / Book Value ratio	x	8.5	10.7
Market Cap	Rs m	7,130,281	9,238,843
Dividends per share (Unadj.)	Rs	73.0	38.0

Ratio Analysis for TCS

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 2.9x during FY21, from 3.3x during FY20. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio improved and stood at 69.7x during FY21, from 46.7x during FY20. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at 37.7% during FY21, from 38.6% during FY21. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 51.4% during FY21, from 51.3% during FY20. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at 26.2% during FY21, from 28.3% during FY20. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*
Current ratio	x	3.3	2.9
Debtors’ Days	Days	7	7
Interest coverage	x	46.7	69.7
Debt to equity ratio	x	0.0	0.0
Return on assets	%	28.3	26.2
Return on equity	%	38.6	37.7
Return on capital employed	%	51.3	51.4

To see how TCS has performed over the last 5 years, please visit here.

TCS Share Price Performance

Over the last one year, TCS share price has moved up from Rs 1,823.1 to Rs 3,177.6, registering a gain of Rs 1,354.6 or around 74.3%.

Meanwhile, the S&P BSE IT Index is trading at Rs 26,543.2 (down 0.7%). Over the last one year it has moved up from 12,842.7 to 26,543.2, a gain of 13,701 points (up 106.7%).

Overall, the S&P BSE SENSEX is up 74.1% over the year.

(To know more, check out historical annual results for TCS and quarterly results for TCS)

Read: Latest Annual Report Analysis of TCS