TCS 2020-21 Annual Report Analysis

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TCS 2020-21 Annual Report Analysis
Thu, 8 Jul

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 20.1% in FY20 to 19.5% 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 % 20.1 19.5
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Accord Fintech, Equitymaster



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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
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Accord Fintech, Equitymaster



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 -
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Accord Fintech, Equitymaster



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 3,257.1, stands at 37.0 times its trailing twelve months earnings.
  • The price to book value (P/BV) ratio at current price levels stands at 10.7 times, while the price to sales ratio stands at 5.6 times.
  • The company's price to cash flow (P/CF) ratio stood at 32.9 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 87.7 88.0
Price to Cash Flow x 34.0 32.9
TTM P/E ratio x 37.5 37.0
Price / Book Value ratio x 8.5 10.7
Market Cap Rs m 12,221,705 12,047,995
Dividends per share (Unadj.) Rs 73.0 38.0
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Accord Fintech, Equitymaster



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 71 67
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
* Results Consolidated
Interim results exclude extraordinary / exceptional items
Source: Accord Fintech, Equitymaster



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 2,217.7 to Rs 3,257.1, registering a gain of Rs 1,039.4 or around 46.9%.

Meanwhile, the S&P BSE IT Index is trading at Rs 29,678.8 (down 0.3%). Over the last one year it has moved up from 15,680.9 to 29,678.8, a gain of 13,998 points (up 89.3%).

Overall, the S&P BSE SENSEX is up 44.1% over the year.

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

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