Assignment on

Analysis of Annual Report of TCS for the year 2008-09

Submitted by

Vismay Sood
Systems and Finance
09020541053
Tata Consultancy Services Limited (TCS) is a software services and
consulting company headquartered in Mumbai, India. TCS is the largest
provider of information technology and business process
outsourcing services in India. The Company is listed on the National Stock
Exchange and Bombay Stock Exchange of India.TCS is a part of one of India's
largest and oldest conglomerates, the Tata Group.
With Consolidated Revenues at Rs.27812.88 Cr for the year ended March 31,
2009, TCS has, over the last five years as a listed company, recorded a CAGR
of 23.33%. TCS has had growth in all industry segments. The Banking and
Financial Services sector, which is the largest segment for TCS, has faced
unprecedented volatility and uncertainty in the global financial markets.
TCS envisioned and pioneered the adoption of the flexible global business
practices that today enable companies to operate more efficiently and
produce more value. More than 95 percent of TCS customers reward the
company’s reliability, passion, creativity, and unique ability to handle the
broadest range of their IT needs. TCS has 143,000+ world’s best trained IT
consultants located in 50 countries.

Indian IT revenue break up by company (2009)

TCS helps some of the world’s largest companies adopt the right technology-
enabled solution that helps them:
➢ Optimize business performance
➢ Facilitate alignment of business with technology
➢ Connect their extended supply chains
➢ Reduce product development time
➢ Improve product differentiation
➢ Provide real-time business insight
 ➢ Lower operational costs

Balance sheet as on March 31, 2009

(Rupees in Cr)
As at
March 31, As at Change
2009 March %age
Particulars 31,2008 Change
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital 197.86 197.86 0 0.00
10806.9
Reserves and surplus 13248.39 5 2441.44 22.59
11004.8
13446.25 1 2441.44 22.19
LOAN FUNDS
Secured 32.63 9.27 23.36 252.00
Unsecured 7.74 8.98 -1.24 -13.81
40.37 18.25 22.12 121.21
DEFERRED TAX LIABILITIES(NET) 103.05 101.43 1.62 1.60
11124.4
TOTAL FUNDS EMPLOYEED 13589.67 9 2465.18 22.16
APPLICATION OF FUNDS
FIXED ASSETS
Gross block 4359.24 3240.64 1118.6 34.52
Less: Depreciation 1690.16 1300.11 390.05 30.00
Net block 2669.08 1940.53 728.55 37.54
Capital work in progress 685.13 889.74 -204.61 -23.00
3354.21 2830.27 523.94 18.51
PRE - OPERATIVE EXPENSES
(PENDING ALLOCA)
INVESTMENTS 5936.03 4509.33 1426.7 31.64
DEFERRED TAX ASSETS 3.65 46.94 -43.29 -92.22
CURRENT ASSETS, LOANS AND
ADVANCES
Interest Accrued on Investments 0.29 1.07 -0.78 -72.90
Inventories 16.95 17.19 -0.24 -1.40
Unbilled Revenues 817.06 870.18 -53.12 -6.10
Sundry Debtors 3717.73 3747.01 -29.28 -0.78
Cash and Bank Balances 1605.26 527.52 1077.74 204.30
Loans and Advances 3089.85 2166.6 923.25 42.61
9247.14 7329.57 1917.57 26.16
Less: CURRENT LIABILITIES AND
PROVISIONS
Current liabilities 3501.13 2404.18 1096.95 45.63
Provisions 1450.23 1187.44 262.79 22.13
4951.36 3591.62 1359.74 37.86

Net current assets 4295.78 3737.95 557.83 14.92

11124.4
TOTAL ASSETS 13589.67 9 2465.18 22.16

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009
(Rs in Cr)
As at As at Percent
March March age
31, 31, Chan change
Particulars 2009 2008 ge %

INCOME

Information technology and 21535.7 17446.5 4089.

consultancy services 5 1 24 23.44
Sale of equipment and software
licences 868.25 843.34 24.91 2.95
-
1146.
Other income, (net) -456.24 689.82 1 -166.14
21947.7 18979.6 2968.
6 7 09 15.64
EXPENDITURE
1408.
Employee costs 7370.09 5961.17 92 23.63
1460.
Operation and other expenses 9013.08 7552.44 64 19.34
Interest 7.44 3.42 4.02 117.54
Depreciation 417.46 458.78 -41.32 -9.01
16808.0 13975.8 2832.
7 1 26 20.27

135.8
PROFIT BEFORE TAXES 5139.69 5003.86 3 2.71

PROVISION FOR TAXES

Current tax 799.15 792.05 7.1 0.90
Deferred tax expense 44.89 29.98 14.91 49.73
Fringe benefit tax 23 24.65 -1.65 -6.69
MAT credit entitlement -423.56 -351.58 -71.98 20.47
443.48 495.1 -51.62 -10.43
 187.4
NET PROFIT FOR THE YEAR 4696.21 4508.76 5 4.16
Balance brought forward from 2454.
previous year 7374.89 4919.99 9 49.90
AMOUNT AVAILABLE FOR 2642.
APPROPRIATION 12071.1 9428.75 35 28.02

APPROPRIATIONS
Interim dividends on equity shares 880.74 880.74 0 0.00
Proposed final dividend on equity
shares 489.31 489.31 0 0.00
Dividend on redeemable preference
shares 7 0.08 6.92 8650.00
Tax on dividend 234.02 232.85 1.17 0.50
General Reserve 469.62 450.88 18.74 4.16
2615.
Balance carried to Balance Sheet 9990.41 7374.89 52 35.47
2642.
12071.1 9428.75 35 28.02

COMPARITIVE ANALYSIS

Reserves and surplus

Reserves and surplus as at March 31, 2009 was Rs.13, 248.39 Cr, an
increase of 22.59% over Rs.10, 806.95 Cr as at March 31, 2008 due to
accretion of profits for fiscal 2009.
The major contributors of Reserves and Surplus are

➢ General reserves
➢ Foreign currency translation primarily on account of revaluation of
loans outstanding with overseas subsidiaries as at March 2009

Secured Loans
This increase is primarily due to finance lease obligations of Rs.31.18 Cr
undertaken as at March 31, 2009. These obligations are secured against
fixed assets.

INVESTMENTS
The Company had been investing in various mutual funds. These are
typically investments in short-term debt funds. Investments in mutual funds
aggregated Rs.1, 410.42 Cr as at March 31, 2009. There has been an
increase in investments in bank fixed deposits.

Inventories
The Company had inventories of Rs.16.95 Cr as at March 31, 2009 (Rs.17.19
Cr as at March 31, 2008) at its Goa manufacturing plant. The inventory
constitutes raw materials, components, sub-assemblies and finished goods.

Sundry debtors
The increase in provisions for bad and doubtful debts is mainly attributed to
a few overseas clients facing economic difficulties and some domestic clients
whose dues fell beyond stipulated period. Sundry debtors at March 31, 2009
were 16.59 % of revenues for fiscal 2009.

Cash and bank balances

The increase in deposits with scheduled banks is in line with the short term
investment strategy adopted in the present economic climate.

Loans and advances

Loans and advances as at March 31, 2009 were Rs.3, 089.85 Cr (Rs.2,
166.60 Cr as at March 31, 2008). Significant items of loans and advances
are:
➢ Loans to subsidiary companies of Rs.536.79 Cr as at March 31, 2009
➢ Advances recoverable in cash or kind or for value to be received
Rs.1,316.54 Cr as at March 31, 2009

Current liabilities
Current liabilities went up to Rs.3, 501.13 Cr as at March 31, 2009 as
compared to Rs.2, 404.18 Cr as at March 31, 2008. This increase is primarily
due to:
➢ change in fair values of foreign exchange forward and currency option
contracts
➢ Increase in payables to subsidiary companies
➢ Higher advances from customers Rs.197.38 Cr as at March 31, 2009
➢ Increases in ‘other liabilities’, mainly on account of subcontracting
expenses, selling and administrative expenses and employee
incentives which are in line with the increase in business,
infrastructure and employee base.

Provisions
The increase is mainly attributable to
➢ Higher income tax provisions of Rs.460.97 Cr as at March 31, 2009,
➢ Provision for increased employee benefits Rs.407.29 Cr as at March 31,
2009
➢ Additional provision of Rs.8.19 Cr for the proposed dividend on
redeemable preference shares (including tax on dividend).

INCOME
 ➢ Information technology and consultancy services
Revenues from information technology and consultancy services
contributed 96.12 % of revenues in fiscal 2009.
➢ Sale of equipment and software licenses increased to Rs.868.25 Cr in
fiscal 2009 from Rs.843.34 Cr in fiscal 2008, a growth of 2.95%. Sale of
equipment and software licenses was at 3.88% of revenues in fiscal
2009

Expenditure
Employee costs and overseas business expenses
‘Total employee costs’ in fiscal 2009 was Rs.11, 676.34 Cr (Rs.9, 413.05 Cr in
fiscal 2008). ‘Total employee costs’ as percentage of revenues was 52.12%
in fiscal 2009 (51.47% in fiscal 2008). This increase of 0.65% is attributable
primarily to:
➢ Increase in headcount
➢ Increase in compensation package, particularly in India
➢ Effect of exchange variation for foreign currency allowances paid to
employees deployed at various overseas locations

Depreciation
Depreciation charge decreased from Rs.458.78 Cr in fiscal 2008 to Rs.417.46
Cr in fiscal 2009. Depreciation charge was 1.86% of revenues in fiscal 2009.
The decrease in depreciation of 0.65% as a percentage of revenues is
primarily the net impact of:
➢ Lower depreciation for computers in current fiscal of 0.89% on account
of a revision in the original estimate of the useful life of computers
from two to four years.
➢ Higher depreciation of 0.27% on additional infrastructural facilities.

Profit before taxes (PBT)

The PBT in fiscal 2009 was Rs.5, 139.69 Cr (Rs.5003.86 Cr in fiscal 2008). As
a percentage of revenues, the PBT decreased from 27.36% in fiscal 2008 to
22.94% in fiscal 2009. The primary reason for the decrease in the
PBT of 4.42% as a percentage of revenues is due to:
➢ Decrease in PBIDT by 5.05%
➢ Increase in PBT due to lower depreciation costs by 0.65%.

Interest
Interest expenses increased from Rs.3.42 Cr in fiscal 2009 to Rs.7.44 Cr in
fiscal 2009 mainly attributable to finance charges related to lease contract
entered into during fiscal 2009.

Net profit
The Company's net profit was Rs.4, 696.21 Cr in fiscal 2009 (Rs.4, 508.76 Cr
in fiscal 2008). Net profit margin as a percentage of revenues declined from
4.65% in fiscal 2008 to 20.96% in fiscal 2009. The reduction of 3.69% is
attributable to:
➢ Lower PBT of 4.42%
➢ Reduction in taxes (including FBT) of 0.73%.

Fringe Benefit Tax

The FBT was Rs.23.00 Cr in fiscal 2009 (Rs.24.65 Cr in fiscal 2008). As a
percentage of revenues, the expense has reduced to 0.10% in fiscal 2009 as
compared to 0.13% in fiscal 2008.

RATIO CALCULATION

1.) Earnings per Share = (Profit after tax) / Number of Equity Shares

4696.21 x 10^ 7/ 978610498

= 47.98

2.) Gross Profit Ratio = (Gross Profit) * 100 / (Net Sales)

= 79320.20 * 100 / 224040.00

= 35.40

3.) Net Profit Ratio/ Operating Profit Ratio = (Net Profit) * 100 / (Net Sales)
 = 4696.21 * 100 / 22404.0

= 20.96

4.) Total Asset Turnover ratio = Net sales / Total Asset.

= 22404.0 / 3354.21

= 6.67

5.) Current Ratio = Total C. Assets / Total C. liabilities

= 9247.14 / 3501.13

= 2.64