How Good is TCS Stock to Invest?

TCS or Tata Consultancy Services is an Indian multinational information technology (IT), giant. The company operates all around the globe. According to reports released by the company, most of the company’s revenues come from clients in North America.

The weakening of the Indian rupee against the American dollar in recent times, through September and October 2018, has translated to an increase in revenue for the company. A part of the multi-billion dollar conglomerate, Tata Group, TCS has been one of the best-performing companies of said group and is widely considered as the second biggest IT service provider in the world.

History of TCS

The company is headquartered in Mumbai, Maharashtra, India. It was founded in the year 1968. Since that time the company has been providing technology services to companies around the world. While the initial contracts of the company came from domestic companies, it eventually worked with international clients. The company was instrumental in the process of automation of the Johannesburg Stock Exchange.

TCS worked with a Swiss company for this project, and eventually acquired that company. In the year 1980, Tata Consultancy set up a center in Pune, India, that would be used for software research and development in India. This was the first such center in India. It was called the Tata Research Development and Design Centre. Later, after the dawn of the new millennium, the company was taken public in the year 2004. In 2005, the company ventured into the bioinformatics, becoming the first Indian IT service providing company to do so. Coming to the Indian market, the company has struck a deal with the Indian Government’s Postal Department to provide them with IT services.

Coming to revenue-based milestones, the company achieved a revenue of over $500 million per year by 2008. Then, less than four years later, the company managed to achieve $10 billion in revenue per year. In 2011, the company had the highest market capitalization in the Indian stock market. This title was previously held by Reliance Industries.

From 2001 to 2013, Tata Consultancy acquired at least sixteen companies from around the world. One of the biggest acquisitions during this period was the acquisition of Citigroup Global Services Limited which helped obtain the captive BPOs of Citigroup.

Recent financial information

From the interim standalone statements of profit and loss released by the company for the second quarter of the financial year spanning 2018–2019, it can be seen that the total income of the company was Rs.32,517 crore. This was an increase of almost Rs.10,000 crore over the corresponding period in the previous financial year.

Total expenses of the company rose from Rs.17,535 crore in the same period the previous year to Rs.22,364 crore in the current year. The profit for the period was Rs.7,620 crore. This was a solid increase from the corresponding period the preceding year when the profit was Rs.5,746 crore.

Historical share prices of TCS

The stock price of TCS rose steadily from April 2018 through to the end of September 2018. During the course of this time period, the company announced two dividends and one bonus. The dividend announced on 31 May 2018 was a final 2900% dividend and a bonus of ratio 1:1 was also announced on the same day. Another dividend, an interim 400% dividend was announced on 17 July 2018. The price of the stock peaked in the first couple of days of October 2018 with the price of a single share reaching about Rs.2255.

The price of the share then decreased over the course of the first two weeks of October. But when all the facts are taken into account, the company might be a good buy at October levels since it has a lower value at present. Click here to know more about stock price trends for TCS.

Why is TCS valuable?

The company is part of the larger Tata Group that is a well-known conglomerate around the world. In the third week of October 2018, the market capitalization of the company was about Rs.7,23,347 crore. It is one of the biggest private companies in India and provides employment to close to 4 lakh individuals around the world. The company has ties to academic institutions like MIT, Stanford, and Carnegie Mellon in the US. The company also has ties with IITs in India. The company uses these institutions to have a hiring ground in order to attract the best talent possible from around the world.

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When seen by the largest employers in the IT industry, TCS is the third-largest employer in the world. The company sponsors a number of marathons around the world. The company provides an extremely wide range of IT services through its 67 subsidiaries. The company has had a market capitalization of over $100 billion in India, being the first Indian IT company to do so.

Conclusion

TCS has experienced leadership that help the company negotiate tough times. Its association with the Tata Group lends it certain credibility in India. Considering the increases in revenue over the years, the number of people the company provides employment for, and so on, TCS could well be considered a stock that can potentially generate good returns. While this might be true, it would be best to research thoroughly considering other factors that are relevant to you before making a decision regarding investing in the company.

DISCLAIMER:

The contents of this post/blog do not constitute financial or other professional advice nor does it imply in any manner a principal-agent relationship, and is not professional advice on a specific financial matter.

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