Sector-IT Industry Current Market Price-Rs. 796.

75
Cygnus Business Consulting & Research Pvt. Ltd 31st March 2010

We are initiating the coverage of TCS with an

Outperform rating and a 12-manth target price in the
range of US$ 17 to 19.5. We anticipate that focused
strategy on domestic market and European & Asian
countries will drive company’s revenue on a sustained
growth path. The company’s brand positioning, service
network, various services, low attrition rate & segments
will help in achieving the revenue and profitability
projections. Company internal R&D also contributing to
reduce the cost and increase the efficiency of the
company.

² The company has been outperforming the industry in

domestic as well as overseas segment. It dominates with
a 31.05% market share.
² Expect that consolidated revenue of the company is
expected to be in the range of $ 1689.2 Mn in JFM
2009.The QOQ growth was 6.34% in OND2009 and YOY
growth is 10.27%.
² EBITDA margin for the FY10 is 25.73% on YOY basis. Gross margin improvement was not only because of
improvement in revenue but also cost cutting measures taken by management and expected to increase. Its not
growing more some reason behind that is appreciation in
rupees.
² Recent share is trading at trailing at 22.1 FY09
earnings. At the price of USD12.67, the company is
expected to trade at forward P/E of 27.76 for FY10 &
20.44 for FY11.

Relative Price Performance Non

Shareholding pattem
250
FII institutional
200 12% investor
6% Mutual Funds /
150 UTI
Other 5%
100
8%
50 Promoters Financial
74% Institutions /
0 Banks
1/4/2009

7/5/2009

4/6/2009

2/7/2009

30-07-

27-08-

25-09-

28-10-

26-11-

24-12-
2009

2009

2009

2009

2009

2009

3% Others
0%
TCS BSE-IT SENSEX

* In June 2009 TCS has issued bonus shares in the ratio of 1:1 Source: BSEIndia
TATA CONSULTANCY SERVICES
INVESTMENT RATIONALE 3

RISK FACTORS 4

FINANCIAL FORECAST AND ASSUMPTIONS 5

VALUATION 7

BUSINESS ANALYSIS 9

Issues, Concerns and Policy 15

INDUSTRY OVERVIEW 16

FINANCIAL STATEMENT 17
TATA CONSULTANCY SERVICES INVESTMENT RATIONALE
Industry on Growth Track
The global IT industry is coming out of recession. IT industry in India is growing at 17 to 19
percent. Over the past 3 years. It accounts for 5.8 per cent of India’s GDP and employs over 2.3
million people directly and eight million indirectly. India’s IT and BPO (business process
outsourcing) services industry could be bringing in US$60 Bn in the year 2010, growing at over
25% in YOY. India’s software and services exports were $17.2 Bn in this fiscal year. The
extended product portfolio and increased global customer base help in demonstrating Indian
software industry. The top ten companies still dominate accounting for 84 percent of the segment
revenue. India’s domestic IT services market is the fastest growing market in Asia Pacific. IT
services contributing 57% of total software and service exports. Exports revenue growth rate is
16 to 17% in the 2008-09 due to demand from vertical market is increasing. IT services
(excluding BPO, Engineering Services, R&D) contributing to 57 percent of the total software
export, remains the dominant segment. India enjoys a cost advantage of around 60-70 percent as
compared to source markets. Indian ITSS industry is projected to increase from US$13.7Bn in
2008 to US$24.6Bn in 2013.Expacted CAGR for 2008-13 is 12%. Additional productivity
improvements and the development of tier 2/3 cities as future delivery centers, is expected to
enhance India’s cost competitiveness.

Top line growth leads to improve in volume

During the quarter ended OND 2009 TCS has registered a Net profit of INR18441.6MN, posting
a growth of about 11%. India's largest information technology services provider, Tata
Consultancy Services, beat market expectations with its third quarter (October-December 2009)
results. The growth drivers were North America and BFSI (banking financial services and
insurance), signaling a recovery in the sector. Financial services shows improvement as global
financial institution Started performing well after global Financial stimulates package they
helped to growing in recession period. North America shows recovery where as Europe is under
performer. The main reason for this growth is improvement in USA economy & strong presence
in USA market which leads to growth in business. TCS focus on new engagement model and
research and innovation model to growing much more in future.

Operating efficiency keeps margin pressure under control

TCS has witnessed a growth of 2.89% in its revenue. The growth drivers were North America
and BFSI (banking financial services and insurance), signaling a recovery in the sector. From
April onward TCS has seen
continues growth. EBDIT Consistent on growth path
25000 30.00
of TCS has grown about
25.00
7.8% QOQ. EBDIT for 20000

OND2009 was 21048.3 20.00

Rs.MN

15000
whereas it was 19520.2 for 15.00
%

10000
JAS 2009. Gross margin 10.00
improvement was not only 5000 5.00
because of improvement in
0 0.00
revenue but also cost JAS2008 OND2008 JFM2009 AMJ2009 JAS2009 OND2009
cutting measures taken by
management. EBDIT Net profit NPM(%)

Source: Company’s Website

TATA CONSULTANCY SERVICES Establishing footprint in International Market
On December 31, 2008 TCS acquired a 96.26 percent equity interest in Citi group (now known
as TCS e-serve limited), a BPO provider within BFS sector, for USD504.5mn include acquisition
cost USD2.5mn. It is very helpful for the company by this company want to establish their
footprint in International BPO market. Citi group is a largest BPO provider in India with a
trained workforce. TCS is entitled to pay some specified claims on Citi group. Now TCS is in a
position to acquire new customers in addition to the existing client base and create substantial
business in BPO services in the BFS sector. TCS has also taken on board 300 associates at its
software delivery centre in Ohio (US) which help the company to increase their business in US.

RISK FACTORS
Over dependence on US
The company’s revenue major part around 80% has been coming from the developed economies
and in the total revenue US contribute 60%. It shows company has more dependent on developed
nations. With economic slowdown along with the effect of credit squeeze across the globe and
increase in govt. bailouts, bankruptcies, company faced difficulties and the strategy of
conducting the business globally is changing continuously.

Exchange Rate Risk

Volatility of the Indian rupee has had both positive and negative impact on the IT industry in
fiscal 2009. And it may continue in fiscal 2010. In the last fiscal year 2008-09 the company has
suffered foreign exchange loss of $779.8mn. So more volatility in exchange rate affects the
company revenue in a big way. The scenario of exchange risk exposure is quite different in
present era, currency movement have added an additional area of volatility.

Treasury Risk
Company does more hedging transaction for want to reduce their exchange risk. But it also arise
treasury risk, because the treasury operations have to conducted through banks which mandated
by RBI as authorized banks. And in it daily record are maintained of all such option & forward
contract and daily P/L statement. In the recent downturn all leading banks have been affected in
varying degree.

High Attrition Rate

High attrition rate of company is another risk for the company. In last fiscal year 2008-09 &
JAS09 it stood at 11.4% which is less than compared to previous fiscal year 2007-08 and also it
is low in the industry. But at that level it is also an issue for the company. The reason for high
attrition rate is the competitor activity; they are ready to provide more salaries to the employee of
rivalry companies and the experienced employee also ready to grab this opportunity which
constitutes 58% level of employment in the company. Another reason for it is high employment
level of female around 30% in the company. Due to their marriage and family they are generally
move to other place so there is always high degree that they will leave the job. For reducing it
company investing in learning and development programs for employees, empowering
employees at all levels etc. due to it the company had achieved this low attrition rate in FY09 at
11.4%.
TATA CONSULTANCY SERVICES Competitive risk
Increased competition could result in pressure on pricing and change pattern of some services
and also create new services. Risk is also associated with innovation. Risk attach with translating
the investment making in innovation into successful business opportunities for future is very
high. Biggest emerging competitor to Indian IT industry is Philippines.

FINANCIAL FORECAST AND ASSUMPTIONS

Revenue of TCS is expected to grow by 21.23% in FY11 to touch at 7689.64 USD million. It
will continue to grow at a CAGR 17.32% for the next five years from FY09 up to 2013-14.

The EBITDA will increases to 25.73% in FY10 to touch at US$1631.88million from US$1549.4
million in FY09.

We anticipate that PAT would grow to US$1314.26 in FY10 from the level of US$1123.8 in
FY09.we expect pat will continue to grow at a CAGR 21.43% for the next five years from FY09
up to 2013-14.

Key Assumptions (Refer ‘Financial Assumptions’ Table)

Revenue
The projection of revenue from operation is based upon the growth rate of different vertical and
geographical segments and employee utilization ratio. It directly gives the revenue from operation.
Overall revenue of the company is expected to increase by 21.23% in FY11. But we see vertical
segments of the company is expected to grow higher than company expected growth and also retail
& Transportation and e-governance is expected to growat higher than other vertical of the company
but little bit lower than company expected growth.

If we see geographical segments of the company Asian countries and MEA is expected to grow at
5%, 5.6% and in the US only Ibero America is expected to grow by 8.8% till FY12. This is higher
than overall company expected growth.

We calculated sales by taking the average of vertical sales and geographical sales Employee
utilization ratio.

Operational Expenses
1. Cost of IT and Consultancy services has been taken as a 51.20% of net sales in FY10 i.e, 105 basis
points lower than the level of FY09. During FY10 it has been recorded as lower at 51.75% of net
sales. It is expected to be decline by FY12.
2. Cost of equipment and Software licenses which constitute around 3.32% of net sales in FY10. It
has been expected on the basis of past trend of last six quarter. In FY10 it is expected to decline by
53 basis points.
3. Selling and Administration expenses which constitute around 18.96% of net sales in FY10 is
expected to be stable some little bit lower and upper from this level by FY12.
4. Research & Development which constitute 0.25% of net sales in FY10 is expected to decline to
0.11% of sales in FY12. It has been expected to decline because company has established its own
R&D hub.
 5. Depreciation has been linked with the assets of the company and takes into account the capital
TATA CONSULTANCY SERVICES
investment of the company which depends upon the recruitment of the company and it depend
upon the sales of company. It is expected that it will increase in the future so depreciation has been
increase in the future. We calculated depreciation after maintained the level of ATR.

Capex
Capital expenditure which constitute around 8-10% of net sales in the past is nil in the FY09 due to
global slowdown. But in the FY10 Company have to do this. In FY10 it is expected to spend 7.7%
of net sales on CAPEX and expected it is also lead by FY11. It is depend upon sales which are
expected to be increase in future. We expected that CAPEX will be increasing on a sustainable
range. CAPEX is also indirectly linked with the employment level of the company which is also
related with company sales.

Tax Rate
We have taken effective tax rate of 14% for FY10 up till 2012. Due to more export company have
to do tax management until now and also avail the benefit of tax holiday which is available up to
FY11 and is expected to increase substantially in the future. It is expected that company will also do
more tax planning in future. But due to increase in MAT to 18% from 15%, effective tax of the
company is expected to increase further.

Dividend Distribution
We expect that the dividend payout ratio of the company will sustain in the future on the level of
little low than the present level. The past range of payout ratio of the Company is 25-30% and
company will maintain it in future on the level of 30%.

Current Assets and Current liabilities

We projected the current assets (except cash) as a % of sale and expect it will lie in future around
this past level. After it we calculate current ratio of last three years and decide the range of it for
future. Then at end we calculate current liabilities of the company.

Investments
We project investment as a % of sales for the last three years. But we left the last FY09 and take the
average of another two years and expect that company will maintain at some variation from this
level. It will be increasing at a CAGR of 16% by 2012.

Assets
We expect that the assets of the company in future will increase based upon the expected sales of
the company. After calculated A.T.R. for the last three years it is expected that company will
maintained the same trend in the future. Because in IT co’s assets are generally depend upon the
sales. We expect the level of company A.T.R. will move in the between 7.50% -8.00%.

Interest expenses
Company has already used some amount of debt but is very low as a % of total capital. So we
expect that company in the future also use some amount of debt. An expense of debt has around 5-
7% of the total debt. So we expect it will move within this range in the future.
TATA CONSULTANCY SERVICES Other income
Other income of company has shown loss in FY09 but only due to global economic slowdown but
before this year it had increased. So we expect that it will increase in the future also. So on the basis
of two year average except FY 2009 we project some range on which it may be increased in future.
O.I. of company is contributed around 2-3% in total income of company.

VALUATION
TCS’s stock is valued at US$21.31 based on our DCF valuation, implying a 22% upside from the
current levels.

Current Valuation justified owing to expected growth rate

Revenue of TCS is expected to grow by 21.23% in FY11 to touch at 7689.64 USD million. It will
continue to grow at a CAGR 17.32% for the next five years from FY09 up to 2013-14. The
EBITDA will increases to 25.73% in FY10 to touch at US$1631.88million from US$1549.4 million
in FY09. After FY13 sales of the company will increase but at a decreasing rate which will be some
more & low than the expected GDP rate. EBITDA & PAT of company will also increasing in the
future but at a lower rate than expected sales growth rate of company.

Higher growth rate is due to the following reason:

1. The company continues to dominate in the industry and has the major presence in the US
market which put the company on the growth path.
2. Increased focus on European market and MEA which is growth driver of the industry has
been given higher top line growth to company. This geographic gives more growth (5.5%) to
the company sales.
3. Good penetration level around different geographical region as well as different segments,
giving large customer reach.
4. M&A is also one another growth driver of company. Acquired citi group is giving more new
clients to the company.
5. Increased domestic demand is another factor for the company growth.

DCF Sensitivity
The DCF valuation is relatively sensitive to the continuing growth rate and the discounting factor
used. We uses continuing growth rate of 8% beyond 2015 onwards. Considering 700 basis points
premium on AAA bond yield rate and market risk 0.9 give the WACC of 13.11%. We have analyzed
the DCF sensitivity with different scenarios with different combinations of growth rates and cost of
capital. Our fair price for the stock is based on the terminal growth rate of 8%, owing with the cost
of capital 13.11%.

Table 1: DCF Sensitivity

10.50% 11.00% 12.00% 12.68% 13.50% 14.50% 15.00%
7.00 45.32 26.98 21.31 18.68 16.25 14.00 13.09
7.50 52.54 30.47 23.42 20.26 17.42 14.85 13.82
7.80 58.17 33.10 24.93 21.37 18.21 15.41 14.30
8.00 62.66 35.13 26.06 22.18 18.79 15.82 14.65
8.50 77.85 41.66 29.46 24.56 20.45 16.95 15.61
9.00 103.15 51.45 33.99 27.59 22.47 18.29 16.73
TATA CONSULTANCY SERVICES Table 2: DCF Valuation
DCF VALUATION (as on December 31, 2009)
In USD Mn
2007-08 2008-09 2009-10E 2010-11E 2011-12E 2012-13E 2013-14E
Revenue 5634.40 6015.70 6342.80 7689.64 9365.02 11198.02 13371.92
EBIT 1276.00 1424.90 1502.33 1807.45 2379.18 2807.42 3315.30
% of Revenues 22.65 23.69 23.69 23.51 25.41 25.07 24.79
Depreciation 143.80 124.50 129.55 157.06 191.28 228.72 273.12
% of Revenues 2.55 2.07 2.04 2.04 2.04 2.04 2.04
EBITDA 1419.80 1549.40 1631.88 1964.51 2570.46 3036.14 3588.42
% of Revenues 25.20 25.76 25.73 25.55 27.45 27.11 26.84
Less: Cash Tax 187.50 190.40 222.89 270.01 356.82 423.79 503.18
NOPLAT 1232.30 1359.00 1409.00 1694.49 2213.64 2612.35 3085.24
Capex -75.10 -47.21 -220.07 -273.76 -299.51 -355.21 0.00
Changes in WC 0.00 132.50 -256.53 -245.58 -305.49 -334.23 -396.39
Post Tax Non-operating cash flows 146.58 -92.94 0.00 0.00 0.00 0.00 0.00
Free Cash Flows 1303.78 1351.36 932.39 1175.16 1608.64 1922.91 2688.85
It is assumed Free Cash flow beyond FY12 grows at 7.8%
PV of Estimated FC Flows 904.97 1012.23 1229.68 1304.48 1618.79
Horizontal Value 59377.39
PV of Estimated Perpetuity Flows 35747.48
Total Present Value (EV) 41817.62

Book Value of Debt 129.7

Fundamental Value of Equity 41687.9

No of Outstanding Shares 1957.2

Rs./USD Exchange Rate (As on 04/03/2010) 45.9
Fundamental Value per share (USD) 21.3 Fundamental Value per share (USD) 977.65

Relative Valuation
Table 3: Relative Valuation

Infosys Wipro TCS HCL Tech Patni

Market Capitalization
(Rs. mn ) 23,372.71 14,207.57 24,805.81 3,293.44 15.92
Book Value 3,784.00 2,958.00 3,085.60 1,186.70 467.52
Debt / Equity 0.00 0.12 0.04 0.01 6.89
P/E (Trailing) * 18.25 18.33 22.1 13.48 2.78
Dividend Yield %
EPS 2.23 0.53 0.57 0.36 13.48
Return on Net Worth 34% 26% 36% 21% 254%
Current Ratio 5.91 1.44 1.98 0.92 5.5
Quick Ratio 4.46 1.38 1.97 0.89 5.06
TCS was trading at a trailing P/E of 22.10 on 3 March, the base date of this valuation exercise
TATA CONSULTANCY SERVICES 2008-09
P/E
200910
Expected Adj. PAT Expected Price Expected price
12.20 0.671 8.2
15.45 0.671 10.4
20.80 0.671 14.0
P/BV Expected Book value Expected Price
2.80 2.05 5.7
5.75 2.05 11.8
7.25 2.05 14.8
EV/EBIDTA Expected EBIDTA (USD m) Expected EV (USD m)
6.90 1631.9 11260.0 5.8
10.60 1631.9 17298.0 8.8
13.95 1631.9 22764.8 11.6

Infosys TCS HCL TechPatni

Market Price 28.89 11.11 101.75 10.54
P/E 12.85 9.67 278.56 11.28
P/BV 4.35 3.52 57.36 1.81
EV/EBITDA 10.40 70.05 1456.20 5.54
EV/Sales 3.06 18.04 301.95 1.98

After considering industry P/E we expect the trailing P/E range is 12.2 to 20.8 for TCS.
Considering the projected EPS of US$0.671 for FY10 the stock is expected to have a price range of
US$ 8.2 to 14.0. Similarly the expected range through P/BV multiple gives a range of US$ 5.7 to
14.8 and EV/EBITDA gives a range of US$ 5.80 to 11.6. On these multiple the share are expected
to trade in a price range of US$ 13.0 to 18.2.

BUSINESS ANALYSIS
Company background
Tata Consultancy Services started in 1968, belongs to TATA Group, which is headed by Mr.
Ratan Tata. Tata Consultancy Services, Asia's largest software and Services Company, has over
143,000 of the world's best trained IT consultants in 42 countries. Company’s registered office is
located at Mumbai in Maharashtra. The company offers a comprehensive range of services
including consulting, IT, IT infrastructure…and also provide product based solutions. Currently
TCS has a presence is 42 countries through its 140 offices globally. Now company remained
focused on helping customer experience certainly. Company closed 28 large deals and added 163
new customers globally in the past one year. There was an increase in the number of customers
across all revenue bands of $1mn, $5mn, $10mn, $20mn and $50mn. TCS entered the EU in
1975 by opening an office in the UK. Since then, it has opened several offices across the EU.
After the USA, the UK is the second largest market for TCS. It has over 5000 consultants
working for more than 130 UK clients.
TATA CONSULTANCY SERVICES Business Model and Strategy
Value Proposition
TCS provides power and flexibility to its customers to stay out in front. It produces software &
services as per the specific need of there customers. It aims at adding value to its customers
business by providing solution as their requirement. TCS follows Global Network Delivery
Model™. It enables its customers-choice a sourcing strategy best suited to their most important
business considerations, assurance of the highest quality of service delivery and Lower the Total
Cost of Ownership (TCO).
Target Customers
Considering its global footprint and its ability & experience to serve clients across the world,
company is in position add value to the business of its customers. Company’s main segments of
customers are BFSI, Telecom, Chemical and Manufacturing. These sectors are biggest
contributor to company’s value. Now TCS is targeting 8 Million small & medium sector
enterprises by scaling up “IT-as-a-Service” business.
Distribution Channel
TCS' Global Network Delivery Model™ (GNDM) is the engine that allows company to provide
reliable and cost effective delivery of services and solutions. It enables company to deliver
highest quality of service regardless of the mix of services, technologies, and locations. This
model enables company to get in touch with their customers on 24*7 basis make them deliver
tailored-made solutions to customers as per their need.
Customer Retention
GNDM model allows company to provide timely, reliable and cost effective delivery of services
and solutions, which helps them to maintain high level of customer satisfaction. Its ability to
serve customers needs, helps them to increased business from its existing clients. TCS has over
40 year’s record of customer retention and increased customer base.
Revenue Stream
Main revenue of TCS comes from BFSI, Manufacturing and Services segment. Company gets it
revenue directly from its clients on the basis of type of contract entered into. Arrangements with
customers for software development and related service are either on fixed-price, fixed
timeframe.
Core Capabilities
The core strength of company is its highly skilled and well trained professionals. TCS has 7
center of excellence in India and has 11 Innovation Labs in India. It has more than 142 offices in
more than 42 countries across the globe. “TCS BaNCS” its universal banking, it consists of a
comprehensive portfolio of solutions for banks, capital markets firms, insurance companies, and
diversified financial institutions. It is considered among the leaders in global evaluation of retail
core banking solutions.
Value Configuration
The Tata Research Development and Design Centre (TRDDC) were established in 1981 as a
division of TCS. TRDDC is home to three R&D labs: Process Engineering, Software
Engineering and Systems Research. SET Labs collaborated with leading national and
international universities such as Columbia University, Georgia Institute of Technology, Indian
Institute of Technology, Bombay, Indian Institute of Technology, Kanpur, Stanford University
and University of Massachusetts, Amherst.
TATA CONSULTANCY SERVICES Partners Network
Transport service provider, hotels, Airlines companies and canteen service providers are the few
partners who get the business from TCS. Company also entered in partnership with global
business firms and institutions to innovate and provide latest technological business solutions.
1) Dow and TCS expand global alliance -The alliance to create jobs for mid-Michigan while
lowering Dow’s long-term costs. November 2009
2) TCS and USA networking giant Cisco Systems announced an alliance Tuesday to help
their customers build Cost Structure for OND09
next-generation data Equipment &
Software
centre. February 2009
4% Communication
Cost Structure Depriciation
2%
The major element of overall 3% Travel
2%
cost is salary & wages Rent
expenses (82% of total Other 4%
expenses) under different Employee Cost
9%
departments like software 82%
development and maintenance, Other Cost
3%
selling and marketing and
administration.

Partner network
The major partner network for the company is technology services provider and educational
provider. The company is also taking their clients inputs to implement in their business model.
Company follows Global Network Delivery Model & integrated business model in which
company has main focus on highly motivated and competent employees because these are the
basic force behind generating value to different services provided by the company.

Key business drivers

Increase in volumes
During the quarter ended Sept 2009/10, Sales & sales Growth
company’s sales witnessed growth of 78,000 10
2.40% to Rs 57444mn compared to 76,000 8
previous quarter. The strong growth was
74,000 6
due to recovery in global financial
Rs. M N

72,000 4
market which helps to increase volume
%

and energy & life science posted higher 70,000 2

growth compared to other vertical. BFSI 68,000 0
also posted growth but only 4.7%. Rupee 66,000 -2
was started appreciating against dollar JAS2008 OND2008 JFM2009 AMJ2009 JAS2009 OND2009
and due to less hedging position its help Sales(LHS) Growth(RHS)
company to show higher growth in
bottom line.
TATA CONSULTANCY SERVICES PAT & Growth
PAT growth decrease rapidly in sept 2009 quarter to 5.57% compare to large growth in previous
quarter. The reason is not still increase in margin front. There is forex loss due to hedging. Other
income was fall due loss incurred under forex hedging.

Leadership in BFSI vertical

BFSI is the major strength of the Segment Analysis OND2009
company as its main focus on this Media &

Others, 2.80%
Entertinment,
Energy & Utilities,
vertical. Because in the recession Travel &
3.40% 2.10%
period also this sector have had Hospitality, 3.40%
Life Services &
restructure themselves and the health care, 5.90%
BFSI, 45%
result that in adverse condition Hi-tech, 5%

company was also got good profit

from this sector. As global
economy is coming out of the Manufacturing,
8.30%
Retail &
Distribution, 12% Telecom, 12.10%
recession which helps global
Banking & Financial institution to
start spending on these verticals.
And also Life science and Energy
& Utilities recorded better than
average growth in all market segments.

Major chunk in US
The USA continued to be the largest Geographical Segmentation
market for TCS and contribute around
51% to the company’s revenue. UK Asia Pacific MEA
has contributed around 19% to the India 6% 2%

company’s revenue. This is due to Continental

9%

ramp-ups from recent large Europe

10%
outsourcing contracts continued to UK North America
52%
drive growth in these countries. 16%

Increased Utilization Rate

The utilization rate of company has Ibero America
5%
been improved. Comparison to first
quarter of FY10 (AMJ10), in the
second quarter (JAS10) utilization rate of company improved to 79.5% (excluding trainee) and
73.6% (including trainee). Along with this the attrition rate of company are also low in the industry.
In JAS10 the attrition rate of company was at 11.4%compare with 13.2% in the same quarter of last
fiscal year. Out of this 11.4% IT services attrition rate was 10.8% and BPO was 18%.

Market share
Company has more market share in the industry which is 15.32% higher than other competitor like,
Wipro, Infosys etc. Competition is Moderate to high as its Herfindahl Index value is around
2292.74. But it showing the company in BFSI vertical it’s giving tough competition to its competitor
due to its core strength in BFSI vertical.
TATA CONSULTANCY SERVICES Improve cost structure
Overall cost structure of company is improving which mean cost of company has been going down.
Main part of cost which has been continuously decline is R&D because company has established
their internal R&D hub.

Financial Performance
The ROE for the company Profitability
60
decrease from 47% on 31st march
55 56.06
2006-07 to 35% due to same
equity capital level & issue of 50 48.95 49.05 49.62
bonus share and more transfer to 45
46.63

%
reserve & surpluses. This is 43.26
40 40.91
indication that company is one of 38.82
the major players which showing 35
higher wealth for its shareholders. 30
2005-2006 2006-2007 2007-2008 2008-2009
Since ROCE is decreasing from ROCE ROE
52% in FY2006-07 to 38% in
FY2008-09 due to debt level becomes nil in FY 2008-09 & PBIT decreases due to slowdown in the
business of the company.

Segmental analysis
Vertical Segment sales & growth
During the quarter ended Sept. 2009-10, overall company’s sales growth comes from BFSI division
compared to previous
quarter. The growth in Segment wise Revenue
40000
the division was on 35000
account of 4.97% (Rs 30000
25849.8mn). The other 25000
division also performed
INR MN

20000
well which added
15000
company’s top line
growth. Out Of total 10000

divisions some 5000

divisions (Telecom, 0
Telecom

Manufacturing

Life Services
Distribution

Hi-tech

& health care

BFSI

Energy &
Hospitality

Others
Entertinment
Travel &

Utilities

Transportation &
Retail &

Media &

Manufacturing)
witnessed dip due to JAS2009 OND2009
unprecedented volatility
and uncertainty in the global financial markets. Now company is more focus on new segment like life
science & Energy so due to the low base effect these vertical shows higher growth. But some sector have
had to restructure themselves (BFSI, Engineering services) so TCS had registered growth in this vertical.
Agreement with Citi broadens TCS’ portfolio of end to end IT & BPO services in global BFSI sector
TATA CONSULTANCY SERVICES Geographical Analysis
YOY revenue growth has been seen maximum in USA market as company started to focus on
different markets to cut
its overdependence on Geographical wise Revenue
USA market. Its 45000
register growth 26% in 40000
last year & Europe 35000
shows growth of 38.5% 30000
CPLY. Due to the

INR MN
25000
global recovery more 20000
demand comes from 15000
USA so volumes are 10000
increasing and revenue 5000
also increasing. 0
Total North Ibero UK Continental India Asia Pacific
Revenue America America Europe JAS2009 OND2009

Client Utilization Analysis

Client utilization is showing high growth in top clients which showing growth of 22.17%
compare to previous quarter. This is due to big clients started their IT spending after revival of
situation. Top 5 clients growing at 8.20% and it’s giving good signal that spending is coming
back on track. At present it stood at to 6.8%, 20.5%, and 28.9% respectively.

Growth in Service Line

In the terms of service line there continue to be strong demand for application development and
management services, while the BPO and Assurance services continue to be grow but at a less
growth because customer realize the combined value of full services offering with global
network delivery model. TCS’s flagship BaNCS added 11 new customers in the global financial
service industry in the last quarter and 7 product implementations went live.

Cost structure 56
Cost of Revenue
The company in quarter 54
ended December 2009 has
52
registered negligible growth
rate with respect to employee 50

cost but employee cost are

%

48
expected to rise as company
46
resumes hiring in big way as
company is going to start 44

new project called as “IT-as- 42

a-service”. TCS has Sterted 40
hiring in big way. TCS has JAS2009 OND2009
implemented a host of Revenue
Depriciation
Employee Cost
Travel
Equipment & Software
Communication
Rent Other Cost
initiatives such as the reuse
of assets and codes, the creation of templates and intellectual property (IP) and the use of
platform business process outsourcing (BPO).
TATA CONSULTANCY SERVICES Markets and Competition
IT industry is highly competitive
industry. This industry runs on the Market Shares of Market leaders OND2009

phenomenon of quality of services and

Patni, 4%
Tech
support. Although there are few Mahindra, 5%

H
C
L,
TCS, 31%
customer in this industry but there is

5%
steep competition among them. TCS is Infosys, 26%

the largest exporter in the Asia pacific.

As TCS’s major revenue comes from
export which is again highly dependent
Wipro, 29%
upon America’s export, TCS is
exploring new markets to reduce its
dependence on USA. The Herfindahl
Index shows the concentration of the industry, this shows that industry is highly competitive.
TCS has always adapted quickly to changing circumstances by its responsive and creative
thinking.

Issues, Concerns and Policy

High fluctuation in Exchange Rates
The major concern for IT industry is volatility in exchange rate. Most of the major companies
depend upon the other countries for their operations. So when the value of dollar has been reduced
against rupee then it badly affects the export of companies which directly affect the revenue of
companies. And when it increase against rupee then it is beneficial for companies.

Lack of infrastructure
Lack of infrastructure in the country is also major issue for IT industry. In the absence of it
companies faced the problem in working. Employee transportation, lack of infrastructure is the
major issue for IT industry.
High Attrition Rate

IT industry has also faced the problem of high attrition rate. Attrition rate is very high in IT
industry; due to it productivity of company has been reduced. Employees of companies have been
change regularly so companies sales have affected by it.
Fake Resume

Most of people put their fake resume on the companies’ site. When companies’ hires people on the
basis of their resume then wrong selection has been made. Due to it quality of services has been
gone down which directly affect the clients of company and it affect the revenue of company.
Software Piracy

Software piracy is also one of major issue for IT industry. When any company launches any new
software in market then after it another player in market copied that thing and produces the same
thing and sells in market at a lower rate then it affects the company image.
TATA CONSULTANCY SERVICES Frequent changes in technology
In the present era technology has been changed continuously. So IT industry always focused on the
pattern of technology. When it has to be changed companies immediately change their strategies.

FDI
100% FDI is available in ITSS sector in India.

Software Technology Park Scheme

It has been created by the government for attract more investment in India. These parks provide
exemption on the income earned to the investors who invest in these schemes. So it encouraged FII
to invest more and more.

Tax Holiday
Government also gives the tax holiday to IT industry which extended up to the end of FY10.

IT Act2000
Information technology act2000 legalizes digital signatures providing a legal backbone to e-
commerce.

H1, B1 Visa
Government established the rule for the technical person to get H1 and B1 visa when the companies
allowtheir employees to do the job in their other centers’ which has outside India.

INDUSTRY OVERVIEW
ITSS (Information technology & software services) is one of the important industry in India. In
1998 its contribution in GDP was only 1.2% but now it has increased up to 5.8% in 2009. It also
contributes around 55% in the total IT industry. Size of total IT industry is USD 64billion in
which ITSS cover USD35.2 billion. Out of it domestic consumption is only USD 8.3billion. It
shows that ITSS mostly depend upon other countries for their operations. ITSS grow at 13.5% in
2009, its slowest due to economic slowdown but now in FY10 it is increasing due to various
reasons like, focus on emerging countries, overall revival of economies, increase domestic
demand etc. It also provides huge employment in India. At present direct employment is 1.7mn
and indirect employment is 8mn. Also it is expected that in future as well as the industry will
grown it also create more employment in India or abroad.
In ITSS, US & UK (including continental Europe) remained the largest exporters at present in
which US accounting for 60% & UK
accounting for 31% respectively. Structure
India’s young demographic profile &
academic structure produce enough
Unorganized
engineers. 23%

Organized
ITSS Structure 77%
ITSS structure constitute both
organized and unorganized sector. In
FY08 organized sector contributes
around 77% and remained 23%
 contributed by unorganized sector. In ITSS some big companies dominate the total industry; around
TATA CONSULTANCY SERVICES
75% industry is constituted by top 10 companies.

Outlook of ITSS Growing Market Size

We expect that ITSS industry will grow
by CAGR of 7.1% till 2012. Because 600,000
global IT spending will pick up from 500,000
2010. At present ITSS industry’s main
400,000
focus on cost & operational efficiencies

Rs. Cr.
300,000
so it is expected that it will enhance
global sourcing. It is expected that 200,000

India will going to increase its market 100,000

share in global software market with its 0

2007 2008 2009 2010 2011 2012
higher CAGR of 18.4% in coming years
and industry will achieve size around
USD 42billion by 2010 in which USD Domestic & Export Revenue
32billion will be just export. Next 350,000

growth drivers for the industry are 300,000

expected Retail, gaming & animation, 250,000

Healthcare and government spending.

Rs. Mn

200,000

M&A will help the IT industry to 150,000

increase their reach in international 100,000
market. 50,000

0
2007 2008 2009 2010 2011 2012

Domestic Revenue Export Revenue

FINANCIAL STATEMENT
TATA CONSULTANCY SERVICES Balance Sheet
USD in millions
Particulars 2007-08 2008-09 2009-10E 2010-11E 2011-12E 2012-13E 2013-14E
Assets
Fixed Asset
Investments 660.10 340.10 924.21 1,429.47 2,111.15 2,957.37 3,956.05
Equity method investment in affiliates 0.70 0.30 0.30 0.30 0.30 0.30 0.30
Property, plant and equipment, net 753.30 738.90 656.55 719.57 802.04 872.83 954.93
Intangible assets, net 90.60 163.20 163.20 163.20 163.20 163.20 163.20
Goodwill 276.9 510.6 510.6 510.6 510.6 510.6 510.6
Other non-current assets 258.9 331.2 317.14 384.48 468.25 559.90 668.60
Toal Fixed Assets 2,040.50 2,084.30 2,572.01 3,207.62 4,055.54 5,064.20 6,253.68
Current Asset
Cash and cash equivalents (Balancing figure) 258.10 292.50 391.07 627.54 951.07 1360.94 1856.09
Accounts receivable 1,330.90 1,191.00 1,409.51 1,708.81 2,081.12 2,488.45 2,971.54
Unbilled revenues 337.20 291.90 352.38 427.20 520.28 622.11 742.88
Inventories 10.60 7.10 9.39 11.38 13.86 16.58 19.80
Prepaid expenses and other current assets 386.50 620.70 654.45 793.42 966.28 1,155.41 1,379.72
Total Current Assets Excluding Cash 2,065.20 2,110.70 2,425.73 2,940.81 3,581.54 4,282.55 5,113.93
Total Current Assests 2,323.30 2,403.20 2,816.80 3,568.35 4,532.61 5,643.49 6,970.03
Capital Deployed 4,363.80 4,487.50 5,388.81 6,775.97 8,588.15 10,707.69 13,223.71
Liabilities
Current Liabilities & Provisions
Accrued expenses and other current liabilities 846.40 935.10 983.13 1,191.89 1,451.58 1,735.69 2,072.65
Unearned and deferred revenues 177.00 174.10 190.28 230.69 280.95 335.94 401.16
Short-term debt 9.30 101.50 95.78 116.11 141.41 169.09 201.92
Total Current Liabilities & Provisions 1,032.70 1,210.70 1,269.19 1,538.70 1,873.94 2,240.72 2,675.72
Non-Current Liabilities
Long-term debt 142.80 34.70 32.83 35.98 40.10 43.64 47.75
Mandatorily redeemable preference shares with Tata Sons Limited 24.90 19.70 19.70 19.70 19.70 19.70 19.70
Other non-current liabilities(Deferred taxes) 18.80 75.30 0.00 0.00 0.00 0.00 0.00
Total non-current Liabilities 186.50 129.70 52.53 55.68 59.80 63.34 67.45
Minority interests 57.30 61.50 61.50 61.50 61.50 61.50 61.50
Shareholder's equity
Share Capital 568.20 568.20 568.20 568.20 568.20 568.20 568.20
Retained earnings 2,295.80 3,073.90 3,993.89 5,108.39 6,581.21 8,330.43 10,407.34
Accumulated other comprehensive (loss)/income 223.3 -556.5 -556.5 -556.5 -556.5 -556.5 -556.5
Total Stock Holder's Equuity 3,087.30 3,085.60 4,005.59 5,120.09 6,592.91 8,342.13 10,419.04
Capital Employed 4,363.80 4,487.50 5,388.81 6,775.97 8,588.15 10,707.69 13,223.71
TATA CONSULTANCY SERVICES Income Statement

Particulars 2007-08 2008-09 2009-10E 2010-11E 2011-12E 2012-13E 2013-14E

A. REVENUES
Information technology and consultancy services 5339.50 5789.30 6136.88 7428.86 8994.09 10722.58 12757.42
% Growth - 8.42% 6.00% 21.05% 21.07% 19.22% 18.98%
Sale of equipment and software licenses 294.90 226.40 205.92 260.77 370.93 475.44 614.50
% Growth - -23.23% -9.05% 26.64% 42.24% 28.18% 29.25%
Net Sales 5634.40 6015.70 6342.80 7689.64 9365.02 11198.02 13371.92
B. EXPENDITURES
1. Cost of Revenue
Cost of information technology and consultancy services 2901.00 3146.70 3282.35 3998.61 4869.81 5822.97 6953.40
% of Net Sales 51.49% 52.31% 51.75% 52.00% 52.00% 52.00% 52.00%
Cost of equipment and software licenses 242.40 196.30 210.59 257.60 313.73 375.13 447.96
% of Net Sales 4.30% 3.26% 3.32% 3.35% 3.35% 3.35% 3.35%
Total Cost of Revenue 3143.40 3343.00 3492.94 4256.21 5183.54 6198.10 7401.36
% of Net Sales 55.79% 55.57% 55.07% 55.35% 55.35% 55.35% 55.35%
2. Operating Cost
Selling, general and administrative expenses 1057.10 1113.00 1202.44 1450.07 1588.07 1936.34 2349.39
% of Net Sales 18.76% 18.50% 18.96% 18.86% 19.00% 19.00% 19.00%
Research and development expenses 14.1 10.3 15.54 18.84 22.94 27.44 32.76
% of Net Sales 0.25% 0.17% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Operating Cost 1071.2 1123.3 1217.98 1468.91 1611.02 1963.78 2382.15
% of Net Sales 19.01% 18.67% 19.20% 19.10% 17.20% 17.54% 17.81%
Total Cost (1+2) 4214.60 4466.30 4710.92 5725.13 6794.56 8161.88 9783.51
% of Net Sales 74.80% 74.24% 74.27% 74.45% 72.55% 72.89% 73.16%
Total Operating profit 1419.80 1549.40 1631.88 1964.51 2570.46 3036.14 3588.42
OPM % 25.20% 25.76% 25.73% 25.55% 27.45% 27.11% 26.84%
Growth % (Operating Profit) - 9.13% 5.32% 20.38% 30.85% 18.12% 18.19%
Depreciation & Amortisation 143.80 124.50 129.55 157.06 191.28 228.72 273.12
EBIT 1276.00 1424.90 1502.33 1807.45 2379.18 2807.42 3315.30
Interest Income 14.10 22.40 37.89 58.61 86.56 121.25 162.20
Interest Expenses -11.30 -11.50 -3.07 -3.89 -4.90 -6.00 -7.30
Other Non-operating Income/(Expenses) 168.40 -108.50 0.00 0.00 0.00 0.00 0.00
PBT 1447.20 1327.30 1537.15 1862.17 2460.84 2922.67 3470.19
Pre-tax Margin % 25.69% 22.06% 24.23% 24.22% 26.28% 26.10% 25.95%
Tax 187.50 190.40 222.89 270.01 356.82 423.79 503.18
Effective Tax Rate % 12.96% 14.34% 14.50% 14.50% 14.50% 14.50% 14.50%
Minority Interest -10.6 -12.9
Equity in net earnings of affiliates 0.2 -0.2
Adjusted PAT 1249.30 1123.80 1314.26 1592.16 2104.02 2498.88 2967.02
Net Profit Margin % 22.17% 18.68% 20.72% 20.71% 22.47% 22.32% 22.19%
Growth in Adjusted PAT % - -10.05% 16.95% 21.14% 32.15% 18.77% 18.73%
Extrodinary Income
Reported PAT 1249.30 1123.80 1314.26 1592.16 2104.02 2498.88 2967.02
TATA CONSULTANCY SERVICES Cash Flow Statement

USD in million
2007-08 2008-09 2009-10E 2010-11E 2011-12 2012-13 2013-14
1 Cash Flow from Operating Activities
PAT 1249.30 1123.80 1314.26 1592.16 2104.02 2498.88 2967.02

Add: Depreciation 143.80 124.50 129.55 157.06 191.28 228.72 273.12

Add: Interest Expense 11.30 11.50 3.07 3.89 4.90 6.00 7.30
Add: Other Non-Cash Charges
Add: Direct taxes paid 187.50 190.40 222.89 270.01 356.82 423.79 503.18

Operating Profit Before WC Changes 1591.90 1450.20 1669.78 2023.12 2657.02 3157.39 3750.61

Changes in Current Assets (excluding cash) (45.50) (315.03) (515.08) (640.73) (701.01) (831.38)
Changes in Current Liabilities 178.00 58.49 269.50 335.24 366.78 435.00
Changes In WC 132.50 (256.53) (245.58) (305.49) (334.23) (396.39)

Cash Generated From Operations 1591.90 1582.70 1413.24 1777.54 2351.53 2823.16 3354.23

Less: Direct Taxes Paid 187.50 190.40 222.89 270.01 356.82 423.79 503.18
Less: Others (provision for deferred tax) 0.00 56.50 -75.30 0.00 0.00 0.00 0.00
Net Cash Generated From Operations 1404.40 1335.80 1265.65 1507.52 1994.71 2399.37 2851.05

2 Cash Flow from Investing Activities

Capital Expenditure (CAPEX) (75.10) (47.21) (220.07) (273.76) (299.51) (355.21)

Change in Other non-current assets (72.30) 14.06 (67.34) (83.77) (91.65) (108.70)
Investments 320.00 (584.11) (505.25) (681.68) (846.22) (998.69)
Change in Intangible Assets (72.60) 0.00 0.00 0.00 0.00 0.00
Change in Goddwill (233.70) 0.00 0.00 0.00 0.00 0.00
Accumulated other comprehensive (loss)/income (779.80) 0.00 0.00 0.00 0.00 0.00
Interest Received 14.10 22.40 37.89 58.61 86.56 121.25 162.20
Mandatorily redeemable preference shares 5.20 0.00 0.00 0.00 0.00 0.00
Equity method investment in affiliates 0.40 0.00 0.00 0.00 0.00 0.00
Others 49.40 -188.49 -58.61 -86.56 -121.25 -162.20

Net Cash Used In Investing Activities 14.10 (836.10) (767.86) (792.67) (1039.21) (1237.38) (1462.60)

3 Cash Flow from Financing Activities

Change in Debt (108.10) (1.87) 3.15 4.12 3.54 4.10

Change in Equity 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Dividends Paid (370.00) (345.70) (394.28) (477.65) (631.21) (749.67) (890.10)
Interest Paid (11.30) (11.50) (3.07) (3.89) (4.90) (6.00) (7.30)
Others

Net Cash used in Financing Activities (381.30) (465.30) (399.23) (478.38) (631.98) (752.12) (893.30)

Net Increase in Cash and Cash Equivalents 1037.20 34.40 98.57 236.47 323.52 409.87 495.15

Cash and cash equivalents At the beginning 258.1 292.5 391.07 627.54 951.07 1360.94
Net Increase in Cash and Cash Equivalents 1037.20 34.40 98.57 236.47 323.52 409.87 495.15
Cash and cash equivalents At the end 1037.20 292.50 391.07 627.54 951.07 1360.94 1856.09

cash balance as per balance sheet 258.1 292.5 391.1 627.5 951.1 1360.9 1856.1
difference 0.00 0.00 0.00 0.00 0.00 0.00
TATA CONSULTANCY SERVICES Ratio Analysis
2007-08 2008-09 2009-10E 2010-11E 2011-12E 2012-13E 2013-14E
Profitability Ratios
Return on Assets (ROA) 28.63% 25.04% 24.39% 23.50% 24.50% 23.34% 22.44%
Return on Equity (ROE) 40.47% 36.42% 32.81% 31.10% 31.91% 29.96% 28.48%
Return on Capital Employed (ROCE) 29.24% 31.75% 27.88% 26.67% 27.70% 26.22% 25.07%
Dupont Analysis-ROE Decomposition
PAT/PBT (Tax Efficiency) 0.863 0.847 0.855 0.855 0.855 0.855 0.855
PBT/EBIT (Interest Burden) 1.134 0.932 1.023 1.030 1.034 1.041 1.047
EBIT/Sales (OPM) 22.65% 23.69% 23.69% 23.51% 25.41% 25.07% 24.79%
Sales/Total Assets (Asset Turnover) 1.291 1.341 1.177 1.135 1.090 1.046 1.011
TA/NW (Financial Leverage) 1.41 1.45 1.35 1.32 1.30 1.28 1.27
ROE 40.47 36.42 32.81 31.10 31.91 29.96 28.48

Liquidity Ratios
Current Ratio 2.250 1.985 2.219 2.319 2.419 2.519 2.605
Acid Test Ratio 2.239 1.979 2.212 2.312 2.411 2.511 2.598
Debt-Equity Ratio 0.06 0.04 0.01 0.01 0.01 0.01 0.01

Efficiency Ratios
Assets Turnover Ratio 1.291 1.341 1.177 1.135 1.090 1.046 1.011
Working Capital Turnover Ratio 4.366 5.045 4.098 3.789 3.522 3.291 3.114
F.A. Turnover Ratio 2.761 2.886 2.466 2.397 2.309 2.211 2.138
C.A. Turnover Ratio 2.43 2.50 2.25 2.15 2.07 1.98 1.92
Debtors Turnover Ratio 4.234 5.051 4.500 4.500 4.500 4.500 4.500
Debtors Velocity 86.217 72.263 81.111 81.111 81.111 81.111 81.111

Margin Ratios (%)

EBITDA Margin 25.20% 25.76% 25.73% 25.55% 27.45% 27.11% 26.84%
Pre-Tax Margin 25.69% 22.06% 24.23% 24.22% 26.28% 26.10% 25.95%
Net Profit Margin 22.17% 18.68% 20.72% 20.71% 22.47% 22.32% 22.19%

Growth Ratios YoY (%)

Net Sales - -23.23% -9.05% 26.64% 42.24% 28.18% 29.25%
EBITDA - 9.13% 5.32% 20.38% 30.85% 18.12% 18.19%
Adj.PAT - -10.05% 16.95% 21.14% 32.15% 18.77% 18.73%
Adj.EPS - -10.05% -41.53% 21.14% 32.15% 18.77% 18.73%

Working Ratios (Days)

Inventory 0.687 0.431 0.540 0.540 0.540 0.540 0.540
Debtors 86.217 72.263 81.111 81.111 81.111 81.111 81.111
Net Working Capital Excluding Cash 66.886 54.607 66.553 66.553 66.553 66.553 66.553

Other Ratios (%)

Other Income/PBT 11.64% -8.17% 0.00% 0.00% 0.00% 0.00% 0.00%

Per Share (Rs.)

Adj.EPS 1.277 1.148 0.671 0.813 1.075 1.277 1.516
CEPS 1.424 1.276 0.738 0.894 1.173 1.394 1.655
DPS 0.353 0.403 0.244 0.323 0.383 0.455 0.455
BVPS 3.155 3.153 2.047 2.616 3.369 4.262 5.323
Cash Per Share 0.26 0.30 0.20 0.32 0.49 0.70 0.95

Valuation Parameters
P/E 14.08 9.67 24.76 20.44 15.47 13.02 10.97
P/CEPS 0.00 8.71 22.54 18.60 14.18 11.93 10.04
P/BV 0.00 3.52 8.12 6.36 4.94 3.90 3.12
EV/EBITDA 123.80 70.05 199.20 165.36 126.25 106.75 90.19
EV/SALES 31.20 18.04 51.25 42.24 34.65 28.94 24.20
TATA CONSULTANCY SERVICES Financial Assumptions

TCS is betting on higher domestic growth. After posing Q3FY10 numbers better than expected,
it is increasing its employee base, taking advantage of expected rise in demand and scaling up It-
as-service.TCS has started global expantion acquiring foreign companies, infact company wants
to do better than Industry as a whole. It is also looking for new markets like latin America, New
Zealand, Malaysia, Singapore etc., to deacrease theire dependency on America's nation. TCS is
concentrating on Tier-II, III and IV cities for unexplored and better market to repeat the story of
“NANO” in software. TCS scaling up its “IT-as-a-service” business to cater to the needs of
around 8 million small and medium sized companies in the country.

Top Five Near shore Growth Strategies for 2010 include:

ü Expand public sector business
ü Build through key acquisitions
ü Strengthen FAO and Shared Services competencies
ü Leverage second-tier Latin America locations
ü Take advantage of Latin America positioning to re-shape the perception of being an
“Indian” outsourcer.

Expected CAGR of IT industry for 2008-13 is 12% and TCS is expected to perfrm better than
industry. More of technological services coming. IT, e-governence spend may touch $4 bn next
ficcal. Indian ITSS industry is projected to increase from US$13.7bn in 2008 to US$24.6bn in
2013.