A PROJECT REPORT

ON
RATIO ANALYSIS OF TCS

Submitted to:SUBMITTED BY
Prof. Anil Tilak

AmitLalchandani
Bikash Sharma

GarimaRajoria

HimanshuUpadhyay

Madhur Ahuja
Ravi Parashar
CONTENTS

1) Company Profile
2) Ratio Analysis
3) Objective of the study
4) Calculations
5) Limitations
6) Bibliography
COMPANY PROFILE
Tata Consultancy Services (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 Asia. The company is listed on the National Stock Exchange and
Bombay Stock Exchange of India.

Tata Consultancy Services was established in the year 1968 and is a pioneer in Information
Technology Outsourcing and Management Industry. It began as the "Tata Computer Centre", for
the company Tata Group whose main business was to provide computer services to other group
companies. F C Kohli was the first general manager. JRD Tata was the first chairman, followed
by NaniPalkhivala.

One of TCS' first assignments was to provide punched card services to a sister concern, Tata
Steel (then TISCO). It later bagged the country's first software project, the Inter-Branch
Reconciliation System (IBRS) for the Central Bank of India. It also provided bureau services to
Unit Trust of India, thus becoming one of the first companies to offer BPO services.

In the early 1970s, Tata Consultancy Services started exporting its services. TCS's first
international order came from Burroughs, one of the first business computer manufacturers. This
experience also helped TCS bag its first onsite project - the Institutional Group & Information
Company (IGIC), a data centre for ten banks, which catered to two million customers in the US.

In 1981, TCS set up India's first software research and development center, the Tata Research
Development and Design Center (TRDDC). The first client-dedicated offshore development
center was set up for Compaq (then Tandem) in 1985.

In the early 1990s, the Indian IT outsourcing industry grew tremendously due to the Y2K bug
and the launch of a unified European currency, Euro. TCS pioneered the factory model for Y2K
conversion and developed software tools which automated the conversion process and enabled
third-party developers and clients to make use of it.

In 1999, TCS saw outsourcing opportunity in E-Commerce and related solutions and set up its E-
Business division with ten people. By 2004, E-Business was contributing half a billion dollars
(US) to TCS.

On 9 August 2004, TCS became a publicly listed company, much later than its rivals, Infosys,
Wipro and Mahindra Satyam.

In 2008, the company went through an internal restructuring exercise that executives claim
would bring about agility to the organization.
With effect from January 2009, TCS acquired Citigroup Global Services, the in-house Indian
BPO of Citigroup thus entering the BFSI segment in a big way. The unit functions as a TCS e-
Serve Ltd which is the Banking BPO of TCS.

Offices and development centers

Tata Consultancy Services campus at Lucknow, India
Tata Consultancy Services at Madhapur, Hyderabad

Indian branches
TCS has development centres and/or regional offices in the following Indian cities: Ahmedabad,
Bangalore, Baroda, Bhubaneswar, Chennai, Coimbatore, Dehradun, Delhi, Gandhinagar, Goa,
Gurgaon, Guwahati, Hyderabad, Jaipur, Jamshedpur, kochi, Kolkata, Lucknow, Mumbai, Noida,
Pune, Thiruvananthapuram.

Global units

Africa:South Africa, Morocco.

Asia (outside India):Bahrain, China, Hong Kong, Indonesia, Israel, Japan, Malaysia, Saudi
Arabia, Singapore, South Korea, Taiwan, Thailand, UAE

Australia:Australia

Europe: Belgium, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy,
Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom

North America: Canada, Mexico, USA

South America:Argentina, Brazil, Chile, Colombia, Ecuador, Uruguay, Peru

 List of acquisitions
The table below gives some details of TCS' key acquisitions

Numbe Acquisitio Company Business Country Value Headcoun Remarks

r n Date t

1 8 October Citi Global Business India US$ 505 12472 TCS

2008 Services Process mn acquired
Limited Outsourcin key BFS
g domain
knowledge
.
2 November TKS- Banking Switzerlan US$ 80.4 115 Expand
, 2006 Teknosoft Product d mn product
portfolio
by
acquiring
rights to
Quartz and
ownership
of Alpha
and e-
portfolio,
enhanced
presence
in
Switzerlan
d and
France
3 November Comicrom Banking Chile US$ 23.7 1257 Entry into
, 2005 BPO mn Latin
America;
Access to
payment
processing
platform
4 February, 2006 Tata IT India - - -
2006 Infotech Services
5 October, FNS Core Australia US$ 26 190 Acquired
2005 Banking mn core
Product banking
 solution
product
and access
to 116
customers
in 35
countries;
FNS was
an existing
partner for
TCS
6 October, Pearl Group Insurance United US$ 94.7 950 Acquired
2005 Kingdom mn life and
pension
outsourcin
g business
from Pearl
Group;
Domain
knowledge
of life and
pension
underwriti
ng
business
7 November TCS IT Australia US$ 13.0 35 Access to
2006 Managemen Services mn Australian
t clients
8 May 2004 Phoenix BPO India US$ 13 350 Acquire
Global mn expertise
Solutions in
insurance
9 May 2005 Swedish IT Sweden US$ 4.8 - Acquire
Indian IT Services mn blue-chip
Resources European
AB customers
(SITAR) like
Ericsson,
IKEA,
Vattenfall
and
Hutchison;
SITAR
was TCS’
exclusive
partner in
 Sweden
and a non-
exclusive
partner in
Norway.
10 May 2004 Aviation IT India - 180 ASDC
Software Services was a
Developme Singapore
nt Airlines-
Consultancy TCS JV;
India Acquired
(ASDC) Singapore
Airlines as
a major
client
11 January Airline BPO India US$ 5.1 316 BPO
2004 Financial mn expertise
Support in Airline
Services and
India (AFS) Hospitalit
y sector
12 October CMC IT India US$33.8 3100 Access to
2001 Limited Services m (51%) domestic
capability;
continues
to be a
separately
run
company.

INNOVATIONS AND R&D

Tata Research Development and Design Center

TCS established the first software research center in India, the Tata Research Development and
Design Center, in Pune, India in 1981.TRDDC undertakes research in Software Engineering,
Process Engineering and Systems Research.
Researchers at TRDDC also developed MasterCraft (now called TCS Code Generator
Framework) an artificial intelligence software that can automatically create code from a simple
computer language, and rewrite the code based on the user's needs.

Research at TRDDC has also resulted in the development of Sujal, a low-cost water purifier that
can be manufactured using locally available resources. TCS deployed thousands of these filters
in the Indian Ocean Tsunami disaster of 2004 as part of its relief activities. This product has been
marketed in India as Swach, a low cost water purifier.

Innovation

In 2007, TCS launched its Co-Innovation Network, a network of TCS Innovation Labs, startup
alliances, University Research Departments, and venture capitalists.

In addition to TRDDC, TCS has 19 Innovation Labs based in three countries.

 TCS Innovation Lab, Convergence: Content management and delivery, convergence

engines, networks such as 3G, WiMax, WiMesh, IP Testing for Quality of Service, IMS,
OSS/BSS systems, and others.
 TCS Innovation Lab, Delhi: Software Architectures, Software as a Service, natural
language processing, text, data and process analytics, multimedia applications and
graphics.
 TCS Innovation Lab, Embedded Systems:Medical electronics, WiMAX, and WLAN
technologies.
 TCS Innovation Lab, Hyderabad: Computational methods in life sciences, meta-
genomics, systems biology, e-security, smart card-based applications, digital media
protection, nano-biotechnology, quantitative finance.
 TCS Innovation Lab, Mumbai: Speech and natural language processing, wireless systems
and wireless applications.
 TCS Innovation Lab, Insurance - Chennai:IT Optimization, Business Process
Optimization, Customer Centricity Enablers, Enterprise Mobility, Telematics, Text
Analytics, 2D Barcodes, Mashups, Innovation in Product Development and Management
(PLM) for Insurance.
 TCS Innovation Lab, Chennai: Infrastructure innovation, green computing, Web 2.0 and
next-generation user interfaces.
 TCS Innovation Lab, Peterborough, England: New-wave communications for the
enterprises, utility computing and RFID (chips, tags, labels, readers and middleware).
 TCS Innovation Lab: Performance Engineering, Mumbai: Performance management,
high performance technology components, and others.
 TCS Innovation Lab, Cincinnati, United States: Engineering and Manufacturing IT
solutions.

Some of the assets created by TCS Innovation Labs are DBProdem, Jensor, Wanem, Scrutinet.
In 2008, the TCS Innovation Lab-developed product, mKrishi, won the Wall Street Journal
Technology Innovation Award in the Wireless category. mKrishi is a service that would enable
India's farmers to receive useful data on an inexpensive mobile device.

TCS' Co-Innovation Network partners include Collabnet, Cassatt, MetricStream, academic

institutions such as Stanford, MIT, various IITs, and venture capitalists like Sequoia and Kleiner
Perkins.

Employees
TCS is considered one of the largest private sector employers in India with core strength in
excess of 160,000 individuals. TCS has one of the lowest attrition rates in the Indian IT industry.

US Visa Program
TCS was the fourth largest visa recipient in 2008, preceded by Infosys, Wipro and Satyam.
RATIO ANALYSIS
Ratio analysis
Ratio analysis is a widely used tool of financial analysis. The term ratio in it
refers to the relationship expressed in mathematical terms between two individual figures or
group of figures connected with each other in some logical manner and are selected from
financial statements of the concern. The ratio analysis is based on the fact that a single
accounting figure by itself may not communicate any meaningful information but when
expressed as a relative to some other figure, it may definitely provide some significant
information the relationship between two or more accounting figure/groups is called a financial
ratio helps to express the relationship between two accounting figures in such a way that users
can draw conclusions about the performance, strengths and weakness of a firm.

Classification of ratios:
A) Liquidity ratios
B) Leverage ratios
C) Activity ratios
D) Profitability ratios

A) LIQUIDITY RATIOS
These ratios portray the capacity of the business unit to meet its short term obligation from
its short-term resources (e.g.) current ratio, quick ratio.

i) Current ratio
Current ratio may be defined as the relationship between current assets and current
liabilities it is the most common ratio for measuring liquidity. It is calculated by dividing current
assets and current liabilities. Current assets are those, the amount of which can be realized with
in a period of one year. Current liabilities are those amounts which are payable with in a period
of one year.

Current assets
Current assets = -------------------------
Current liabilities
ii) Liquid Ratio
The term ‘liquidity’ refers to the ability of a firm to pay its short-term
obligation as and when they become due. The term quick assets or liquid assets refers current
assets which can be converted into cash immediately it comprises all current assets except stock
and prepaid expenses it is determined by dividing quick assets by quick liabilities.

Liquid assets
Liquid ratio = -------------------------
Liquid liabilities

iii) Absolute liquidity ratio

Absolute liquid assets include cash, bank, and marketable securities. This ratio
Obtained by dividing cash and bank and marketable securities by current liabilities.

Cash + bank +marketable securities

Absolute liquidity ratio = ----------------------------------------------
Current liabilities
B) LEVERAGE RATIOS
Many financial analyses are interested in the relative use of debt and equity in the firm.
The term ‘solvency’ refers to the ability of a concern to meet its long-term obligation.
Accordingly, long-term solvency ratios indicate a firm’s ability to meet the fixed interest and
costs and repayment schedules associated with its long-term borrowings. (E.g.) debt equity ratio,
proprietary ratio, etc….

i) Debt equity ratio

It expresses the relationship between the external equities and internal equities or the
relationship between borrowed funds and ‘owners’ capital. It is a popular measure of the long-
term financial solvency of a firm. This relationship is shown by the debt equity ratio. This ratio
indicates the relative proportion of dept and equity in financing the assets of a firm. This ratio is
computed by dividing the total debt of the firm by its equity (i.e.) net worth.

Outsider’s funds
Debt equity ratio = ------------------------------
Proprietor’s funds

ii) Proprietary ratio

Proprietary ratio relates to the proprietors funds to total assets. It reveals the owners
contribution to the total value of assets. This ratio shows the long-time solvency of the business
it is calculated by dividing proprietor’s funds by the total tangible assets.

Proprietor’s funds
Proprietary ratio = ---------------------------
Total tangible assets
C) ACTIVITY RATIOS
These ratios evaluate the use of the total resources of the business concern along with the
use of the components of total assets. They are intended to measure the effectiveness of the
assets management the efficiency with which the assts are used would be reflected in the speed
and rapidity with which the assets are converted into sales. The greater the rate of turnover, the
more efficient the management would be (E.g.) stock turnover ratio, fixed assets turnover ratios
etc….

i) Stock turnover ratio

This ratio indicates whether investment is inventory is efficiently used or not it explains
whether investment in inventories in with in proper limits or not. It also measures the
effectiveness of the firms’ sales efforts the ratio is calculated as follows.
Cost of goods sold
Stock turnover ratio = -----------------------------
Average stock

Opening Stock + Closing Stock

Average stock = -----------------------------------------
2
ii) Fixed assets turnover ratio
The ratio indicates the extent to which the investments in fixed assets contribute towards
sales. If compared with a pervious year. It indicates whether the investment infixed assets has
been judious or not the ratio is calculated as follows.

Net sales
Fixed assets turnover ratio = -------------------
Fixed assets

iii)Working capital turnover ratio

Working capital turnover ratio indicates the velocity of the utilization of net working
capital. This ratio indicates the number of times the working capital is turned over in the course
of a year. It is a good measure over –trading and under-trading.

Net sales
Working capital turnover ratio = ----------------------------
Net working capital

iv) Return on total assets

Profitability can be measured in terms of relationship between net profit and total
assets. It measures the profitability of investment. The overall profitability can be known by
applying this ratio.
Net profit
Return on total assets = ----------------------------- x100
Total assets
D)PROFITABILITY RATIOS

The profitability ratios of a business concern can be measured by the profitability ratios.
These ratios highlight the end result of business activities by which alone the over all
efficiency of a business unit can be judged, (E.g.) gross ratios, Net profit ratio.

i) Gross profit ratio

This ratio expresses the relationship between Gross profit and sales. It indicated the
efficiency of production or trading operation. A high gross profit ratio is a good management as
it implies that cost of production is relatively low.

Gross profit
Gross profit ratio = ----------------------------------- x 100
Net sales

ii) Net profit ratio

Net profit ratio establishes a relationship between net profit (after taxes) and sales. It is
determined by dividing the net income after tax to the net sales for the period and measures the
profit per rupee of sales.

Net profit
Net profit sales = ----------------- x 100
Net sales
iii) Expenses ratio
This ratio establishes the relationship between various indirect expenses to net sales.
a) ADMINISTRATIVE EXPENSES RATIO

Administrative expenses
Administrative expenses ratio = ------------------------------- x 100
Sales

b) SELLING &DISTRIBUTION EXPENSES RATIO

Selling &distribution expenses

Selling &distribution expenses ratio = ----------------------------------------- x 100
Sales
 OBJECTIVES OF THE STUDY

 The basic objective of studying the ratios of the company is to know the
financial position of the company.

 To know the borrowings of the company as well as the liquidity position of

the company.

 To study the current assets and current liabilities so as to know weather the
shareholders could invest in Tata Consultancy Services or not.

 To study the profits of the business and net sales of the business and to
know the stock reserve for sales of the business.

 To know the solvency of the business and the capacity to give interest to
the long term loan lenders (debenture holders) and dividend to the share
holders.
 CALCULATIONS

(A) Current Assets Ratio

Year 2008 2009 2010

10837.0
Current Assets 7396.76 9250.79 8
Current Liabilities 3713 5054.41 7279.35
1.99212 1.83024 1.48874
Current Ratio 5 1 3

Current Ratio
2.5

1.5 Current Ratio

0.5

0
2008 2009 2010

The above diagram shows the Current Ratio of TCS for the year 2008-2010.
The current Ratio is declining every year.The normal current ratio is 2:1.
Though there is a decline in the current ratio but the company is still enjoying its
credit worthiness.
 (B) Liquid Ratio

Year 2008 2009 2010

Liquid Assets 7379.27 9233.84 10830.3
Current Liabilities 3713 5054.41 7279.35
1.98741 1.82688 1.48781
Liquid ratio 4 8 1

Liquid ratio
2.5

1.5 Liquid ratio

0.5

0
2008 2009 2010

The above diagram shows the Liquid Ratio of TCS for the year 2008-2010.
Liquid ratio us declining every year. The liquid ratio of TCS is more than the
standard liquid ratio i.e. 1:1. It signifies that the firm is able to meet it’s short term
obligations in time.
(C)Debt Equity Ratio

Year 2008 2009 2010

Outsider's Fund 18.25 40.37 35.74
Proprietor's Fund 197.86 197.86 295.72
0.09223 0.20403 0.12085
Debt Equity Ratio 7 3 8

Debt Equity Ratio

0.25

0.2

0.15 Debt Equity Ratio

0.1

0.05

0
2008 2009 2010

The above table and diagramshows the debt equity relationship of the
company during the study period.In all the years the equity is more when
compared with borrowings. Hence the company is maintaining its debt position
(D) Selling & Administrative Exp. Ratio
Year 2008 2009 2010
Selling & Administrative Exp 991.43 1218.41 1268.03
18533.7 22401.9 23044.4
Net Sales 2 2 5
Selling & Administrative Exp. 5.34933 5.43886
Ratio 1 4 5.50254

Selling & Administrative Exp. Ratio

5.55

5.5

5.45
Selling & Administrative
Exp. Ratio
5.4

5.35

5.3

5.25
2008 2009 2010

The ratio shows selling and administrative expenses against the sales.The graph
shows that the ratio is increasing this is because the sales are increasing, so is the
cost associated with it.
 (E)Stock turnover ratio
Year 2008 2009 2010
18533.7 22401.9 23044.4
Net Sales 2 2 5
Average Stock 17.19 16.95 6.78
1078.16 1321.64 3398.88
Stock Turnover Ratio 9 7 6

Stock Turnover Ratio

4000
3500
3000
2500
Stock Turnover Ratio
2000
1500
1000
500
0
2008 2009 2010

The above table and diagram shows the relation ship between Net sales and average stock. A
high inventory ratio of TCS means that the company is efficiently managing and selling its
inventory. The faster the inventory sells, the less funds the company has tied up.
(F) Fixed Assets Turnover Ratio
Year 2008 2009 2010
Net Sales 18533.72 22401.92 23044.45
Fixed Assets 3240.64 4359.24 4871.27
Fixed Assets Turnover Ratio 5.719154 5.138951 4.730686

Fixed Assets Turnover Ratio

7

5
Fixed Assets Turnover
4 Ratio
3

0
2008 2009 2010

The above table and diagram shows the relationship between the fixed assets
and sales. A higher fixed-asset turnover ratio shows that the company has
been more effective in using the investment in fixed assets to generate
revenues.

But in case of TCS both the Net Sales and value of fixed assets have
increased but the percentage change in fixed assets is much more than that
of the change in Net Sales.
 (G) Working Capital Turnover Ratio
Year 2008 2009 2010
18533.7 22401.9 23044.4
Net Sales 2 2 5
10837.0
Current Assets 7396.76 9250.79 8
Current Liabilities 3713 5054.41 7279.35
Working Capital 3683.76 4196.38 3557.73
5.03119 5.33839
Working Capital Turnover Ratio 6 2 6.47729

Working Capital Turnover Ratio

7

5
Working Capital Turnover
4 Ratio
3

0
2008 2009 2010

The above table and diagram shows the relation ship between net working
capital and net sales.As the above ratio is increasing it means that the company
is generating a lot of sales compared to the money it uses to fund the sales. 
 (H) Return on total assets

Year 2008 2009 2010

Net Profit 4508.76 4696.21 5618.51
11023.0 13486.6 15152.3
Total Assets 6 2 6
40.9029 34.8212
Return on Total Assets 8 5 37.0801

Return on Total Assets

42

40

38
Return on Total Assets
36

34

32

30
2008 2009 2010
 The above table and diagram shows the relation ship between the total assets to
net sales. In 2008 the return on assets was comparatively high as compared to
2009. The ROA figure gives investors an idea of how effectively the company
is converting the money it has to invest into net income

(I)Gross Profit Ratio

Year 2008 2009 2010

Gross Profit 5025.61 6020.83 6667.17
18533.7 22401.9 23044.4
Net Sales 2 2 5
27.1160 28.9317
Gross Profit Ratio 3 26.8764 8

Gross Profit Ratio

29.5
29
28.5
28
Gross Profit Ratio
27.5
27
26.5
26
25.5
2008 2009 2010
 The above table and diagram shows the relation ship between the gross profit
and net sales in percentage. It can be seen that the G.P ratio is almost constant
for the period of study.

(J) Net profit ratio

Year 2008 2009 2010

Net Profit 4508.76 4696.21 5618.51
18533.7 22401.9 23044.4
Net Sales 2 2 5
24.3273 20.9634 24.3811
Net Profit Ratio 3 3 9

Net Profit Ratio

25

24

23
Net Profit Ratio
22

21

20

19
2008 2009 2010
The above table and diagram shows the relation ship between net profit and net
sales. The above graph shows that the N.P ratio decreased in 2009 as compared
to 2008 but again increased in 2010.

LIMITATIONS

 The analysis was made with the help of the secondary data collected from
the company balance sheet

 The period of study is 3 years from 2008-2010.

 BIBLIOGRAPHY

1) www.investopedia.com/university/ratios/
2) http://www.moneycontrol.com/financials/tataconsultancyservices/balance-
sheet/TCS