Tata Consultancy Services (TCS)

CMP: | 3121 Target: | 3630 (16%) Target Period: 12 months BUY

October 11, 2022

Strong Q2 numbers…

About the stock: Tata Consultancy Services (TCS) is one of the leading IT service Particulars

Result Update
providers with a presence in BFSI, communication, manufacturing, retail & hi tech. P articular Amount
 Consistent organic revenue growth and industry leading margins (>25%) Market Capitalization (| Crore) 11,41,554.0
Total Debt (| Crore) 7,818.0
 Stable management, robust return ratios (>RoCE 40%) & payouts (~70%) Cash and equivalents (| Crore) 48,483.0
EV (| Crore) 11,10,860.0

52 week H/L 4043/ 2927

Q2FY23 Results: TCS reported strong revenue & margin growth for Q2. Equity capital (| Crore) 366
 Reported CC growth of 4% QoQ & 15.4% YoY, respectively Face value |1
Shareholding pattern
 EBIT margins improved 90 bps QoQ to 24% for the quarter
Sep-21 Dec-21 M ar-22 Jun-22
 TCV remained steady at US$8.1 billion (bn) Promoters 72.2 72.2 72.3 72.3
FII 15.4 15.0 14.2 13.5
DII 7.8 7.8 7.9 8.4
Others 4.7 5.1 5.7 5.8
What should investors do? TCS’ share price has grown by ~2.5x over the past Price Chart
five years (from ~| 1,227 in October 2017 to ~| 3,121 levels in October 2022).
20,000 4,500
 We maintain BUY rating on the stock 16,000 4,000
3,500
12,000 3,000

ICICI Securities – Retail Equity Research

Target Price and Valuation: We value TCS at | 3,630 i.e. 26x P/E on FY25E EPS 8,000 2,500
2,000
4,000 1,500
0 1,000

Sep-2022
Jun-2020

Jun-2021

May-2022
Jan-2022
Feb-2020

Feb-2021
Oct-2019

Oct-2020

Oct-2021
Key triggers for future price performance:
 New organisation structure, which is aimed at increasing customer Nifty (L.H.S) Price (R.H.S)

stickiness, is expected to enhance market share gains

 Increase in outsourcing in Europe, vendor consolidation and deal pipeline Recent event & key risks
leading to rupee revenue CAGR of 9.4% over FY22-25E
 Declared interim dividend of | 8
 We expect margins to improve from FY23 onwards due to utilisation per share
improvement, moderation of sub-contractor costs. We build in margin
 Key Risk: i) Higher-than-
expansion of 130 bps over FY23-25E
expected attrition, ii)
 Double-digit return ratios, strong cash generation and healthy payout Deteriorating TCV

Research Analyst
Sameer Pardikar
Alternate Stock Idea: Besides TCS, in our IT coverage we also like Infosys. sameer.pardikar@icicisecurities.com
 Key beneficiary of improved digital demand, industry leading revenue Sujay Chavan
growth and healthy capital allocation prompt us to be positive sujay.chavan @icicisecurities.com

 BUY with a target price of | 1,760

Key Financial Summary

5 year CAGR 3 year CAGR
Financials FY21 FY22 FY23E FY24E FY25E
(FY17-22) (FY22-25E)
Net Sales 1,64,177 1,91,754 12.9 2,18,226 2,35,293 2,51,410 9.4
EBITDA 46,546 53,057 13.2 58,048 64,235 69,138 9.2
EBITDA Margins (%) 28.4 27.7 26.6 27.3 27.5
Net Profit 32,430 38,327 9.9 42,335 47,680 51,091 10.1
EPS (|) 86.7 104.7 9.9 115.7 130.3 139.6
P/E 35.5 29.8 27.0 23.9 22.3
RoNW (%) 37.5 43.0 42.0 41.0 38.6
RoCE (%) 45.9 51.4 49.3 48.7 46.3
s

Source: Company, ICICI Direct Research

 Result Update | Tata Consultancy Services ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

 TCS reported 4% QoQ, 15.4% YoY CC revenue growth for the quarter.
Dollar revenues were up 1.4% QoQ and 8.6% YoY to US$6,877 million (mn),
implying 260 bps cross currency headwinds for the quarter

 In terms of revenue by geographies (in CC terms), the North America market

(54% of mix), grew 17.6% YoY while UK and Continental Europe reported
growth of 14.8% and 14.1% YoY, respectively. India, Asia Pacific and MEA
regions grew 16.7%, 7.0% and 8.2% YoY, respectively. Vertical wise,
growth was aided by retail, BFSI, media & comm and healthcare, which grew
22.9%, 13.1%, 18.7% and 14.5% YoY, respectively

 LTM attrition continued to inch up to 21.5% (up from 19.7% in the previous
quarter). The management in Q1FY23 earnings call had indicated that LTM
attrition is likely to be at an elevated level in H2 and is expected to moderate
in H2. In continuance of its commentary, the company mentioned that LTM
attrition in Q2 could be at a peak and is expected to moderate from here
onwards. The management also indicated it is also a function of job market
demand supply mismatch, which is now cooling off for tech talent

 The company added 9,840 net associates in Q2, taking the total to 616,171.
TCS also indicated that it hired around 20,000 freshers in Q2

 On a reported basis, TCV for the quarter was at US$8.1 bn, which was
largely constant for two consecutive quarters (it reported US$8.2 bn TCV in
Q1). The company continued to maintain that steady state deal win number
for the quarter could be in the range of US$7-9 bn in the foreseeable future.
TCS also indicated that the deal win number was also impacted by currency
movement

 EBIT margin for the quarter was up 90 bps QoQ at 24%. There was a positive
impact of currency (rupee depreciation against dollar) as well as utilisation
improvement. Margin headwinds for the quarter were normalisation of
travelling and facility expenses as well as increase in backfilling costs due
to high LTM attrition. The company maintained its earlier guidance of exit
margins of 25% in Q4FY23

 TCS indicated that it has hired 35,000 freshers in H1FY23 (15,000 in Q1 and
20,000 in Q2) and maintained guidance of 40,000 fresher additions in FY23,
which implies that pace of fresher additions is likely to come down in H2.
The company also indicated that fresher hiring is being done keeping an eye
on long term demand outlook and there could be some variation in quarterly
trends. TCS clarified that it is honouring all fresher’s offers. It has also
indicated that 70% of employees have been paid 100% variable payout
while rest 30% of employees would be paid on the basis of performance
 TCS indicated that demand for the US market continued to robust, which is
a function of continued strong deal execution. It also indicated that near
term outlook also looks strong with healthy TCV of US$2 bn+ for the market.
The company indicated that it has not picked up any sign of growth
moderation in the region as well as change in spending pattern across
clients. TCS is also not seeing any deal cancellation or delay in the project
execution in the region. The company expects normal seasonality in the US
market for the December quarter

 Regarding Europe region, the company continued to see robust numbers

as it indicates that Europe is going through a strong tech cycle where
technology is a key driver in both revenue and cost reduction programmes.
TCS believes that it is playing that cycle well and continues to gain market
share there, which is also a reflection of its continued strong growth of
14%+ on a YoY basis in Q2. However, the company indicated that the near
term outlook for the Europe region is cautious due to continued geopolitical
risks and volatility in the upcoming winter regarding energy requirements.
The order book in Q2FY23 grew 33% QoQ for Europe

ICICI Securities | Retail Research 2

 Result Update | Tata Consultancy Services ICICI Direct Research

 The management indicated that it expects a margin improvement, going

forward. Some margin tailwinds are i) rupee depreciation, ii) pricing
increase, iii) utilisation improvement (as fresher hiring is likely come down),
iv) moderation of subcontractor costs, which is likely to mitigate
normalisation of travel expenses and facility expenses. Subcontractor costs
as percentage of revenue dipped marginally to 9.9% of sales in Q2FY23 vs.
7.6% it achieved few quarters back. Facility expenses as a percentage of
sales is currently at 1.2%, up from the Covid quarter low of 0.6% of sales

ICICI Securities | Retail Research 3

 Result Update | Tata Consultancy Services ICICI Direct Research

Exhibit 1: Variance Analysis

Q2FY23 Q2FY23E Q2FY22 YoY (%) Q1FY23 QoQ (%) C omments
Revenue grew 4% QoQ in CC term driven by
Revenue (US$ mn) 6,877 6,882 6,333 8.6 6,780 1.4 continued growth momentum in BFSI, retail,
manufacturing, etc
Revenue growth was aided by the North
America region, which grew 17.6% YoY in CC
Revenue (| crore) 55,309 54,916 46,867 18.0 52,758 4.8 terms while vertical wise retail, BFSI, media &
healthcare grew 22.9%, 13.1%, 18.7% & 14.5%
YoY, respectively, in CC terms
Employee expenses 32,526 32,675 27,048 20.3 31,553 3.1

Gross Margin 22,783 22,241 19,819 15.0 21,205 7.4

Gross margin (%) 41.2 40.5 42.3 -110 bps 40.2 100 bps
SG&A expenses 8,267 8,018 6,704 23.3 7,788 6.2

EBITDA 14,516 14,223 13,115 10.7 13,417 8.2

EBITDA Margin (%) 26.2 25.9 28.0 -174 bps 25.4 81 bps
Depreciation 1,237 1,263 1,115 10.9 1,231 0.5
EBIT 13,279 12,960 12,000 10.7 12,186 9.0
EBIT margin expanded due to currency
depreciation & utilisation related benefits, which
was mitigated, to some extent, due to
EBIT Margin (%) 24.0 23.6 25.6 -160 bps 23.1 91 bps
normalisation of travel & facility expenses as
well as increase in backfilling costs amid high
attrition
Other income (less interest) 817 600 969 -15.7 590 38.5
PBT 14,096 13,560 12,969 8.7 12,776 10.3
Tax paid 3,631 3,458 3,316 9.5 3,257 11.5
Reported PAT 10,431 10,062 9,624 8.4 9,478 10.1
Adjusted PAT 10,431 10,062 9,624 8.4 9,478 10.1
Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates

FY23E FY24E FY25E C omments
(| Crore) old New % Change Old New % Change Introduced

Revenue 214,348 218,226 1.8 236,378 235,293 -0.5 251,410

EBIT 52,515 52,811 0.6 59,095 59,059 -0.1 63,607

EBIT Margin (%) 24.5 24.2 -30 bps 25.0 25.1 10 bps 25.3 We build in margin expansion from FY23 onwards

PAT 42,115 42,335 0.5 47,707 47,680 -0.1 51,091

EPS (|) 115.1 115.7 0.5 130.4 130.3 -0.1 139.6
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 4

 Result Update | Tata Consultancy Services ICICI Direct Research

Quarterly highlights

Exhibit 3: Dollar growth hit by cross currency headwinds Exhibit 4: CC YoY revenue growth has been steady
25.0 1.2 20.0
21.6 16.4 15.5 15.4 14.3 15.5 15.4
20.0 1.0 15.0
16.8
15.0 14.4 0.8
11.8 10.0
10.0 10.0 10.2 0.6
8.6
5.0
5.0 0.4 0.4 5.9
(1.7) 2.1 -
- 0.2 (3.2)
(5.0) - (5.0)
Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23
Dollar revenue YoY growth (%) CC YoY revenue growth (%)

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 5: Steady growth in North America market Exhibit 6: UK & Continental Europe growth pick up in Q2
25.0 25.0
18.0 18.7 19.1 20.0
20.0 17.4 17.6
15.8 15.0
15.0
10.0

11.7

13.0

12.6

14.1
14.8
19.7
16.3

13.5
15.6

17.5
12.7

10.1

12.1
10.0 5.9

3.7

3.6

1.0
5.0
5.0 -
(0.2)
(5.0)
(8.1)

(1.6)
-
(5.0) (3.0) (10.0)
Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23
Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23

North America CC YoY growth (%) CC YoY growth (%) - Continental Europe CC YoY growth (%) - UK

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 7: BFSI revenue remains stable Exhibit 8: Retail revenues continue to be strong
25.0 30.0
21.7 22.1 25.1
20.0 19.3 25.0 20.4
18.4 22.9
17.9 20.0
15.0 13.9
17.0 15.0
13.3 13.1
10.0 12.9 10.0
5.0 (0.9)
5.0 -
2.4 (5.7)
- (5.0)
(10.0) (5.1)
(5.0) (1.1)
Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23
Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q1FY23

BFSI revenue CC YoY growth (%) Retail & CPG revenue CC YoY growth (%)

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 5

 Result Update | Tata Consultancy Services ICICI Direct Research

Exhibit 9: Employee additions moderating Exhibit 10: LTM attrition at elevated level
40.0 25.0 21.5
35.0 19.7
30.0 20.0 17.4
25.0 15.3
20.0 15.0 11.9
15.0 8.9 8.6
10.0
15.7
10.0 7.6 7.2

35.2

14.1
19.4

20.4

19.7

28.2
9.9

9.8
5.0
- 5.0
(5.0)
Q2FY21 (5.0)

(10.0) -

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23
Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23

Q2FY23
Employee addition ('000) LTM Attrition - IT Services(%)

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 11: Sub-contracting costs largely stable Exhibit 12: Travel cost continues to inch up
12.0 2.2
9.5 10.0 10.0 2.1 2.1
8.9 8.9 9.2 2.0
10.0 8.6
7.6 7.7 1.8 1.8
8.0 1.6
1.4
6.0
1.2 1.2
4.0 1.0 1.0 1.1
0.8 0.7 0.8 0.8
2.0 0.7 0.7
0.6 0.6 0.6
- 0.4
Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q2FY20

Q3FY20

Q4FY20

Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22
Q1FY23

Q2FY23

Q1FY23

Q2FY23
Sub contracting cost as % of Revenue Travel cost as % of Revenue

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 13: Employee costs cool off after Q1 wage hike Exhibit 14: Margins on up move
58.0 57.7 57.5 28.0
26.6 26.8
56.5 56.5 56.3 27.0 26.2
57.0 25.5 25.6
56.0 56.1 26.0 25.0 25.1 25.0 25.0
55.8 55.6
56.0 55.2 25.0
55.1 24.0 24.0
23.6
55.0 24.0 23.1
54.3 54.1 23.0
54.0
22.0
53.0 21.0
Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q2FY20

Q3FY20

Q4FY20

Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22
Q2FY20

Q3FY20

Q4FY20

Q1FY23

Q2FY23

Q1FY23

Q2FY23

Employee cost as % of Revenue EBIT margin (%)

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 6

 Result Update | Tata Consultancy Services ICICI Direct Research

Exhibit 15: TCV remains steady Exhibit 16: TCV trend for BFSI
11.3
12.0 4.5 3.9
8.9 9.2 4.0
10.0 8.6 8.1 7.6 7.6 8.2 8.1 3.2
3.5 2.9
8.0 6.4 6.0 6.9 6.8 3.0 2.6 2.6
2.1 2.2 2.1 2.3
2.5
6.0 1.7
2.0
4.0 1.5
1.0
2.0
0.5
- -
Q2FY20

Q3FY20

Q4FY20

Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22
Q1FY23

Q2FY23

Q1FY23

Q2FY23
TCV (US$bn) TCV (US$bn) -BFSI

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 17: TCV trend for retail Exhibit 18: TCV trend for North America
3.0 2.6 7.0 6.1
2.5 6.0
5.0 4.2 4.5 4.5 4.3
2.0 1.6 4.0 4.0 3.9
1.4 1.5 4.0 3.3 3.2
1.5 1.2 1.2
0.9 1.0 1.0 1.0 3.0
1.0 2.0
0.5 1.0
- -
Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22
Q1FY23

Q2FY23

Q1FY23

Q2FY23
TCV (US$bn) -Retail TCV (US$bn) -North America

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 19: Adds five clients in US$100 mn+ on YoY basis Exhibit 20: Client addition trend
300 1,400

250 1,200
1,000
200
800
150
600
100
400
1,118

1,138

1,182
1,175

1,196

1,210

50
120

124

124

586

417

619
426

638

446

650
455
241
105

247
114

255
118

268

272

283

405

609

439

650

200
50

54

58

58

59

59

- -
Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23

US$ 20M+ Clients US$ 50M+ Clients US$ 100M+ Clients US$ 1M+ Clients US$ 5M+ Clients US$ 10M+ Clients

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 7

 Result Update | Tata Consultancy Services ICICI Direct Research

Peer comparison
Exhibit 21: Peer Comparison
EPS (|) P/E RoCE (x) RoE(x)
Company Name CMP TP (|) Rating Mcap (|) FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E
HCL Tech (HCLTEC) 962 1,050 HOLD 2,61,055 49.8 50.5 55.2 19.3 19.1 17.4 24.2 24.8 26.0 21.8 21.0 21.9
Infosys (INFTEC) 1,463 1,760 BUY 6,15,575 52.1 58.1 67.5 28.1 25.2 21.7 36.0 35.0 37.7 29.2 29.1 31.1
TCS (TCS) 3,119 3,630 BUY 11,41,258 104.7 115.1 130.4 29.8 27.1 23.9 51.4 49.2 48.7 43.0 41.9 41.0
Tech M (TECMAH) 1,030 1,170 BUY 1,00,200 63.1 66.2 77.9 16.3 15.6 13.2 22.5 21.8 22.7 20.7 19.4 20.3
Wipro (WIPRO) 411 460 HOLD 2,25,281 22.3 23.3 27.1 18.5 17.7 15.2 18.8 18.9 21.0 19.6 18.7 20.8
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 8

 Result Update | Tata Consultancy Services ICICI Direct Research

Financial summary

Exhibit 22: Profit and loss statement | crore Exhibit 23: Cash flow statement | crore
(Year-end March) FY22 FY23E FY24E FY25E (Year-end March) FY22 FY23E FY24E FY25E
Total operating Income 1,91,754 2,18,226 2,35,293 2,51,410 Profit before Tax 51,687 56,837 63,735 68,284
Growth (%) 16.8 13.8 7.8 6.8 Add: Depreciation 4,604 5,237 5,176 5,531
COGS (employee expenses) 1,11,053 1,29,626 1,37,882 1,47,075 (Inc)/dec in Current Assets 1,092 -2,505 -4,891 -4,618
S,G&A expenses 27,644 30,552 33,176 35,197 Inc/(dec) in CL and Provisions 8,124 3,521 3,641 3,438
Total Operating Expenditure 1,38,697 1,60,178 1,71,058 1,82,273 Taxes paid -13,238 -14,380 -15,934 -17,071
EBITDA 53,057 58,048 64,235 69,138 CF from operating activities 49,332 45,148 47,714 51,550
Growth (%) 14.0 9.4 10.7 7.6 (Inc)/dec in Investments -1,100 -35 -358 -338
Depreciation 4,604 5,237 5,176 5,531 (Inc)/dec in Fixed Assets -3,835 -4,365 -4,706 -5,028
Other Income less interest 3,234 4,026 4,677 4,677 Others 2,937 3,563 4,014 4,014
PBT 51,687 56,837 63,735 68,284 CF from investing activities -1,998 -836 -1,050 -1,353
Total Tax 13,238 14,380 15,934 17,071 Inc/(dec) in loan funds 0 0 0 0
Minority Interest 122 122 122 122 Dividend paid & dividend tax -34,123 -30,587 -32,256 -34,891
Others -1,498 0 0 0
PAT 38,327 42,335 47,680 51,091 CF from financing activities -35,621 -30,587 -32,256 -34,891
Growth (%) 18.2 10.5 12.6 7.2 Net Cash flow 11,713 13,724 14,408 15,306
EPS (|) 104.7 115.7 130.3 139.6 Exchange difference 0 0 0 0
PAT 38,327 42,335 47,680 51,091 Opening Cash 7,705 21,042 34,766 49,174
EPS - Reported (|) 104.7 115.7 130.3 139.6 Closing cash and Bank 21,042 34,766 49,174 64,480 eses
es

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 24: Balance sheet | crore Exhibit 25: Key ratios | crore
(Year-end March) FY22 FY23E FY24E FY25E (Year-end March) FY22 FY23E FY24E FY25E
Liabilities Per share data (|)
Equity Capital 366 366 366 366 Adjusted EPS (Diluted) 104.7 115.7 130.3 139.6
Reserve and Surplus 88,773 1,00,521 1,15,944 1,32,144 BV per share 243.5 275.6 317.8 362.0
Share Premium 0 0 0 0 DPS 93.3 83.6 88.2 95.4
Total Shareholders funds 89,139 1,00,887 1,16,310 1,32,510 Cash Per Share 49.8 95.0 134.4 176.2
Total debt 7,818 10,229 10,364 10,490 Operating Ratios (%)
Other liabilities & Provisions 2,359 2,678 2,755 2,829 EBIT margins 25.3 24.2 25.1 25.3
Deferred tax liability(net) 590 590 590 590 PBT Margins 27.0 26.0 27.1 27.2
Minority Interest / Others 707 829 951 1,073 PAT Margin 20.0 19.4 20.3 20.3
Total Liabilities 1,00,613 1,15,213 1,30,970 1,47,492 Debtor days 65 67 67 67
Creditor days 15 17 17 17
Assets Return Ratios (%)
Net assets & CWIP 20,716 19,167 18,696 18,193 RoE 43.0 42.0 41.0 38.6
Goodwill 1,787 1,787 1,787 1,787 RoCE 51.4 49.3 48.7 46.3
Other non current assets 10,501 10,536 10,894 11,233 RoIC 92.9 105.2 114.6 120.6
Debtors 34,219 40,054 43,187 46,145 Valuation Ratios (x)
Loans and Advances 6,456 10,911 11,765 12,571 P/E 29.7 26.9 23.9 22.3
Other Current Assets 19,352 11,566 12,471 13,325 EV / Net Sales 5.7 5.0 4.6 4.2
Current Investments 30,262 30,262 30,262 30,262 Market Cap / Sales 6.0 5.2 4.9 4.5
Cash 18,221 34,766 49,174 64,480 Solvency Ratios
Trade Payable 8,045 10,448 11,265 12,036 Debt / EBITDA 0.1 0.2 0.2 0.2
OCL & Provisions 32,856 33,389 36,000 38,466 Debt / Equity 0.1 0.1 0.1 0.1
Application of Funds 1,00,613 1,15,213 1,30,971 1,47,493 Current Ratio 1.5 1.4 1.4 1.4
Source: Company, ICICI Direct Research Quick Ratio 1.5 1.4 1.4 1.4
es

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 9

 Result Update | Tata Consultancy Services ICICI Direct Research

Exhibit 26: ICICI Direct coverage universe (IT)

EPS (|) P/E RoCE (x) RoE(x)
Company Name CMP TP (|) Rating Mcap (|) FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E
HCL Tech (HCLTEC) 962 1,050 HOLD 2,61,055 49.8 50.5 55.2 19.3 19.1 17.4 24.2 24.8 26.0 21.8 21.0 21.9
Infosys (INFTEC) 1,463 1,760 BUY 6,15,575 52.1 58.1 67.5 28.1 25.2 21.7 36.0 35.0 37.7 29.2 29.1 31.1
TCS (TCS) 3,119 3,630 BUY 11,41,258 104.7 115.1 130.4 29.8 27.1 23.9 51.4 49.2 48.7 43.0 41.9 41.0
Tech M (TECMAH) 1,030 1,170 BUY 1,00,200 63.1 66.2 77.9 16.3 15.6 13.2 22.5 21.8 22.7 20.7 19.4 20.3
Wipro (WIPRO) 411 460 HOLD 2,25,281 22.3 23.3 27.1 18.5 17.7 15.2 18.8 18.9 21.0 19.6 18.7 20.8
LTI (LTINFC) 4,700 4,480 HOLD 82,355 130.8 140.3 165.9 35.9 33.5 28.3 32.3 29.0 29.6 26.1 24.1 24.4
Mindtree (MINCON) 3,348 3,320 BUY 55,177 100.3 109.8 127.9 33.4 30.5 26.2 38.0 35.4 34.5 30.2 27.4 26.6
Coforge (NIITEC) 3,639 4,375 BUY 22,163 106.5 147.8 175.0 34.2 24.6 20.8 25.6 31.5 31.8 24.2 28.4 28.3
TeamLease (TEASER) 3,069 4,240 BUY 5,247 22.5 85.6 124.6 136.5 35.8 24.6 15.4 17.6 20.8 (4.7) 17.4 20.4
Infoedge (INFEDG) 3,817 5,230 BUY 47,969 35.8 47.8 54.2 106.7 79.9 70.4 4.2 5.7 6.3 3.2 4.3 4.7
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 10

 Result Update | Tata Consultancy Services ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

ICICI Securities | Retail Research 11

 Result Update | Tata Consultancy Services ICICI Direct Research

ANALYST CERTIFICATION
I/We, Sameer Pardikar, MBA, Sujay Chavan, MMS Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the
subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned
Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products.
ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI)
as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock
broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture
capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship
with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial
interest in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as
such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may
not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected
recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would
endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI
Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in
circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein
is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting
and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who
must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient.
The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities
whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks
associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-
managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past
twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other
benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of
interest at the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of
the research report.

Since associates of ICICI Securities and ICICI Securities as a entity are engaged in various financial service businesses, they might have financial interests or actual/ beneficial ownership of one percent or more or other material
conflict of interest various companies including the subject company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or

use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in

all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

ICICI Securities | Retail Research 12