BW Real 500: The Real Big Boy

Tata consultancy services (TCS) holds the tag of being India’s largest software exporter by revenue. Shareholders love the TCS scrip for its consistent performance over the years. During 2015-16, TCS remained the most profitable company in the Indian IT services industry posting net margins of 22.4 per cent and annual net profit of Rs 24,375 crore. This has enabled the company to retain its position as the most valuable company in India with a market cap of Rs 4,95,770 crore ($74.84 billion) as on March 2016.

TCS delivered a strong performance during 2015-16 and crossed the trillion rupee revenue milestone, with reported revenues of Rs 1,08,646 crore at an annual growth of 14.8 per cent. Operating margins were an industry benchmark at 26.4 per cent for the year, well within its target range of 26-28 per cent.

During FY16, all key segments posted steady growth led by banking and financial services, retail, manufacturing and life sciences — growing above the company’s average growth rate on a constant currency basis. In terms of markets, growth was well distributed with North America growing 10.8 per cent, Europe by 12.9 per cent, and UK by 8.3 per cent in constant currency terms. India crossed $1 billion milestone in annual revenues while overall revenues from new growth markets exceeded $3.3 billion in FY16.

From a services perspective, growth was led by infrastructure services, products and platforms, and assurance services. Digital services grew by 52.2 per cent annually with revenues crossing the $2 billion mark.

TCS added eight new customers in the $100+ million band taking the total to 37 customers, while 37 new customers were added in the $10+ million band totalling 298 customers. “Our customer satisfaction scores also reached an all-time high, reflecting this trend,” N. Chandrasekaran, CEO and MD, TCS said in a letter to shareholders.

Digital Trends: Demand for TCS’ services is being driven by the acceleration in the adoption of digital, says Chandrasekaran. “Digital is creating new opportunities for enterprises to drive efficiency and simplification across the business…The impact of digital technologies has further intensified in the past 12 months.”

Today, TCS is a digital partner for 52 per cent of their customers across segments such as mobility and pervasive computing, cloud, big data, artificial intelligence and robotics, all of which have grown at a compounded quarterly growth rate of 8-12 per cent during FY16. “We have built the right technology talent combined with deep domain expertise and an understanding of the customer’s business,” says Chandrasekaran.

TCS’s investments in digital have resulted in a growing portfolio of digital products and platforms. The company’s strategic bets on TCS Bancs (financial services) and iON (education) have performed well. Its new cloud platforms together delivered $172 million in revenues in FY16, a growth of 37 per cent year-on-year.

In June 2015, TCS launched ‘ignio’, its flagship automation product for enterprise IT that helps customers analyse, plan and predict their IT needs. Within nine months of its launch, it had signed up 16 customers. TCS has also filed 24 patents for ‘ignio’ till date.

TCS has also refined its in-house research and innovation (R&I) programme to focus on deep learning, nano-materials, cognitive computing, and genomics as well as engage in innovations like the use of blockchain technology in banking, connected cars or smart homes. At the end of FY16, the company had applied for 2,842 patents cumulatively, including 565 applied during the past 12 months, of which the company has been granted 341 patents.