Tata Consultancy Services revenue growth decelerated to 15.7% in FY2015 vs. 29.9% a year earliner

16-04-2015 • About Tata Consultancy Services ($TCS) • By InTwits

Tata Consultancy Services reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Tata Consultancy Services is a fast growth stock: FY2015 revenue growth was 15.7%, 5 year revenue CAGR was 25.8% at FY2015 ROIC 40.5%
Tata Consultancy Services has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.0%. At the same time it's in pair with industry average of 3.7%.
CAPEX is quite volatile: 920 in FY2015, 1,890 in FY2014, 550 in FY2013, 1,300 in FY2012, 990 in FY2011
The company has highly profitable business model: ROIC is at 40.5%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Tata Consultancy Services ($TCS) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	373,245	488,938	629,895	818,094	946,484	15.7%
Gross Profit				387,449	401,492	3.6%
SG&A				149,369	173,527	16.2%
EBITDA	111,784	144,353	180,399	251,322	246,664	-1.9%
Net Income	90,680	104,135	139,173	191,168	196,484	2.8%
Balance Sheet
Cash	46,410	57,666	67,353	144,907	182,451	25.9%
Short Term Debt	371	112	1,013	1,696	2,434	43.5%
Long Term Debt	377	1,154	1,310	1,273	1,143	-10.2%
Cash flow
Capex	18,266	20,071	26,378	30,746	28,862	-6.1%
Ratios
Revenue growth	24.3%	31.0%	28.8%	29.9%	15.7%
EBITDA growth	28.6%	29.1%	25.0%	39.3%	-1.9%
Gross Margin				47.4%	42.4%	-4.9%
EBITDA Margin	29.9%	29.5%	28.6%	30.7%	26.1%	-4.7%
Net Income Margin	24.3%	21.3%	22.1%	23.4%	20.8%	-2.6%
SG&A, % of revenue				18.3%	18.3%	0.1%
CAPEX, % of revenue	4.9%	4.1%	4.2%	3.8%	3.0%	-0.7%
ROIC	47.1%	48.6%	48.4%	50.2%	40.5%	-9.6%
ROE	42.3%	38.6%	40.9%	40.7%	34.8%	-5.9%
Net Debt/EBITDA	-0.4x	-0.4x	-0.4x	-0.6x	-0.7x	-0.2x

Revenue and profitability

The company's Revenue surged on 15.7% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.58 pp from 5.1% to 5.7% in FY2015.

Gross Margin decreased on 4.9 pp from 47.4% to 42.4% in FY2015. SG&A as a % of Revenue showed almost no change in FY2015.

Net Income marign decreased on 2.6 pp from 23.4% to 20.8% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 Tata Consultancy Services had CAPEX/Revenue of 3.0%. Tata Consultancy Services's CAPEX/Revenue decreased slightly on 1.1 pp from 4.1% in FY2012 to 3.0% in FY2015. Average CAPEX/Revenue for the last three years was 3.7%.

Return on investment

The company operates at high and attractive ROIC (40.54%) and ROE (34.83%). ROIC decreased on 9.6 pp from 50.2% to 40.5% in FY2015. ROE decreased on 5.9 pp from 40.7% to 34.8% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.7x and Debt / EBITDA is 0.0x. Net Debt / EBITDA dropped on 0.2x from -0.6x to -0.7x in FY2015. Debt jumped on 20.5% in FY2015 while cash surged on 25.9% in FY2015.

Appendix 1: Peers in IT Consulting & Software

Below we provide Tata Consultancy Services benchmarking against other companies in IT Consulting & Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tech Mahindra ($TECHM)	-85.8%	6.8%	25.2%	174.0%
Mindtree ($MINDTREE)		26.6%	23.2%	28.8%	17.0%
Infinite Computer Solutions (India) ($INFINITE)	-57.9%	19.5%	31.7%	24.6%
Infosys ($INFY)	20.9%	22.7%	19.6%	24.2%
Sqs India Bfsi ($SQSBFSI)	-66.5%	46.4%	32.9%	20.4%
Median (21 companies)	-44.3%	22.7%	20.4%	14.0%	14.8%
Tata Consultancy Services ($TCS)		31.0%	28.8%	29.9%	15.7%

Top companies by Gross margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Infosys ($INFY)	45.3%	41.3%	98.1%	35.9%
Wipro ($WIPRO)	31.5%	29.2%	30.4%	32.0%
Median (2 companies)	34.7%	32.7%	36.2%	33.9%	34.8%
Tata Consultancy Services ($TCS)				47.4%	42.4%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Oracle Financial Services Software ($OFSS)	37.4%	35.3%	35.2%	37.4%
Infosys ($INFY)	32.5%	31.6%	27.9%	26.3%
Wipro ($WIPRO)	21.1%	19.1%	20.9%	22.4%
Tech Mahindra ($TECHM)	19.5%	16.7%	20.7%	22.2%
Mindtree ($MINDTREE)	11.8%	15.1%	19.8%	20.6%	20.3%
Median (18 companies)	18.0%	15.1%	16.5%	18.3%	18.1%
Tata Consultancy Services ($TCS)	29.9%	29.5%	28.6%	30.7%	26.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ramco Systems ($RAMCOSYS)	16.4%		22.1%	15.3%
Niit Technologies ($NIITTECH)	4.1%	5.9%	4.6%	6.1%
Infosys ($INFY)	4.7%	4.9%	5.2%	5.5%
Mindtree ($MINDTREE)	5.6%	2.5%	4.5%	5.0%	5.6%
Tech Mahindra ($TECHM)	3.0%	5.4%	2.6%	5.0%
Median (17 companies)	4.0%	3.7%	3.2%	2.6%	4.4%
Tata Consultancy Services ($TCS)	4.9%	4.1%	4.2%	3.8%	3.0%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tech Mahindra ($TECHM)	19.2%	15.4%	20.1%	43.0%
Geometric ($GEOMETRIC)	19.6%	29.9%	46.4%	41.1%
Mindtree ($MINDTREE)	14.9%	24.9%	34.6%	36.2%	32.0%
Cmc ($CMC)	31.5%	26.2%	33.2%	35.3%	26.0%
Hexaware Technologies ($HEXAWARE)	23.8%	33.5%	39.2%	34.7%
Median (30 companies)	16.0%	19.1%	20.4%	22.9%	29.0%
Tata Consultancy Services ($TCS)	47.1%	48.6%	48.4%	50.2%	40.5%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
3I Infotech ($3IINFOTECH)	3.5x	8.5x	20.3x	27.7x
Ramco Systems ($RAMCOSYS)	4.0x	8.8x		27.6x
Starcom Information Technology ($STARCOM)				17.4x
Onward Technologies ($ONWARDTEC)	2.7x	2.4x	2.2x	4.1x
Kpit Technologies ($KPIT)	-0.7x	0.3x	0.5x	0.7x
Median (23 companies)	-0.1x	-0.0x	-0.2x	-0.2x	-0.4x
Tata Consultancy Services ($TCS)	-0.4x	-0.4x	-0.4x	-0.6x	-0.7x

Tata Consultancy Services stock price chart

Tata Consultancy Services financials

mln.	FY2010	FY2011	FY2012

Revenue	300,289	373,245	488,938
EBITDA	86,946	111,784	144,353
Net income	70,006	90,680	104,135
CAPEX	10,448	18,266	20,071
Debt	1,033	748.0	1,266
Cash	47,186	46,410	57,666

About Tata Consultancy Services

Tata Consultancy Services Limited provides information technology (IT) and IT-enabled services worldwide. The company offers assurance services, such as test consulting and advisory services, test services implementation, and managed services; business intelligence and performance management, including business intelligence, business process management, enterprise data management, and integration services; business process services; and cloud services. It also provides connected marketing solutions; consulting services comprising business change, and business and technology optimization; and eco-sustainability services. In addition, the company offers engineering and industrial services, including new product development, plant, product lifecycle management, geospatial technology, and computing-based engineering services; enterprise security and risk management services; enterprise solutions; iON, a cloud-based enterprise resource planning solution for small and medium businesses; and IT infrastructure services consisting of IT service desk, data center and application management, end user computing, converged network, managed security, enterprise system and IT service management, and transformation solutions. Further, it provides IT services comprising system integration, performance engineering, custom application development, application management, and application modernization; mobility products and services; and platform solutions. Additionally, the company offers software products, such as TCS BaNCS, TCS MasterCraft, and TCS technology products. It serves banking and financial services, energy, utilities, government, healthcare, high tech, insurance, life sciences, manufacturing, media and information services, resources, retail and consumer products, telecom, travel, transportation, and hospitality industries. The company was founded in 1968 and is based in Mumbai, India. Tata Consultancy Services Limited is a subsidiary of Tata Sons Limited.