TCS second Indian firm to cross $100 bn; guess the first one!

Tata Consultancy Services (TCS) on Monday crossed the $100 billion mark in terms of market capitalisation in intraday trade, but failed to settle above it by a whisker. However, the IT major was not the first company in India to achieve this milestone. Energy-to-telecom conglomerate Reliance Industries had already registered this fiat way back in 2007. with Rs 4 lakh crore market capitalisation and rupee-dollar exchange rate of 39.5, RIL achieved this milestone on October 18, 2007. 

RIL's market value came in at Rs 5.9 lakh crore by Monday's closing. This translates into $88.8 billion market cap at rupee-dollar exchange rate of roughly 66. Rupee has depreciated over 60 per cent since 2007. 

Meanwhile, TCS share price settled flat at Rs 3415.20 after hitting its lifetime high of Rs 3557 in intraday trade. The company missed the $100 billion mark by a whisker by settling at $99.7 billion or Rs 6.55 trillion market capitalisation. 

Interestingly, the market value of TCS is 2.5 times higher than that of Infosys, which was 1.5 times lower than that of Infosys back in 2009. Also, the market capitalisation of TCS at Rs 6.5 lakh crore is just a tad lower than the market value of rest of all IT companies on Nifty IT index put together. Yes, that includes Infosys, HCL Tech, and Wipro!

TCS share price has had a stellar run since it got listed on August 25, 2004, delivering a healthy 21.3 per cent compound annual growth rate (CAGR) over 13.5 year period. This compares favourably with peer Infosys, which recorded a 14.4 per cent CAGR. By comparison, the benchmark BSE Sensex delivered a 15.1 per cent CAGR over the same period.

 "With its consistently superior financial performances, it is no surprise that the stock has been rewarded by the street, particularly for its sheer consistency. Over the past five-odd years, TCS' average forward PE multiple stands at 19.3x vs 16x for Infosys, implying an average PE premium of >20% for TCS," said Harit Shah - Senior Analyst-IT at Reliance Securities. 

"For such a large firm in a maturing industry to be able to maintain and even enhance profitability over so many years, and to be able to deliver well above-industry revenue growth is no mean feat. We expect the IT major's strong processes, execution engine and operational efficiency to drive its performances going forward as well, given that these factors are structural and give it a competitive advantage vs peers," Shah added.

AK Prabhakar, head of research at IDBI Capital expects the stock to hit Rs 4200-4500 in next two-three years, an upside of 20 per cent to 25 per cent. Jay Anand Thakkar, AVP - Equity Research, Anand Rathi Securities sees a target price of Rs 3700-3800 on TCS in next 12 months. 

Out of the 45 analysts covering TCS, 19 have a "buy" or higher rating, 18 a "hold", while the rest rate it "sell" or lower, reported Reuters.

The IT major last week on Thursday reported a 4.4 per cent growth in its consolidated net profit at Rs 6,904 crore for the March 2018 quarter and its board recommended a 1:1 bonus share issue, along with Rs 29 per share dividend. This was the first full quarter for Rajesh Gopinathan as MD and CEO od the company. He was elevated to the role of chief executive in February 2017 after serving as the chief financial officer since 2013.