TCS Crosses Rs.15 Trillion in Market Capitalization
On 17th January when the price of TCS touched a life-time high of Rs.4,045, the market capitalization of TCS scaled up to Rs.15,00,000 crore or Rs.15 trillion to put it more succinctly. With the US$ at around Rs.74.43/$, the market cap of TCS in dollar terms is already at above $200 billion, becoming only the second company after TCS to scale the $200 billion market cap mark.
Out of the top 15 Indian companies by market, 4 are IT companies. The market cap of TCS at $200 billion is nearly twice that of Infosys and the market value of TCS is approximately equivalent to the combined market cap of Infosys, Wipro and HCL Technologies put together. If you look at the Tata group overall, TCS alone accounts for over 60% of the overall market capitalization of the Tata group.
Check - TCS crosses $200 billion market capitalization
A lot of value in India IT has gravitated to the top 4-5 IT companies in India. What set companies like TCS apart is their ability to grow their revenues and profits at consistently high rates. TCS has also maintained its operating margins consistently at above 25% and that helped the company to sustain valuations. But more than anything, the company is a virtual cash generation machine with zero debt in its books.
Just look at the number of buybacks that TCS has done till date. TCS did a buyback of Rs.16,000 crore in 2017, Rs.16,000 crore in 2019 and Rs.16,000 in 2020. The company has a cash balance of Rs.52,000 crore in its books and has just announced another buyback of Rs.18,000 crore to shareholders. To add to this, TCS is also generating net profits of nearly Rs.32,000 crore each year. It is this combination of cash and growth that is boosting value.
Check - TCS Board to Consider Fourth Buyback of Shares
IT companies in India have seen a lot of value gravitating towards them and for a number of reasons. Firstly, the pandemic forced most global corporations to spend aggressively on their digital spending to keep pace with the emerging opportunities. Companies like TCS have been the obvious beneficiaries of this trend. Also, the shift to digitization has been best captured by companies like TCS.
One of the characteristics that companies like TCS have displayed in abundance is the ability to adapt to changing circumstances. For example, in 2015 when the global IT spending patterns were shifting to digital and the US under Trump became more inward looking, companies like TCS substantially expanded their digital business and offshoring. Today digital accounts for 55% of TCS revenues.
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