TCS plans share buyback, m-cap tops ~10 trillion
First company after RIL to cross milestone; valuation highest in 15 years
Software major Tata
Consultancy Services (TCS) on
Monday became the first company after Reliance Industries
(RIL) in India to cross the market capitalisation (m-cap) of
~10 trillion.
The Tata group cash cow and crown jewel closed Monday with record m-cap of ~10.16 trillion, up 7.3 per cent for the day.
In comparison, the benchmark
BSE Sensex closed the day with gains of 0.7 per cent.
Most importantly, TCS’ valuation is now at its highest level in 15 years. At Monday’s close, the information technology (IT) major was at a price-to-earnings
(P/E) multiple of 32.6x — the highest since March 2005, when it was valued at around
35x its earnings.
The rally has been fuelled by expectation of a better-thanexpected earnings by TCS and other IT companies in the
September quarter and the company’s share-buyback plan.
In comparison, the country’s top software exporter was trading at a P/E multiple of
21.2x at the end of March this year and 25x at the end of
December 2019.
TCS came out with its initial public offer in 2004 and listed on the bourses in August that year, with a m-cap of ~52,000 crore and a P/E multiple of 34x.
TCS has become the world’s second-largest IT services firm, in terms of m-cap — a notch below Accenture and ahead of IBM. The IT services and consulting company is currently valued at $139 billion on the bourses, against Accenture’s current m-cap of $142 billion and IBM’S $108 billion.
Three years ago, TCS’ m-cap was nearly half of IBM’S and 20 per cent lower than Accenture’s.
TCS, along with its other tech peers such as Infosys and Wipro, has been one of the top performers on the bourses since the beginning of September. TCS is up 20 per cent since the beginning of
September. Wipro is up 23 per cent, while Infosys is up 13 per cent during the same period. Together, the top five IT services exporters have seen 18 per cent rise in their m-cap during the period.
With this rally, IT companies are now the biggest contributor on the bourses after RIL. TCS has added nearly ~3.3 trillion to its m-cap since the end of March this year and is up nearly 49 per cent during the period. The company has accounted for 13.2 per cent of the rise in the combined m-cap of all Nifty50 companies since the end of March this year. The index companies’ combined m-cap is up 37 per cent, or ~25 trillion during the period.
RIL has been the top contributor, accounting for a third of the rise on the index during the period. Its m-cap is up 112 per cent since the end of March this year, or ~7.9 trillion. The five IT firms together have added ~7.14 trillion to their m-cap since the end of March, accounting for 29 per cent of the rise on the index during the period.