What triggered the rise in TCS stock price?
Shares of Tata Consultancy Services, India's IT bellwether, touched a market capitalisation of $100 billion on Monday and made history. Though TCS is not the first Indian company to touch the mark, as RIL had surpassed $100 billion in market value back in 2007, it is the first-ever Indian IT company to cross the value. The stock has been on rise for a while now. Consider this: In just one year, its stock price has gone up by 50 per cent, quite impressive for a large-cap company. Analysts say it is a mix of both. However, there are other factors which need to be kept in mind, while reading the market performance of TCS. It is a $20 billion company, in a $110 billion IT export market, and is growing faster than the overall industry growth rate. In the coming year, the company is expected to grow at the rate of at least 10 per cent, again higher than the overall industry. Reading of these numbers, backed by its early investments into key competencies and geographical expansions, is also reflected in the stock's performance on the indices. Clearly, analysts see TCS as a company that has not just been able to deliver better numbers and handle change in leadership better than its competitors, but has also emerged as a company that has a better automation and AI story to tell. TCS has also been able to bag bigger and complex deals in areas like insurance. "TCS, has 20 per cent share of the Indian IT export market, and is today growing faster than the market. Apart from all the positives about its strategy, consistency and investments, it is also leveraging its scale and presence to increase its wallet share in the client account," says Sudin Apte, CEO & research director, Offshore Insights. He also gives another perspective and says, "TCS is perhaps able to take business away from others, maybe some of the tier II companies, who in turn are showing slower growth." However, according to Madhu Babu, analyst at Prabhudas Lilladher, it is not fair to compare TCS with other Indian IT companies. "The growth metrics for TCS has improved, its margin execution has been steady and today TCS is trading at par with Accenture. Therefore, the right metric to compare TCS would be Accenture and not other Indian IT companies," he says. "TCS is today also in a position to bid for and win complex deals, including platform-led deals. In insurance, they won three large deals, including in claims processing, which typically is because of their investments in those areas earlier," Babu adds. It must be noted that the company has not given revenue guidance and there is a great deal of positive talk. Therefore, it remains to be seen whether the company will be able to convert the positive and forward-looking commentary into reality.