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TERM PAPER

OF

FINANCIAL MANAGEMENT (MGT 517)

TOPIC :( Comparative analysis of capital structure of two

companies, HCL & TCS in the same industry for the last

five years)

(DEPARTMENT OF MANAGEMENT)

SUBMITTED TO-

SUBMITTED BY-

MISS. HARJEET KAURROHIT KUMAR KUSHWAHA

LCTURER (LSM)

ROLLNO.-RS1904B47


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REG.NO - 10906443

CLASS- MBA (GENERAL)

ACKNOWLEDGEMENT

I take this opportunity to present my votes of thanks to all

those guidepost who really acted as lightening pillars to

enlighten our way throughout this project that has led to

successful and satisfactory completion of this study.

We are really grateful to our professor for providing us with an

opportunity to undertake this project in this university and

providing us with all the facilities. We are highly thankful to

Miss.Harjeet Kaur for his active support, valuable time and

advice, whole-hearted guidance, sincere cooperation and

pains-taking involvement during the study and in completing

the assignment of preparing the said project within the time

stipulated.

Lastly, We are thankful to all those, particularly the various

friends , who have been instrumental in creating proper,

healthy and conductive environment and including new andfresh innovative ideas for us during the project, their help, it

would have been extremely difficult for us to prepare the

project in a time bound framework.


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Name RohitKumar Kushwaha

Regd.No-

10906443,

Roll.No-

RS1904B47

INDEX

1. HCL, HISTORY AND

BACKGROUND.4-8

2. MANAGEMENT OF

HCL..

3. TCS, HISTORY AND

BACKGROUND..............9-17

4. MANAGEMENT OF

TCS..

5. FINANCIAL POSITIONS OF HCL

.17-20

6. FINANCIAL POSITIONS OF TCS.

.20-24


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7. CAPITAL STRUCTURE OF

HCL.24-26

8. CAPITAL STRUCTURE OF

TCS..26-26

9. COMPERATIVE ANALYSIS OF CAPITAL

STRUCTURE.27-28

10.REFERENCES

29-29

11.BIBLOGRAPHY

29-29

HINDUSTAN COMPUTER LIMITED (HCL)


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BACKGROUND AND HISTORY:

In 1976, Shiv Nadar quit an executive job with Delhi Cloth Mills

(DCM) along with five of his friends (Arjun Malhotra, Subhash

Arora, Badam Kishore Kumar, T.V Bharadwaj & Arun Kumar H) to

start a new company, Microcomp Limited. The focus of the

company was design and manufacturing of scientific calculators.

The venture provided its founders money to start a company that

focused on manufacturing computers. The company was renamed

as Hindustan Computers Limited (HCL) and received support from

the Uttar Pradesh government to setup their manufacturing in

Noida.

In 1981, NIIT was started to cater to the increasing demand in

computer education. By early 2000s, Nadar divested his stake in

this venture.

HCL (Hindustan Computers Limited) is a leading global

Technology and IT enterprise whose range of services spans

Product Engineering and Technology Development, Application

Services, BPO Services, Infrastructure Services, IT Hardware,

Systems Integration, and Distribution of Technology and Telecom

products in India. The HCL Enterprise comprises two companies

listed in India: HCL Technologies and HCL Info systems. HCL

Technologies is the IT and BPO services arm focused on global

markets, while HCL Info systems deals in the IT, Communication,

Office Automation Products & System Integration arm focused on

the Indian market. Today, HCL has 45,000 employees of diverse
http://en.wikipedia.org/wiki/1976http://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/NIIThttp://en.wikipedia.org/wiki/1976http://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/NIIT


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nationalities, operating across 17 countries including 360 service

centers in India. HCL has global partnerships with several leading

Fortune 1000 firms, including several IT and Technology majors.

Shiv Nadar is the founder of HCL. He founded HCL in 1976 in a

Delhi "barsaati". In 1978, HCL developed the first indigenous

micro-computer at the same time as Apple and 3 years before

IBM's PC. In 1980, HCL introduced bit sliced, 16-bit processor

based micro-computer. In 1983, HCL Indigenously developed

architecture, at the same time as global IT peers. In 1986, HCL

became the largest IT Company in India. In 1988, HCL introducedfine grained multi-processor Unix-3 years ahead of "Sun" and

"HP". In 1991, HCL entered into a joint venture Hewlett Packard

and HCL-Hewlett Packard Ltd. was formed. The joint developed

multi-processor UNIX for HP and heralded HCL's entry into

contract R&D. In 1997, an HCL Info system was formed. In the

same year HCL ventured into software services. In 1999, HCL

Technologies Ltd issued an IPO and became a public listed

company. In 2001, HCL BPO was incorporated and HCL Info

systems became the largest hardware company. In 2002,

software businesses of HCL Info systems and HCL Technologies

were merged. In 2005, HCL set up first Power PC architecture

design centre outside of IBM. In the same year HCL Info systems

launched sub Rs.10, 000 PC. In 2006, HCL Info systems became

the first company in India to launch the New Generation of High

Performance Server Platforms Powered by Intel Dual - Core Xeon

5000 Processor. Today, HCL has a turnover of over US$4billion.


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MANAGEMENT:

SHIV NADAR (FOUNDER- HCL, CHIEF OFFICER AND

STRATEGY OFFICER-HCL TECHNOLOGIES):

A young team of six led by Shiv Nadar, the pioneers of HCL,

believed in the growth prospects IT industry had for India. Today

HCL is one of the leading IT enterprises employing 60,000

professionals, with a global presence in 23 countries spanning

locations worldwide.

AJAI CHOWDHRY (CHAIRMAN, CEO)

An engineer by training, Ajai Chowdhry is one of the six founder

members of HCL, India's leading Technology and IT Company.

HCL, India's original IT garage start-up founded in 1976, is today a

USD 5 Billion Global Enterprise. Ajai Chowdhry took over the reins

of HCL Info systems, the flagship company of the group, asPresident and CEO in 1994. He was appointed the Chairman of

HCL Info systems in November 1999. Under Ajai's stewardship,

the company's turnover has grown to USD 3.1 Billion (approx.

Rs.15500 crores) from USD 89 million in 1994. Employing 5100

people, it has emerged as the country's information-enabling

powerhouse.

RAJIV SWARUP (HEAD, BUSINESS SERVICES)


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Rajiv Swarup heads up the Business Services division of HCL

Technologies Ltd. Rajiv also holds the responsibility for expanding

HCL Technologies Global Delivery Centers.

As the head of HCL Technologies Ltd. -Business strategy and the

expansion of service offerings. He leads the business delivery

across industry verticals with a focus on global operations, while

driving best practices and end-to-end solutions. Rajiv has over 30

years of rich and diverse experience in the IT and Telecom

sectors. Before taking up his current role Rajiv worked with the

HCL Technologies software division for over 9 years where he

managed global delivery for industry verticals that employed over

6000 software professionals. During this period he has managed

and grown several key accounts in HCL like Microsoft, GTECH, Air

Canada, Pearson, EMI, Fonterra, and Merck to name a few. He

was also responsible for starting up the Hyderabad delivery

center for HCL in 2006; the city now has over 1200 HCL delivery

personnel. Rajiv started his career in computer research &

development with DCM Indias Data Products Division in the 70s

and then moved on to head the Production unit of DCM.

R.RANGARAJAN (HEAD- OPERATIONS)

R.Rangarajan has over 31 years of experience in the IT/ Ties

industry. He currently heads Operations for HCL Technologies

Ltd.- BPO Services delivery centers in India. Ranga has been

associated with HCLs BPO operations since the inception of the


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BPO arm in 2001. For the past 9 years, Ranga has focused on

planning, designing and implementing BPO projects for global

clients. He has vast experience in Direct Sales, Marketing,

Finance, Manufacturing and Distribution. With strong IT domain

knowledge and extensive functional expertise, Ranga has been

responsible for the process migration and delivery of various

Fortune 500 clients.

Vineet Nayar (CEO, HCL Technologies)

Vineet Nayar is the CEO of the $1.9 billion HCL Technologies Ltd,

leading a team of 50,741 professionals in 18 countries to drive

growth in IT Services industry. He also serves on the board of the

company as a whole time Director. Vineet has instituted several

radical programs that began a quiet transformation across the

organization. His mantra of Employee First and a strong belief

in value-based leadership has been recognized globally. FortuneMagazine has articulated his leadership style as The Worlds

Most Modern Management and the London Business School calls

him the leader of organizational Innovation. The Harvard

Business School (HBS) has written a case study on the

Transformation at HCL, based on his innovative and radical

leadership. The case study is being taught in the Strategy and

Leadership classes at HBS.

T S R SUBRAMANIAN (Director)


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Mr. Subramanian had a distinguished career in the Indian

Administrative Service, where he held various positions including

that of Cabinet Secretary, the highest post in the Indian

administration and the post of Secretary in the Ministry of

Textiles. He has also worked in the Ministry of Commerce, where

he dealt with trade policy issues and matters relating to General

Agreement on Trade and Tariffs (GATT) and with UNCTAD. His

assignments in the state of Uttar Pradesh included the highest

executive post, Chief Secretary of the State. For over five years,

Mr. Subramanian was a Senior Adviser in the International TradeCentre, Geneva, a United Nations Organization under the purview

of GATT, where he dealt with issues relating to small and medium

enterprises (SMES) as well as export-oriented joint ventures. His

work covered developing countries in Asia, Africa and Latin

America, as well as developed countries. As Cabinet Secretary to

the Government of India, Mr. Subramanian took a number of

initiatives to modernize and develop the infrastructure sector in

India, especially in the Power, Telecom and Surface Transport

sectors.

TATA CONSULTANCY SERVICES (TCS)

BACKGROUND AND HISTORY:

Tata Consultancy Services (TCS) (BSE: 532540) is a software

services and consulting company headquartered in Mumbai,

India. TCS is the largest provider of information technology and

business process outsourcing services in India. The company is


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listed on the National Stock Exchange and Bombay Stock

Exchange of India.TCS is a subsidiary of one of India's largest and

oldest conglomerates, the Tata Group, which has interests in

areas such as energy, telecommunications, financial services,

manufacturing, chemicals, engineering, materials, government

and healthcare Tata Consultancy Services was established in the

year 1968 and is a pioneer in the Indian IT industry. Despite

unfavorable government regulations like the License Raj the

company succeeded in establishing the Indian IT Industry. It

began as the "Tata Computer Centre", a division of the TataGroup whose main business was to provide computer services to

other group companies. F C Kohli was the first general manager.

JRD Tata was the first chairman, followed by Nani Palkhivala. One

of TCS' first assignments was to provide punched card services to

a sister concern, Tata Steel (then TISCO). It later bagged the

country's first software project, the Inter-Branch Reconciliation

System (IBRS) for the Central Bank of India. It also provided

bureau services to Unit Trust of India, thus becoming one of the

first companies to offer BPO services. In the early 1970s, Tata

Consultancy Services started exporting its services. TCS's first

international order came from Burroughs, one of the first business

computer manufacturers. TCS was assigned to write code for the

Burroughs machines for several US-based clients. This experience

also helped TCS bag its first onsite project - the Institutional

Group & Information Company (IGIC), a data centre for ten banks,


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which catered to two million customers in the US, assigned TCS

the task of maintaining and upgrading its computer systems.

In 1981, TCS set up India's first software research and

development center, the Tata Research Development and Design

Center (TRDDC). The first client-dedicated offshore development

center was set up for Compaq (then Tandem) in 1985. In 1989,

TCS delivered an electronic depository and trading system called

SECOM for SIS Sega Inter Settle, Switzerland. It was by far the

most complex project undertaken by an Indian IT company. TCS

followed this up with System X for the Canadian Depository

System and also automated the Johannesburg Stock Exchange

(JSE)[8]. TCS associated with a Swiss partner, TKS Teknosoft,

which it later acquired. In the early 1990s, the Indian IT

outsourcing industry grew tremendously due to the Y2K bug and

the launch of a unified European currency, Euro. TCS pioneered

the factory model for Y2K conversion and developed software

tools which automated the conversion process and enabled third-

party developers and clients to make use of it.

In 1999, TCS saw outsourcing opportunity in E-Commerce and

related solutions and set up its E-Business division with ten

people. By 2004, E-Business was contributing half a billion dollars

(US) to TCS. On 9 August 2004, TCS became a publicly listed

company, much later than its rivals, Infosys, Wipro and Mahindra

Satyam. During 2004, TCS ventured into a new area for an Indian

IT services company Bioinformatics In 2008, the company went


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through an internal restructuring exercise that executives claim

would bring about agility to the organization.

MANGEMENT:

Ratan N Tata (Chairman)

Ratan N Tata has been the Chairman of Tata Sons, the holding

company of the Tata Group, since 1991. He is also the Chairman

of the major Tata companies including Tata Motors, Tata Steel,

Tata Consultancy Services, Tata Power, Tata Tea, Tata Chemicals,

Indian Hotels and Tata Teleservices. During his tenure, the

Groups revenues have grown over 13-fold to annualized Group

revenues of over $80 bn. Ratan Tata joined the Tata Group in

December 1962. After serving in various companies, he was

appointed the Director-in-Charge of The National Radio &

Electronics Company Limited (NELCO) in 1971. In 1981, he was

named Chairman of Tata Industries; the Groups other holding

company, where he was responsible for transforming it into a

Group strategy think-tank, and a promoter of new ventures in

high technology businesses. He is also the Chairman of two of the

largest private sector promoted philanthropic trusts in India.

Ratan Tata is associated with various organizations in India and

abroad. He is the Chairman of the Government of Indias

Investment Commission and a member of the Prime Ministers

Council on Trade and Industry, the National Hydrogen Energy

Board and the National Manufacturing Competitiveness Council.


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He also serves on the UK Prime Ministers Business Council for

Britain and the International Advisory Council of Singapores

Economic Development Board. He is also on the international

advisory boards of the Mitsubishi Corporation, the American

International Group, JP Morgan Chase and Rolls Royce. He also

serves on the board of directors of Fiat SpA and Alcoa. Ratan Tata

is President of the Court of the Indian Institute of Science and

Chairman of the Council of Management of the Tata Institute of

Fundamental Research. He is a member of the Board of Trustees

of Cornell University and the University of Southern California.Ratan Tata received a Bachelor of Science degree in Architecture

with Structural Engineering from Cornell University in 1962. He

worked briefly with Jones and Emmons in Los Angeles, before

returning to India in late 1962. He completed the Advanced

Management Program at Harvard Business School in 1975. The

Government of India honored Ratan Tata with its second highest

civilian award, the Padma Vibhushan, last year.

S Ramadorai(Vice Chairman)

S Ramadorai, Vice Chairman of Tata Consultancy Services

Limited, has been associated with the company for the past thirty

seven years. Joining as a trainee engineer, Ramadorai took over

as CEO in 1996 and has been instrumental in building TCS to a

$6.3 billion global software and services company. Ramadorai is

also represented on the Board of a number of companies and

educational institutes - Tata Industries, Hindustan Unilever


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Limited, Piramal Healthcare Limited and the MIT Executive Board

(EMSAB) to name a few. In recognition of Ramadorais

commitment and dedication to the IT industry he was awarded

the Padma Bhushan in January 06. In April 2009 he was awarded

the CBE (Commander of the Order of the British Empire) by Her

Majesty Queen Elizabeth II for his contribution to the Indo-British

economic relations.

Laura M Cha (Director)

Laura M Cha is a member of the Executive Council of the

Government of Hong Kong Special Administrative Region (HKSAR)

and Non-Executive Deputy Chairman of the Hongkong & Shanghai

Banking Corporation Limited. Between 2001 and 2004, she

served as the vice-chairman of China Securities Regulatory

Commission (CSRC), the first person to be invited from outside

Mainland China to serve in the Central government of thePeople's Republic of China. Before joining CSRC, Laura Cha was

with the Securities and Futures Commission in Hong Kong from

1991 to early 2001. She is currently the vice-chairman of the

International Advisory Council of the CSRC.

Clayton M Christensen (Director)

Clayton M Christensen is the Robert and Jane Cizik Professor of

Business Administration at the Harvard Business School, with a

joint appointment in the Technology & Operations Management

and General Management faculty groups. His research and


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teaching interests center on managing innovation and creating

new growth markets.

Aman Mehta (Director)

Aman Mehta was born in New Delhi in 1946. After graduating

from Delhi University with an economics degree in 1967, he

joined the Bombay office of Mercantile Bank Limited, a wholly

owned subsidiary of The Hong Kong and Shanghai Banking

Corporation Limited. Following training in the Bank's London

office, Mehta returned to the Group's operations in India. Since

1969, he has held a number of assignments throughout the Bank,

including appointments in Operations, Credit, Branch and Area

Management and Merchant Banking. In 1985, he was appointed

Manager Corporate Planning at The Hong Kong and Shanghai

Banking Corporation's headquarters in Hong Kong. In January

1988, he moved to Riyadh to take up the post of ManagingDirector of The Saudi British Bank, a 40 percent owned associate

of The Hong Kong and Shanghai Banking Corporation. In May

1991, Mehta was appointed Group General Manager and,

following a brief strategic planning assignment in North America,

he was appointed General Manager International in February

1992 with responsibility for overseas subsidiaries.

Dr. Ron Sommer (Director)

Dr. Ron Sommer was Chairman of the Board of Management of

Deutsche Telekom AG, a telecommunication company, from May


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1995 until he retired in July 2002. He is Director of Motorola,

Muenchener Rueckversicherung, Sistema, Weather Investments

and Tata Consultancy Services, and member of the International

Advisory Board of The Blackstone Group. Dr. Sommer received a

Ph.D. degree in Mathematics from the University of Vienna,

Austria.

N Chandrasekaran (Chief Executive Officer and Managing

Director)

Responsible for formulating and executing the company's global

strategy, Chandra has been at helm of several key strategic

transitions at TCS since 2002 when he took over the role as head

of global sales. In his previous role as Chief Operating Officer, he

was the architect of the new organization structure unveiled in

2008 which created multiple agile business units focused on

domains and markets as well as built strategic business units inorder to pursue new initiatives with the ability to invest, develop

and mature new ideas. Under his leadership, TCS has pioneered

the creation of its unique Global Network Delivery Model

(GNDM) across five continents and ventured into new markets

including Europe, China and Latin America. It added new business

lines like BPO, Infrastructure and Assurance services. Chandra

has also driven the domain diversification drive which has seen

the company enter new verticals like Media and Information

Services as well as Hi-tech. All of these have matured into

sizeable businesses under his mentorship and guidance. Chandra


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personifies TCS commitment to customer satisfaction and high

quality of deliverables. Through his experience in a variety of

operating roles across TCS, he has built a reputation in the IT

services industry for his exceptional ability to build and grow new

businesses and nurture long-term relationships. He has also been

a champion of software and business quality for the industry.

Mahalingam (Chief Financial Officer and Executive Director)

Seturaman Mahalingam or Maha, as he is better known, started

his professional career with Tata Consultancy Services in 1970. In

his 40-year career with TCS, Maha has been involved in myriad

aspects of the Companys operations and growth, before being

appointed as the Chief Financial Officer of the Company in

February 2003 and as Executive Director in August 2007.A

chartered accountant by qualification, Maha began his career as

an IT consultant and thereafter played a major role in marketingTCS services across the globe, developing processes and creating

large software development centers for the Company.

Hiroz A Vandrevala (Executive Director and Head, Global

Corporate Affairs): As Executive Director, head, Global

Corporate Affairs, Phiroz Vandrevala is responsible for

corporate affairs at Tata Consultancy Services. Phiroz is also

a member of the strategy group at TCS. An active

spokesperson for the Indian IT Industry on the important

issues confronting the sector, Phiroz is a former chairman of


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India's apex industry body for IT, Nasscom. He is also the

Chairman of 'Diligenta' a UK based subsidiary of TCS

engaged in providing service to Life Insurance and Pension

companies. He continues to play a significant role in the

policy-making process for industry and the software sector in

his various capacities as a member of the executive council

of Nasscom and as a member of the National Council of the

Confederation of Indian Industry - the apex industry body in

the country. In the banking and financial services sector,

Phiroz has been part of numerous expert committeesconstituted by the Reserve Bank of India to guide the central

bank in its policy-making efforts. He is also a part of various

large IT initiatives of the government of India.

FINANCIAL POSITIONS OF HCL AND TCS

Profit & Lossaccount of HCL

------------------- in Rs. Cr. -------------------

2005 2006 2007 2008 2909

Income

Sales Turnover 1,970.94 2,381.36 11,818.25 12,569.44 12,336.81

Excise Duty 39.28 86.66 170.13 158.00 126.08Net Sales 1,931.66 2,294.70 11,648.12 12,411.44 12,210.73

Other Income 31.93 9.80 52.81 32.37 -8.84

Stock Adjustments 6.52 59.40 270.99 89.81 17.90

Total Income 1,970.11 2,363.90 11,971.92 12,533.62 12,219.79

Expenditure

Raw Materials 1,511.87 1,868.94 10,929.68 11,347.82 11,040.53


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Power & Fuel Cost 1.22 1.41 1.64 1.60 1.72

Employee Cost 106.99 130.22 217.73 292.96 325.98

Other Manufacturing Expenses 91.84 108.40 121.76 110.47 104.75

Selling and Admin Expenses 79.82 89.11 197.09 255.37 270.40

Miscellaneous Expenses 20.06 18.10 36.29 31.46 44.51

Preoperative Exp Capitalized -5.61 -5.70 0.00 -0.55 -0.49

Total Expenses 1,806.19 2,210.48 11,504.19 12,039.13 11,787.40

2005 2006 2007 2008 2009

Operating Profit 131.99 143.62 414.92 462.12 441.23

PBDIT 163.92 153.42 467.73 494.49 432.39

Interest 14.32 21.46 31.59 58.84 56.73

PBDT 149.60 131.96 436.14 435.65 375.66

Depreciation 6.50 6.75 12.55 16.35 17.27

Other Written Off 0.00 0.00 0.00 0.00 0.00

Profit Before Tax 143.10 125.21 423.59 419.30 358.39

Extra-ordinary items 5.82 6.31 6.40 15.17 15.59

PBT (Post Extra-ord Items) 148.92 131.52 429.99 434.47 373.98

Tax 16.10 18.30 112.14 129.72 113.42

Reported Net Profit 132.77 113.22 317.85 304.75 260.44

Total Value Addition 294.32 341.54 574.51 691.31 746.87

Preference Dividend 0.00 0.00 0.00 0.00 0.00

Equity Dividend 103.22 134.68 135.30 136.84 111.27

Corporate Dividend Tax 14.08 18.89 20.98 23.26 18.91

Per share data (annualized)

Shares in issue (lakhs) 1,671.82 1,687.29 1,691.53 1,711.50 1,712.12

Earnings Per Share (Rs) 7.94 6.71 18.79 17.81 15.21

Equity Dividend (%) 310.00 400.00 400.00 400.00 325.00

Book Value (Rs) 25.86 24.20 49.79 58.61 66.14

INTERPRETATION: HCLhas shown an increasing pattern of total

income, from 2005 to 2006 it registered total income of 1970.11cr. to 2363.90 cr. it is showing an increasing trend but the it

revolution in the year 2007 brought its total income to an

astonishing increase of 11971.92 cr. from 2363.90 cr. in the

upcoming years the total income reached to the 12000 cr. mark


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and has continuously shown the growth pattern. The recession

has little effect on HCLs total income as it has secure sources

(mostly domestic) and the industry has the same sources. So

there is very small decrease in total income. In 2005 earnings per

share were 7.94 which decreased in 2006 but afterwards

increased income in year 2007 has caused huge increase in

earnings per share as well. This has resulted in high dividend for

the shareholders and large amount of retained earnings for

companys growth plans.

Financial Ratios ofHCL

------------------- in Rs. Cr. -------------------

2005

2006 2007 2008 2009

Investment Valuation Ratios

Face Value 2.00 2.00 2.00 2.00 2.00

Dividend Per Share 6.20 8.00 8.00 8.00 6.50

Operating Profit Per Share (Rs) 7.89 8.51 24.53 27.00 25.76

Net Operating Profit Per Share (Rs) 115.54 136.00 688.62 725.18 713.19

Free Reserves Per Share (Rs) 23.86 22.20 47.79 56.61 63.90

Bonus in Equity Capital 31.81 31.52 31.45 31.08 31.07

Profitability Ratios

Operating Profit Margin (%) 6.83 6.25 3.56 3.72 3.61

Profit Before Interest And Tax Margin (%) 6.45 5.92 3.44 3.58 3.46

Gross Profit Margin (%) 6.99 6.22 3.60 3.59 3.47

Cash Profit Margin (%) 7.16 5.19 2.82 2.43 2.35

Adjusted Cash Margin (%) 5.79 5.14 2.56 2.43 2.35

Net Profit Margin (%) 6.83 4.90 2.72 2.44 2.12Adjusted Net Profit Margin (%) 5.45 4.85 2.45 2.44 2.12

Return On Capital Employed (%) 26.54 25.13 39.90 35.03 32.41

Return On Net Worth (%) 30.71 27.72 37.74 30.38 22.99

Adjusted Return on Net Worth (%) 24.53 27.43 34.02 28.54 23.88

Return on Assets Excluding Revaluations 13.34 9.21 12.43 9.93 --


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Return on Assets Including Revaluations 13.38 9.23 12.44 9.94 --

Return on Long Term Funds (%) 28.23 33.50 44.54 43.79 35.70

Liquidity And Solvency Ratios

Current Ratio 1.59 1.31 1.36 1.36 1.38

Quick Ratio 1.31 1.24 0.92 1.05 1.01

Debt Equity Ratio 0.19 0.48 0.28 0.35 0.20

Long Term Debt Equity Ratio 0.12 0.11 0.15 0.08 0.09

Debt Coverage Ratios

Interest Cover 19.14 10.22 20.06 9.98 9.87

Total Debt to Owners Fund 0.19 0.48 0.28 0.35 0.20

Financial Charges Coverage Ratio 9.99 7.39 14.02 8.35 8.07

Financial Charges Coverage Ratio PostTax

10.73 6.59 11.46 6.46 5.90

Management Efficiency Ratios

Inventory Turnover Ratio 10.33 9.61 14.75 15.07 15.02Debtors Turnover Ratio 5.81 5.21 15.39 11.06 8.91

Investments Turnover Ratio 12.46 11.72 16.07 15.07 15.02

Fixed Assets Turnover Ratio 44.07 36.37 121.48 58.06 52.89

Total Assets Turnover Ratio 3.76 3.80 10.81 9.17 9.01

Asset Turnover Ratio 20.28 20.81 72.24 58.06 52.89

Average Raw Material Holding 28.62 18.88 36.37 24.56 17.27

Average Finished Goods Held 14.65 22.57 20.09 21.60 22.43

Number of Days In Working Capital 63.58 61.48 21.06 28.76 27.21

Profit & Loss Account Ratios

Material Cost Composition 78.26 81.44 93.83 91.43 90.41

Imported Composition of Raw MaterialsConsumed

72.24 75.99 76.37 78.71 73.97

Selling Distribution Cost Composition 2.11 2.02 0.90 1.17 1.07

Expenses as Composition of Total Sales 2.43 3.42 0.74 0.78 0.78

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 88.34 135.63 49.16 52.53 49.98

Dividend Payout Ratio Cash Profit 84.22 128.00 47.30 49.85 46.87

Earning Retention Ratio-

10.58 -37.06 45.47 44.09 51.88

Cash Earning Retention Ratio -4.20 -29.27 47.76 47.11 54.77

Adjusted Cash Flow Times 0.73 1.65 0.79 1.17 0.79

2005

2006 2007 2008 2009

Earnings Per Share 7.94 6.71 18.79 17.81 15.21


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Book Value 25.86 24.20 49.79 58.61 66.14

INTERPRETATION: In the interpretation of ratios current ratio in

year 2005 was 1.59 which is less than the ideal ratio of 2:1.it

means that the company does not have the adequate current

assets. But further it shows a decrease for coming years. It means

that the company is using low working capital. Quick ratio was

1.31 in year 2005 which is a little more than the ideal ratio of 1:1.

This indicates that the company has idol quick assets in its

running capital but it has shown further control over its quick

assets. In results the ratio reached very close to the ideal ratio of

1. This shows effective use of quick assets. The debt equity ratio

has been significantly low over the years. It is good for the

company. Because it is directly related to the debt of the

company it should be low. In year 2006 it is increased with very

high rate but in 2007, 08, 09 it is continuously decreasing. So it is

shown good condition of the company. Investment turnover ratiowas in year 12.46. But in year 2007 it is increased a very high

rate at 16.06 it is also good for the company it shows the

turnover of the company. But in year 2008, 09, it is slightly

decreasing at 15.65 and it is continuously going on in year 2009.

The assets turnover ratio shows the good position of the company

it is 20.28 in year 2005 but in year 2007 it is increased a very

high rate at rate 72.24 that time it shows good position of the

company but in year 2008, 09 it decreased at 58.06 and

52.87.Ratio define the overall position of the company and the

ration of HCL is showing good prospect for the future.


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Profit & Lossaccount of TataConsultancy Services

------------------- in Rs. Cr. -------------------

2005 2006 2007 2008 2009

Income

Sales Turnover 8,051.10 11,236.01 14,942.09 18,536.55 22,404.00

Excise Duty 0.00 5.51 2.12 2.83 2.08

Net Sales 8,051.10 11,230.50 14,939.97 18,533.72 22,401.92

Other Income -152.65 -1.19 216.04 440.45 -456.24

Stock Adjustments 0.00 4.14 -2.79 -0.04 0.00

Total Income 7,898.45 11,233.45 15,153.22 18,974.13 21,945.68

ExpenditureRaw Materials 0.00 161.50 22.02 45.81 53.67

Power & Fuel Cost 44.59 66.85 93.89 135.57 164.34

Employee Cost 3,967.52 5,113.96 6,186.85 6,015.19 7,370.09

Other Manufacturing Expenses 487.18 793.01 3,095.82 5,687.82 7,003.00

Selling and Admin Expenses 513.88 756.39 765.08 991.43 1,218.41

Miscellaneous Expenses 629.48 1,005.52 472.04 632.25 571.58

Preoperative Exp Capitalized 0.00 0.00 0.00 0.00 0.00

Total Expenses 5,642.65 7,897.23 10,635.70 13,508.07 16,381.09

2005 2006 2007 2008 2009

Operating Profit 2,408.45 3,337.41 4,301.48 5,025.61 6,020.83

PBDIT 2,255.80 3,336.22 4,517.52 5,466.06 5,564.59

Interest 10.40 4.49 3.43 3.42 7.44

PBDT 2,245.40 3,331.73 4,514.09 5,462.64 5,557.15

Depreciation 133.22 257.38 343.41 458.78 417.46

Other Written Off 0.00 0.00 0.00 0.00 0.00

Profit Before Tax 2,112.18 3,074.35 4,170.68 5,003.86 5,139.69

Extra-ordinary items 0.00 -38.03 -2.59 -37.52 0.00

PBT (Post Extra-ord Items) 2,112.18 3,036.32 4,168.09 4,966.34 5,139.69

Tax 280.76 319.45 410.80 457.58 443.48

Reported Net Profit 1,831.42 2,716.87 3,757.29 4,508.76 4,696.21

Total Value Addition 5,642.65 7,735.73 10,613.68 13,462.26 16,327.42

Preference Dividend 0.00 0.00 0.00 0.08 7.00

Equity Dividend 552.13 660.56 1,125.39 1,370.05 1,370.05


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Corporate Dividend Tax 74.46 92.64 169.48 232.85 234.02

Per share data (annualised)

Shares in issue (lakhs) 4,801.15 4,893.05 9,786.10 9,786.10 9,786.10

Earning Per Share (Rs) 38.15 55.53 38.39 46.07 47.92

Equity Dividend (%) 1,150.00 1,350.00 1,150.00 1,400.00 1,400.00

Book Value (Rs) 69.17 114.64 82.35 111.43 136.38

INTERPRETATION: The total income of TCS in year 2005 was

7898.45 but is continuously increasing a very high rate in 2007 it

was 15153.22 and till 2009 it has been reached 21945.68. So the

total income of the company is increasing at a very high rate so it

does indicate good position of the company. The net sales of the

company have a continuously increasing pattern of net sales overthe year from 2005 to 2009. It has reached from 8051.10 cr. to

22401.92 cr. over five years this is because of the continuous

growth of the service industry of India. This present a very proper

offering shareholder and investor. Earnings per share has been

showing a increase in trend over five years all thought a scenario

of up and down was created in year 2006 and 2007. It has shown

a decent increasing trend which provides a sense of regular profit

to the shareholders. There has been continuous growth with

periodic satiability in the equity dividend percentage. It shows the

company commitment toward profit sharing with its investors. It

was 1150.00 in year 2005 and it reached 1400.00 in year 2009.

Financial Ratios ofTata Consultancy

Services

------------------- in Rs. Cr. -------------------

2005 2006 2007 2008 2009Investment Valuation Ratios

Face Value 1.00 1.00 1.00 1.00 1.00

Dividend Per Share 11.50 13.50 11.50 14.00 14.00

Operating Profit Per Share (Rs) 50.16 68.21 43.95 51.35 61.52

Net Operating Profit Per Share (Rs) 167.69 229.52 152.67 189.39 228.92


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Free Reserves Per Share (Rs) 68.17 113.86 80.25 110.22 141.74

Bonus in Equity Capital 18.97 18.61 59.30 59.30 59.30

Profitability Ratios

Operating Profit Margin(%) 29.91 29.71 28.79 27.11 26.87

Profit Before Interest And TaxMargin(%) 28.12 27.26 26.34 24.42 24.75Gross Profit Margin(%) 30.12 30.07 29.17 24.64 25.01

Cash Profit Margin(%) 24.28 26.33 27.29 25.29 25.63

Adjusted Cash Margin(%) 26.65 27.25 26.44 25.29 25.63

Net Profit Margin(%) 22.63 24.05 25.00 24.11 20.74

Adjusted Net Profit Margin(%) 25.01 24.97 24.15 24.11 20.74

Return On Capital Employed(%) 67.25 55.70 49.87 42.92 43.27

Return On Net Worth(%) 55.15 48.43 46.62 41.34 35.13

Adjusted Return on Net Worth(%) 60.93 50.28 45.04 39.16 40.29

Return on Assets ExcludingRevaluations 38.53 36.59 34.90 30.60 25.33Return on Assets IncludingRevaluations

38.53 36.59 34.90 30.60 25.33

Return on Long Term Funds(%) 69.49 55.97 50.12 42.96 43.27

Liquidity And Solvency Ratios

Current Ratio 1.51 2.19 1.93 1.98 1.83

Quick Ratio 1.77 2.22 1.98 1.97 1.83

Debt Equity Ratio 0.04 0.01 0.01 0.01 0.01

Long Term Debt Equity Ratio -- -- -- 0.01 0.01

Debt Coverage Ratios

Interest Cover 222.57 700.35 1,179.14 1,383.58 784.41

Total Debt to Owners Fund 0.04 0.01 0.01 0.01 0.01

Financial Charges Coverage Ratio 235.38 757.67 1,279.26 1,517.73 840.52

Financial Charges Coverage RatioPost Tax

189.91 663.42 1,196.54 1,453.50 688.32

Management Efficiency Ratios

Inventory Turnover Ratio -- 492.37 1,245.97 1,137.21 1,321.7

Debtors Turnover Ratio 11.00 5.93 5.83 5.66 6.00

Investments Turnover Ratio -- 536.84 1,412.30 1,137.21 1,321.7

Fixed Assets Turnover Ratio 12.84 9.11 8.20 5.74 5.15

Total Assets Turnover Ratio 2.34 1.99 1.85 1.68 1.66

Asset Turnover Ratio 7.73 6.68 6.49 5.74 5.15

Average Raw Material Holding -- 85.76 144.33 98.28 93.98

Average Finished Goods Held -- 0.48 0.05 0.03 0.07

Number of Days In Working Capital 45.11 71.53 63.60 71.55 67.44


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Profit & Loss Account Ratios

Material Cost Composition -- 1.43 0.14 0.24 0.23

Imported Composition of Raw MaterialsConsumed

-- 80.37 70.79 80.43 79.74

Selling Distribution Cost Composition 0.10 0.10 0.20 0.14 0.09

Expenses as Composition of TotalSales

92.97 90.17 92.38 90.51 93.01

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 34.21 27.72 34.46 35.55 34.20

Dividend Payout Ratio Cash Profit 31.89 25.32 31.57 32.26 31.41

Earning Retention Ratio 69.04 73.30 64.34 62.47 70.18

Cash Earning Retention Ratio 70.95 75.53 67.42 66.11 72.33

Adjusted Cash Flow Times 0.06 0.01 0.01 0.00 0.01

2005 2006 2007 2008 2009Earnings Per Share 38.15 55.53 38.39 46.07 47.92

Book Value 69.17 114.64 82.35 111.43 136.38

INTERPRETATION: In the interpretation of ratios current ratio in

year 2005 was 1.51 which is less than the ideal ratio of 2:1.it

means that the company does not have the adequate current

assets. But further it shows a decrease for coming years. It means

that the company is using low working capital. Quick ratio was1.77 in year 2005 which is a little more than the ideal ratio of 1:1.

This indicates that the company has idol quick assets in its

running capital but it has shown further control over its quick

assets. In results the ratio reached very close to the ideal ratio of

1. This shows effective use of quick assets. The debt equity ratio

has been significantly low over the years. It is good for thecompany. Because it is directly related to the debt of the

company it should be low. In year 2006 it is increased with very

high rate but in 2007, 08, 09 it is continuously decreasing. So it is

shown good condition of the company. Investment turnover ratio


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was in year 536.84 in year 2006. But in year 2007 it is decreased

a very high rate at 1412.30 it is bed for the company it shows the

turnover of the company. But in year 2008, 09, it is slightly

decreasing and it is continuously going on in year 2009. The

assets turnover ratio shows the good position of the company it is

7.73 in year 2005 but in year 2007 it is decreased a very slightly

rate at rate 5.31 that time it shows bed position of the company

but in year 2008, 09 it decreased at 5.63 and 5.87.Ratio define

the overall position of the company and the ration of HCL is

showing good prospect for the future.

CAPITAL STRUCTURE OF HCL

PERIOD INSTRUMENT AUTHORIZED

CAPITL(Rs.Cr

.)

ISSUED

CAPITAL

(Rs.Cr.)

PAID UP

SHARES

(Nos)

PAID

UP

FACE

VALUE

CAPITAL

FROM TO

2008 200

9

EQUITY 150 134.05 67025660

02

2 134.0

52007 200

8

EQUITY 150 133.27 66634027

22

2 133.2

72006 200

7

EQUITY 150 132.74 66368311

62

2 132.7

42005 200

6

EQUITY 125.45 64.69 32344235

02

2 64.69

2004 200

5

EQUITY 80 63.84 31921478

42

2 63.84


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CAPITAL STRUCTURE: capital structure refers to the waya corporation finances its assets through some combinationof equity, debt, or hybrid securities. A firm's capital structure isthen the composition or 'structure' of its liabilities. The firm's ratio

of debt to total financing, 80% in this example is referred to asthe firm's leverage. In reality, capital structure may be highlycomplex and include tens of sources. Gearing Ratio is theproportion of the capital employed of the firm which come fromoutside of the business finance, e.g. by taking a short term loanetc. On the basis for modern thinking on capital structure, thoughit is generally viewed as a purely theoretical result since itassumes away many important factors in the capital structure

decision. The theorem states that, in a perfect market, how a firmis financed is irrelevant to its value. This result provides the basewith which to examine real world reasons why capitalstructure is relevant, that is, a company's value is affected by thecapital structure it employs. These other reasonsinclude bankruptcy costs, agency costs, taxes, informationasymmetry, to name some. This analysis can then be extended tolook at whether there is in fact an optimal capital structure: theone which maximizes the value of the firm.

One way of determining the right mix of capital is to measure theimpacts of different financing plans on Earnings Per Share (EPS).The objective is to find the level of EBIT (Earnings Before InterestTaxes) where EPS does not change; i.e. the EBIT Breakeven. Atthe EBIT Breakeven, EPS will be the same under each financingplan we have under consideration. As a general rule, usingfinancial leverage will generate more EPS where EBIT is greaterthan the EBIT Breakeven. Using less leverage will generate more

EPS where EBIT is less than EBIT Breakeven.EBIT Breakeven is calculated by finding the point wherealternative financing plans are equal according to the followingformula: (EBIT - I) x (1.0 - TR) / Equity number of shares afterimplementing financing plan.


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Interest Expense TR: Tax Rate Formula assumes no preferredstock.

The formula is calculated for each financing plan. For example,you may be considering issuing more stock under Plan A andincurring more debt under Plan B. Each of these plans will havedifferent impacts on EPS. You want to find the right plan thathelps maximize EPS, but still manage risks within an acceptablerange. EBIT-EPS Analysis can help find the right capital mix forhigh returns and low costs of capital.

INTERPRETATION : As per the capital structure is concern itshows the upward trend as issued capital is increased year byyear it means that the company is moving towards profit and he

is getting more and more funds so it will beneficial for thecompany for further investment. In 2004-05 the issued capitalwas 63.84 and its increased till 2008-09,135.01 so it is showinggood position of the company.

CAPITAL STRUCTURE OF TCS

PERIOD INSTRUMENT AUTHORIZED

CAPITL(Rs.Cr

.)

ISSUED

CAPITAL

(Rs.Cr.)

PAID UP

SHARES

(Nos)

PAID

UP

FACE

VALUE

CAPITAL

FROM TO

2008 200

9

EQUITY 120 97.86 97861049

8

1 97.86

2007 200

8

EQUITY 120 97.86 97861049

8

1 97.86

2006 2007

EQUITY 120 97.86 978610498

1 97.86

2005 200

6

EQUITY 60 48.93 48930524

9

1 48.93

2004 200 EQUITY 60 48.01 48011480 1 48.01


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5 9

INTERPRETATION: As per the capital structure is concern itshows the upward trend as issued capital is increased year by

year it means that the company is moving towards profit and heis getting more and more funds so it will beneficial for thecompany for further investment. In 2004-05 the issued capitalwas 48.01 and its increased till 2008-09, 97.86 so it is showinggood position of the company.

COMPERATIVE ANALYSIS OF CAPITAL STRUCTURE: HCL

more capital structure with the comparison of TCS. HCL capital

structure was in 2007-08 was 133.46 and it is increased in 2009

till 134.01 where as TCS capital structure was in 2007-08 was

97.86 and it had not been increased in year 2009. So here we can

determine that HCL is more profitable organization rather than

TCS. HCL is more progressive company, here if the company will

get profit continuous than the investment will increase. We

cannot say that the position of TCS is not good; TCS is alsogetting more profit in year 2008 and 2009 so if we will talk about

future both companies have more future opportunities to enhance

their profit as well as their capital structure.

EQUITY-

1. Equity capital of HCL & TCS has increased consequently year

after year

2. According to equity capital it is depicted that HCL`s equity

capital is more as compare to TCS


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DEBT

1. Debt of HCL increased year after year on the other hand debt

of TCS decrease over the year

2. According to debt we can conclude that TCS is quiet efficientlyutilizing debt equity mix.

RETAINED EARNING

1. Retained earnings of HCL & TCS has increase consequently

over the year

2. It is clearly analyzed after seeing the retained earnings of boththe companies that TCS is earning more profit as both the

companies retained earnings increase over the years but TCS

retained earning has increased at faster rate as compare to HCL

DIVIDEND

1. Dividend provided to shareholder of TCS has increase over the

years but dividend provided to shareholder by HCL has increased

in initial year but decreased in last year

2. It is clearly recognized by dividend provided by both the

companies to shareholder that TCS is earning more as compare

to HCL as dividend of TCS has increased at faster rate as compare

to HCL


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REFERENCES:

1. www.tcs.com

2. www.hcl.com

3. www.moneycontrol.com

4. www.google.com

5. http://www.exinfm.com/board/capital_structure_analysis.htm

BIBLOGRAPHY:

1. Financial management by I.M. PANDEY

2. Financial management by M.Y. KHAN

Date post:	08-Apr-2018
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