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Company Background: Tata Consultancy Services (TCS) is a part of the Tata group
and India's largest multinational business group. It is an IT services, consulting and
business solutions organization that has been partnering with many of the world’s
largest businesses in their transformation journeys for over 50 years. TCS offers a
consulting-led, cognitive powered, integrated portfolio of business, technology and
engineering services and solutions.

Regions & Verticals will continue to drive growth: TCS is one of the well-diversified
companies across geographies and verticals. Amongst the geographies and
verticals, America and BFSI are the largest contributor to revenue with 55.5%, and
31%, respectively. Going ahead, we believe TCS will continue to expand in America
and Europe regions, gain large transformation deals and add more clients. Also, the
growth will be driven by TCS unique solutions across verticals, cost effective product
and platform offerings and focus on new technology such as automation, Artificial
intelligence and block chain.

Deal flow remains strong: TCS Order book for FY22 stood at USD 34.6bn (all-time
high order book) and 9MFY23 came in at 24.1bn. The deal momentum has been
strong and driven largely by factors such as demand for cloud migration, digital
transformation and focus on innovation capabilities.

Attrition at lowest amongst the large-cap peers: With cloud & digital
transformation journey on front foot, most of the IT companies’ attrition was at the
highest point. Having said that, TCS attrition came in at 17.4% in FY22 and it
increased to 21.3% in Q3FY23. Despite the increase, TCS has managed to maintain
the lowest attrition rate in the industry.

Growth strategies –

a) Customer centric approach - Over the years, TCS continued
its focus towards customers by geography, industry verticals and service line and
now focus on customers according to the relationship stage. In this, customers will
now be segmented into business groups like acquisition stage, relationship stage,
high growth phase and mature relationship stage.

b) Change in top management -
Its Managing Director & CEO, Rajesh Gopinathan decided to step down and in his
place the board has appointed K. Krithivasan as the CEO Designated with effective
from March 16, 2023.

Valuation: We have assigned a PE multiple of 24x (which is an average PE in the last
10 years) on FY25EPS and have initiated the coverage on TCS with a Buy rating and a
target price of Rs 3,882.

Risk: Growth can be impacted by a) Increase in attrition and b) High volatility in
currencies as compared to rupee.

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