1| Page

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 KAUR

ROHIT KUMAR KUSHWAHA

LCTURER (LSM)
ROLLNO.-RS1904B47
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[Link] - 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
[Link] 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 and
fresh 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.
3| Page

Name –Rohit
Kumar Kushwaha

[Link]-
10906443,

[Link]-
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
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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 introduced
fine 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.
7| Page

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, as
President 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 India’s Data Products Division in the 70’s
and then moved on to head the Production unit of DCM.

• [Link] (HEAD- OPERATIONS)

[Link] 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 HCL’s BPO operations since the inception of the
9| Page

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. Fortune
Magazine has articulated his leadership style as “The World’s
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 Trade
Centre, 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 [Link] 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 Tata
Group 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,
12 | P a g e

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
Group’s 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 Group’s 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 India’s
Investment Commission and a member of the Prime Minister’s
Council on Trade and Industry, the National Hydrogen Energy
Board and the National Manufacturing Competitiveness Council.
14 | P a g e

He also serves on the UK Prime Minister’s Business Council for

Britain and the International Advisory Council of Singapore’s
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 Ramadorai’s
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 the
People'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 Managing
Director 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 in
order 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 Company’s 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 marketing
TCS 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
 19 | P a g e

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 committees
constituted 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 & Loss------------------- in Rs. Cr. -------------------

account of HCL
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 86.66 170.13 158.00 126.08
Net 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
 20 | P a g e

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: HCL has shown an increasing pattern of total

income, from 2005 to 2006 it registered total income of 1970.11
cr. 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
 21 | P a g e

and has continuously shown the growth pattern. The recession

has little effect on HCL’s 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
company’s growth plans.

Financial Ratios of ------------------- in Rs. Cr. -------------------

HCL
200
2006 2007 2008 2009
5
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
115.5
Net Operating Profit Per Share (Rs) 136.00 688.62 725.18 713.19
4
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 2.12
Adjusted 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 --
 22 | P a g e

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 Post
10.73 6.59 11.46 6.46 5.90
Tax
Management Efficiency Ratios
Inventory Turnover Ratio 10.33 9.61 14.75 15.07 15.02
Debtors 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 Materials
72.24 75.99 76.37 78.71 73.97
Consumed
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 -37.06 45.47 44.09 51.88
10.58
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

200
2006 2007 2008 2009
5
Earnings Per Share 7.94 6.71 18.79 17.81 15.21
 23 | P a g e

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:[Link]
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 ratio
was 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
[Link] define the overall position of the company and the
ration of HCL is showing good prospect for the future.
 24 | P a g e

Profit & Loss

account of Tata ------------------- in Rs. Cr. -------------------

Consultancy Services
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
Expenditure
Raw 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
 25 | P a g e

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 over
the 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 of
Tata Consultancy ------------------- in Rs. Cr. -------------------

Services
2005 2006 2007 2008 2009
Investment 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
 26 | P a g e

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 Tax
28.12 27.26 26.34 24.42 24.75
Margin(%)
Gross 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 Excluding
38.53 36.59 34.90 30.60 25.33
Revaluations
Return on Assets Including
38.53 36.59 34.90 30.60 25.33
Revaluations
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 Ratio
189.91 663.42 1,196.54 1,453.50 688.32
Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio -- 492.37 1,245.97 1,137.21 1,321.77
Debtors Turnover Ratio 11.00 5.93 5.83 5.66 6.00
Investments Turnover Ratio -- 536.84 1,412.30 1,137.21 1,321.77
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
 27 | P a g e

Profit & Loss Account Ratios

Material Cost Composition -- 1.43 0.14 0.24 0.23
Imported Composition of Raw Materials
-- 80.37 70.79 80.43 79.74
Consumed
Selling Distribution Cost Composition 0.10 0.10 0.20 0.14 0.09
Expenses as Composition of Total
92.97 90.17 92.38 90.51 93.01
Sales
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 2009

Earnings 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:[Link]
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
1.77 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 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 ratio
 28 | P a g e

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 [Link] 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 ISSUED PAID UP PAID CAPITAL

CAPITL([Link] CAPITAL SHARES UP
.) ([Link].) (Nos) FACE
VALUE
FROM TO
2008 200 EQUITY 150 134.05 67025660 2 134.0
9 02 5
2007 200 EQUITY 150 133.27 66634027 2 133.2
8 22 7
2006 200 EQUITY 150 132.74 66368311 2 132.7
7 62 4
2005 200 EQUITY 125.45 64.69 32344235 2 64.69
6 02
2004 200 EQUITY 80 63.84 31921478 2 63.84
5 42
29 | P a g e

CAPITAL STRUCTURE: capital structure refers to the way

a corporation finances its assets through some combination
of equity, debt, or hybrid securities. A firm's capital structure is
then the composition or 'structure' of its liabilities. The firm's ratio
of debt to total financing, 80% in this example is referred to as
the firm's leverage. In reality, capital structure may be highly
complex and include tens of sources. Gearing Ratio is the
proportion of the capital employed of the firm which come from
outside of the business finance, e.g. by taking a short term loan
etc. On the basis for modern thinking on capital structure, though
it is generally viewed as a purely theoretical result since it
assumes away many important factors in the capital structure
decision. The theorem states that, in a perfect market, how a firm
is financed is irrelevant to its value. This result provides the base
with which to examine real world reasons why capital
structure is relevant, that is, a company's value is affected by the
capital structure it employs. These other reasons
include bankruptcy costs, agency costs, taxes, information
asymmetry, to name some. This analysis can then be extended to
look at whether there is in fact an optimal capital structure: the
one which maximizes the value of the firm.

One way of determining the right mix of capital is to measure the

impacts of different financing plans on Earnings Per Share (EPS).
The objective is to find the level of EBIT (Earnings Before Interest
Taxes) where EPS does not change; i.e. the EBIT Breakeven. At
the EBIT Breakeven, EPS will be the same under each financing
plan we have under consideration. As a general rule, using
financial leverage will generate more EPS where EBIT is greater
than 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 where

alternative financing plans are equal according to the following
formula: (EBIT - I) x (1.0 - TR) / Equity number of shares after
implementing financing plan.
 30 | P a g e

Interest Expense TR: Tax Rate Formula assumes no preferred

stock.

The formula is calculated for each financing plan. For example,

you may be considering issuing more stock under Plan A and
incurring more debt under Plan B. Each of these plans will have
different impacts on EPS. You want to find the right plan that
helps maximize EPS, but still manage risks within an acceptable
range. EBIT-EPS Analysis can help find the right capital mix for
high returns and low costs of capital.

INTERPRETATION : As per the capital structure is concern it

shows the upward trend as issued capital is increased year by
year it means that the company is moving towards profit and he
is getting more and more funds so it will beneficial for the
company for further investment. In 2004-05 the issued capital
was 63.84 and it’s increased till 2008-09,135.01 so it is showing
good position of the company.

CAPITAL STRUCTURE OF TCS

PERIOD INSTRUMENT AUTHORIZED ISSUED PAID UP PAID CAPITAL

CAPITL([Link] CAPITAL SHARES UP
.) ([Link].) (Nos) FACE
VALUE
FROM TO
2008 200 EQUITY 120 97.86 97861049 1 97.86
9 8
2007 200 EQUITY 120 97.86 97861049 1 97.86
8 8
2006 200 EQUITY 120 97.86 97861049 1 97.86
7 8
2005 200 EQUITY 60 48.93 48930524 1 48.93
6 9
2004 200 EQUITY 60 48.01 48011480 1 48.01
31 | P a g e

5 9

INTERPRETATION: As per the capital structure is concern it

shows the upward trend as issued capital is increased year by
year it means that the company is moving towards profit and he
is getting more and more funds so it will beneficial for the
company for further investment. In 2004-05 the issued capital
was 48.01 and it’s increased till 2008-09, 97.86 so it is showing
good 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 also
getting 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
32 | P a g e

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 efficiently

utilizing 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 both

the 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
33 | P a g e

REFERENCES:

1. [Link]
2. [Link]
3. [Link]
4. [Link]
5. [Link]

BIBLOGRAPHY:

1. Financial management by I.M. PANDEY

2. Financial management by M.Y. KHAN