DCF Studio

    TCS.NS · NSI · Technology

    Tata Consultancy Services Limited

    Also onConsensus Drift

    Implied value per share

    INR 2594.53

    Market price

    INR 2105.00

    Implied upside

    +23.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis line has no market capitalisation, which means it is not ordinary shares - typically a hybrid, preference line, note or unlisted stub. A discounted cashflow values a claim on the whole business, so applying it here attributes all of the group’s revenue to a security that has no such claim. Its value is its coupon and call schedule. Look up the ordinary line instead.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    No usable EV/EBITDA (EBITDA is not positive), so the exit multiple falls back to 8x.

    Value Per Share

    Perpetuity growth
    INR 2594.53+23.3%
    Exit multiple
    INR 2137.31+1.5%
    Market price
    INR 2105.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn315bn631bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 2825.1bnINR 2989.0bnINR 3162.5bnINR 3345.9bnINR 3540.1bn+5.8%
    EBITINR 694.2bnINR 734.4bnINR 777.1bnINR 822.1bnINR 869.8bn+5.8%
    NOPATINR 519.2bnINR 549.4bnINR 581.2bnINR 615.0bnINR 650.6bn+5.8%
    Add depreciation & amortisationINR 59.6bnINR 63.0bnINR 66.7bnINR 70.5bnINR 74.6bn+5.8%
    Less capital expenditureINR -39.4bnINR -41.7bnINR -44.1bnINR -46.7bnINR -49.4bn+5.8%
    Less increase in working capitalINR -36.1bnINR -38.2bnINR -40.4bnINR -42.7bnINR -45.2bn+5.8%
    Free cashflow to firmINR 503.3bnINR 532.5bnINR 563.4bnINR 596.1bnINR 630.7bn+5.8%
    Discount factor0.95840.88020.80840.74250.6820-
    Present valueINR 482.4bnINR 468.7bnINR 455.5bnINR 442.6bnINR 430.1bn-2.8%
    Present Value Of The ForecastINR 2279.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.441Reported 0.166, pulled toward 1.0 (Blume)
    Cost of equity10.33%Risk-free + beta x equity risk premium
    Cost of debt11.87%Interest expense / average total debt
    Market capitalisationINR 0.000.0% of capital
    Total debtINR 112.8bn100.0% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC8.88%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareINR 2594.53

    75% of EV

    Forecast FCFF, final year
    INR 630.7bn
    Capex at depreciation, working capital in reinvestment
    INR 655.3bn
    Less reinvestment at g/ROIC (5.2% of NOPAT)
    INR -34.2bn
    Capitalised
    INR 621.1bn
    ROIC (reported)
    47.9%
    Terminal value, undiscounted
    INR 9981.4bn
    Terminal value, discounted
    INR 6807.0bn
    Enterprise value
    INR 9086.3bn
    Less net debt
    INR -300.9bn
    Equity value
    INR 9387.2bn

    Exit at 8.0x EBITDA

    Value per shareINR 2137.31

    69% of EV

    Terminal value, undiscounted
    INR 7555.7bn
    Terminal value, discounted
    INR 5152.7bn
    Enterprise value
    INR 7432.1bn
    Less net debt
    INR -300.9bn
    Equity value
    INR 7733.0bn

    Spread between methods: 19%.

    Sensitivity

    Value per share (INR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.88%3197.093432.723721.844085.154555.58
    7.88%2712.322868.453053.353275.893548.94
    8.88%2359.132468.372594.542741.952916.53
    9.88%2090.382169.952260.132363.242482.33
    10.88%1879.071938.832005.582080.662165.76

    Outlined: this model. Green text: above today's price of 2105.00. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year5.8%0.4%-5.4pp
    EBIT margin24.6%19.8%-4.8pp
    Discount rate8.9%10.5%+1.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.