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Why TCS is the New Superstar of India Inc

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Why TCS is the New Superstar of India Inc

Tata Consultancy Services has firmly established itself as India's most-valued company. On Wednesday, the Mumbai-based outsourcer added another feather to its cap as it became the first Indian company to surpass Rs 5 lakh crore ($83 billion at 60 rupees=1 dollar) in market capitalisation. (Read more)

The emergence of TCS has eclipsed Mukesh Ambani-controlled Reliance Industries, which for a long time enjoyed the status of India's most valued company. RIL, India's biggest company by sales, has been weighed down by the downturn in the Indian economy and a sharp fall in gas output from its Krishna Godavari D6 block off the east coast.

In contrast, TCS shares have been on the rise on the back of the upturn in the US economy, its biggest market, and a weakness in the rupee, which helps IT exporters.

(See:When It Comes To TCS, Size Does Not Matter)

The Tata Group-controlled firm, which overtook its global peers such as Accenture and HP last year, is on the verge of rubbing shoulders with Cisco Systems, Unilever and PepsiCo - all part of the $100 billion global club.

Here's why TCS has stayed ahead of competition:

1) Superlative growth: Historically, large caps have experienced slower growth, but TCS has grown at a staggering rate over the last three years and has outpaced its peers on revenue and ebitda growth. For the current year too, TCS is estimated to post revenue growth of 16 per cent compared with Infosys' 8.3 per cent and Wipro's 9.9 per cent (Reuters estimates).

2) Leadership: In 2003, then TCS chief executive S. Ramadorai set a goal to be among the world's top ten companies by 2010. The company achieved the target a year ahead of schedule. Mr Ramadorai's successor N Chandrasekaran extended TCS' lead over its rivals. Since October 2009, when Mr Chandrasekaran took over as CEO, the revenue of TCS has more than doubled from $6.3 billion in the 2009-10 fiscal to about $13.4 billion in 2013-14. In contrast, both Infosys and Wipro have had internal management changes and have underperformed the industry.

3) Winner across verticals and geographies: TCS is the biggest Indian outsourcer in US and European markets, which account for 75 per cent of total IT sales. TCS also leads in financial, manufacturing, telecom and retail business verticals and in application development and maintenance (ADM) and enterprise resource planning (ERP) services lines.

4) Intelligent acquisitions: TCS has a track record of investing in new markets ahead of demand and then patiently waiting until the segment becomes large, said Ambit's Sagar Rastogi and Utsav Mehta. These strategic acquisitions have worked very well for TCS in Latin America, Switzerland, the Nordic countries and in the UK, the brokerage added.

5) Happy employees: According to Ambit, TCS has retained the dynamism of a small company despite having over 3 lakh employees. That's because it runs as a loosely coupled federation of 25 near-independent business units. The company has the lowest attrition among peers. (Read more)



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