Independent Investor and Research Analyst

Madhukar Ladha

Equity Bottom-Up

According to newspaper reports, <a href="https://www.smartkarma.com/entities/25999" target="_blank" data-smartkarma-citation="entities:25999:1">Tata Sons Ltd (47588Z IN)</a> has recently re-paid INR170bn of the outstanding debt of Tata Teleservices (includes subsidiary <a href="https://www.smartkarma.com/entities/9534" target="_blank" data-smartkarma-citation="entities:9534:1">Tata Teleservices (Maharashtra) Limited (TTLS IN)</a>). The total consolidated debt outstanding of Tata Teleservices as at March 2017, was about INR300bn and Tata Sons was expected to infuse the same into the Tata Teleservices. This should logically imply a share buyback at some point in 2HCY18 by <a href="https://www.smartkarma.com/entities/18708" target="_blank" data-smartkarma-citation="entities:18708:1">Tata Consultancy Svcs Ltd (TCS IN)</a> in order to repatriate funds to its parent company. Any such move will provide support and may be further upside to the stock.Additionally, the business environment for Indian IT services also seems to be turning the corner. The world economy is in good shape and as business momentum improves, demand for IT services should further pick up. The tax cuts in the US should only help at least from a demand point of view. Digital services continue to grow at an impressive pace and digital deals are increasing in size- this augurs well for the company and the sector.Finally, there is some valuation comfort as TCS is trading at P/E of 18.7x and 17.0x for FY19E and FY20E respectively. Plus any buyback will provide additional comfort as EPS will go up by 2-3%. The real game changer for the stock may come from 1) a change in market perception that the company will do buybacks annually, and  2) a solid uptick in business momentum.

According to newspaper reports, Tata Sons Ltd (47588Z IN) has recently re-paid INR170bn of the outstanding debt of Tata Teleservices (includes subsidiary Tata Teleservices (Maharashtra) Limited (TTLS IN)). The total consolidated debt outstanding of Tata Teleservices as at March 2017, was about INR300bn and Tata Sons was expected to infuse the same into the Tata Teleservices. This should logically imply a share buyback at some point in 2HCY18 by Tata Consultancy Svcs Ltd (TCS IN) in order to repatriate funds to its parent company. Any such move will provide support and may be further upside to the stock.Additionally, the business environment for Indian IT services also seems to be turning the corner. The world economy is in good shape and as business momentum improves, demand for IT services should further pick up. The tax cuts in the US should only help at least from a demand point of view. Digital services continue to grow at an impressive pace and digital deals are increasing in size- this augurs well for the company and the sector.Finally, there is some valuation comfort as TCS is trading at P/E of 18.7x and 17.0x for FY19E and FY20E respectively. Plus any buyback will provide additional comfort as EPS will go up by 2-3%. The real game changer for the stock may come from 1) a change in market perception that the company will do buybacks annually, and  2) a solid uptick in business momentum.

TCS - Buyback in the Future (Maybe?), & Improving Business Fundamentals.

India

Tata Sons Private Limited operates as an investment holding company. The Company focuses on promoting its subsidiaries, as well as holds shares. Tata Sons also provides philanthropic activities. Tata Sons serves customers worldwide.

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Tata Sons Private Ltd (47588Z IN)

TCS - Buyback in the Future (Maybe?), & Improving Business Fundamentals.

According to newspaper reports, Tata Sons Ltd (47588Z IN) has recently re-paid INR170bn of the outstanding debt of Tata Teleservices (includes...

Madhukar Ladha

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