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TCS: Magic In Numbers

The real reason why he is rated so highly is the manner in which he has protected and improved the profitability of this IT giant

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Whiz kids accustomed to jaw dropping compensation packages might actually be aghast and bewildered. According to the 2014-15 annual report of the company, Rajesh Gopinathan, CFO of TCS earned a gross package of a little more than Rs 2 crore. If you understand the world of finance and the high rollers playing for big stakes out there, that amounts to peanuts. But then, that’s classically TCS and classically understated Rajesh Gopinathan. Practice modesty even as you ensure long term stability and deliver big returns to all stakeholders.

The year 2015 has been a marquee and memorable one for both TCS and Gopinathan in many ways. Despite a pall of recessionary gloom hanging over the global economy, the company actually registered a healthy growth in revenues to notch up a figure of Rs 94,658 crore. By the time Gopinathan finalises the annual report for 2015-16, TCS would become the first Indian IT company to post annual revenue in excess of Rs 100,000 crore. But revenue figures tell only part of the story.

The real reason why Gopinathan is rated so highly is the manner in which he has protected and improved the profitability of this IT giant. In 2014-15, profit after taxes grew more than 14 per cent to Rs 21,912 crore, making it one of the most profitable companies in India. As a special gesture, all employees with more than one year of service,most of the 3,19,000-odd employees, were given a special bonus which resulted in a payout of Rs 2,630 crore. If employees had reasons to be happy, investors were given even more cause to celebrate. In the same year, TCS announced a special dividend of Rs 40 per share for all shareholders and paid a total dividend of Rs 79 per share.

Gopinathan, the TCS CEO N. Chandrasekaran and the board of directors could afford to be a tad extravagant last year. After all, the company boasts of one of the most solid balance sheets in the country. But there was more to the understated extravagance benefiting employees and shareholders. It was in 2005, much after rivals like Infosys, that the company had decided to list its share in the markets. In the 10 years since then, TCS has delivered phenomenal results and returns to stakeholders.

In 2015, it became the first Indian company to cross a market capitalisation of Rs 500,000 crore. It has slipped below that number since then, but will inevitably cross that magic number again once the markets improve. More important, it beats all its rivals by a wide margin when it comes to market cap. The number two after TCS is Infosys, way behind with a market cap of Rs 2,79,000 crore.

Wipro is an even more distant number three with a market cap of Rs 139,000 crore. HCL Infotech and Tech Mahindra come in as number four and five with Rs 1,15,000 crore and Rs 45,000 crore, respectively. Even when you compare TCS with other Tata group companies, the results are stark. Tata Steel and Tata Motors may ha e gone global with a vengeance in the last decade, but their returns to shareholders pale in comparison to what TVS has consistently delivered.

There is a conscious strategy behind all this. The top management focuses on relationship building while the team under Gopinathan works round the clock to improve the quality of the numbers. For the low profile alumni of IIM, Ahmedabad, there is clearly some magic in numbers!

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