Tata Consultancy Services Limited (TCS), one of the most profitable and high-return IT giants, has made a significant move to expand its real estate assets. In a recent board meeting, the company announced the acquisition of Darshita Southern India Happy Homes Private Limited, a commercial real estate entity, for Rs 2,250 crore in cash. This deal involves acquiring 100 per cent equity shares in the company, with a call option allowing TCS to complete the transaction within two years.
The primary objective of this acquisition is to secure land and building assets to establish a new delivery centre, reinforcing TCS’s long-term growth and expansion strategies. Darshita Southern India Happy Homes, incorporated in September 2004, is engaged in developing a commercial property meant for leasing to industrial clients. However, the company has not yet started generating revenue.
The acquisition of Darshita Southern India Happy Homes aligns with TCS’s strategy to expand its physical infrastructure to support business operations and enhance service delivery. The deal underscores the company’s focus on securing key real estate assets that can be leveraged for future growth.
TCS has been continuously expanding its delivery centres across multiple geographies to cater to its growing client base. By acquiring a commercial property under development, TCS ensures it has dedicated office and operational space for future expansion, particularly in Southern India.
This investment comes amid a challenging period for the company’s stock performance, but it signals TCS’s long-term confidence in the IT industry’s growth and its ability to capitalize on strategic investments.
TCS: A Leading Global IT Powerhouse
Tata Consultancy Services (TCS) is one of the world’s largest IT services, consulting, and business solutions providers. The company has a global presence and serves a diverse range of industries, including banking, financial services, healthcare, retail, and telecommunications.
As per the latest market data, TCS stock is currently trading at Rs 3,565, with a total market capitalization of Rs 12,89,830 crore. Despite its industry dominance, TCS has experienced a stock decline of -13.26 per cent over the past year. The stock’s 52-week high stands at Rs 4,585.9, while the 52-week low is Rs 3,457.35.
Dividend and Shareholding Pattern
TCS has a track record of consistently rewarding shareholders with dividends. The company currently maintains a healthy dividend payout of 66.1 per cent, demonstrating its commitment to returning capital to investors.
As of December 2024, TCS’s shareholding pattern is as follows:
- Promoters: 71.77%
- Foreign Institutional Investors (FIIs): 12.68%
- Domestic Institutional Investors (DIIs): 10.86%
- Government Holdings: 0.06%
- Public Shareholding: 4.63%
There has been no significant change in the shareholding structure in the last quarter, reflecting stability in investor confidence.
Despite fluctuations in stock price, TCS has maintained strong financial performance over the last year.
Quarterly Results: December 2024
In Q3 FY24 (December 2024), TCS reported a revenue of Rs 63,973 crore, reflecting:
- A 5.60% year-on-year (YoY) growth, compared to Rs 60,583 crore in December 2023
- A 0.45% quarter-on-quarter (QoQ) decline, compared to Rs 64,259 crore in September 2024
The net profit for the quarter stood at Rs 12,380 crore, reflecting:
- A 11.96% YoY increase, from Rs 11,058 crore in December 2023
- A 3.95% QoQ increase, from Rs 11,909 crore in September 2024
TCS’s net profit margin has also improved:
- December 2024: 19.35%
- September 2024: 18.53%
- December 2023: 18.25%
Annual Performance: FY24 vs FY23
For FY24, TCS reported total revenue of Rs 2,40,893 crore, up from Rs 2,25,458 crore in FY23, reflecting a 6.85% annual growth.
The company’s net profit also increased from Rs 42,635 crore in FY23 to Rs 48,763 crore in FY24, marking a 9.73% growth.
The net profit margin for FY24 stood at 17.70%, compared to 17.23% in FY23, indicating sustained profitability.
TCS Valuation and Industry Comparison
TCS currently has a Price-to-Earnings (PE) ratio of 26.4x, which is lower than the industry average PE of 28.2x, suggesting that TCS trades at a slight discount compared to its peers.
However, the company remains an industry leader in Return on Capital Employed (ROCE) and Return on Equity (ROE):
- ROCE: 64.3%
- ROE: 51.5%
These figures demonstrate TCS’s ability to generate high returns on its investments, making it one of the most efficient IT firms globally.
Why Investors Should Monitor TCS
TCS continues to be a strong long-term investment option despite recent stock market fluctuations. Key reasons to keep an eye on the company include:
- Strategic Expansion – The recent Rs 2,250 crore real estate acquisition signals TCS’s commitment to long-term infrastructure investment to support its business growth.
- Strong Financial Performance – Despite market volatility, TCS has delivered consistent revenue and profit growth while maintaining a healthy profit margin.
- Stable Shareholding and Dividends – The company’s high dividend payout ratio and stable shareholding pattern make it a reliable investment.
- Market Leader in the IT Sector – With high ROE and ROCE, TCS outperforms most of its competitors in operational efficiency.
- Valuation Opportunity – TCS currently trades at a discount to the industry PE, providing potential for upside in stock price.
Tata Consultancy Services (TCS) has reinforced its growth strategy by acquiring Darshita Southern India Happy Homes for Rs 2,250 crore. This move highlights the company’s long-term vision of expanding its delivery centres and securing real estate assets for future business needs.
Despite short-term stock price challenges, TCS remains one of the most financially robust IT firms, delivering strong revenue and profit growth. Investors looking for long-term stability, high returns, and consistent dividends should closely monitor TCS as it continues its journey as a global IT powerhouse.
