4QFY16 TCS. Exhibit 1: YoY CC growth improves to 8.4%, but remains in single digits for the fifth consecutive quarter

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1 12 January 2017 Results Update Sector: Technology TCS BSE SENSEX S&P CNX 27,247 8,407 Bloomberg TCS IN Equity Shares (m) 1,970 M.Cap.(INRb)/(USDb) 4,577.4 / Week Range (INR) 2740 / , 6, 12 Rel. Per (%) 3/-2/-10 Avg Val, INRm 2840 Free float (%) 26.7 Financials & Valuations (INR b) Y/E Mar E 2018E Net Sales 1, , ,345.0 EBITDA PAT EPS (INR) Gr. (%) BV/Sh (INR) RoE (%) RoCE (%) P/E (x) P/BV (x) Estimate change TP change Rating change CMP: INR2,323 TP: INR2,550(+10%) Neutral Set for new innings under Rajesh Gopinathan Amid background of marginal 3Q beat and positive outlook CFO Rajesh to succeed as the CEO: With Mr. Natarajan Chandrasekaran set to be the chairman of Tata Sons starting February 21, CFO Mr. Rajesh Gopinathan will take charge as the CEO of TCS. He started his professional career with TCS in He was appointed as the CFO in February 2013, and has also worked in roles of Strategy and Business Finance in the past. TCS also announced N G Subramaniam as the COO of the company. Marginal beat: TCS CC revenue growth of 2.0% QoQ and EBIT margin of 26% (flat QoQ) were both 50bp ahead of our estimates. India (+10.3% QoQ), IMS (+9.5% QoQ CC) and Asset Leveraged solution (+21% QoQ CC) drove growth, with BFSI and Retail seeing some recovery to grow at company average. PAT was INR67.8b, +2.9% QoQ compared to our estimate of INR62.5b aided by operating beat and higher other income. Positive outlook - undeterred by visa implications: TCS expects momentum to sustain in 4Q, which drives our estimate of 2.2% QoQ CC growth next quarter. Commentary was positive on all fronts: [1] Commitment to EBIT margin band of 26-28% for now, despite the potential hike in wages for visa employees, [2] Positive momentum in BFSI as clients shift from cost takeout to growth, [3] Opportunity in traditional business from consolidation. Valuation & View: For the industry in last couple of years, topmost level changes have understandably been accompanied with a round of flux ( more recently at INFO, WPRO, MTCL), and one will have to be watchful of a potentially similar shuffle at TCS. We tread cautiously as a result of this uncertainty and ascribe a target multiple of 16x (v/s 17x earlier). Over FY16-19, we expect TCS to grow its CC revenue/usd revenue/earnings at CAGR of 10.1% / 8.3% / 8.8%. Our price target of INR2,550 implies 9% upside. Neutral Ashish Chopra (Ashish.Chopra@MotilalOswal.com); Sagar Lele (Sagar.Lele@MotilalOswal.com); Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on Bloomberg, Thomson Reuters, Factset and S&P Capital.

2 marginally ahead of estimates TCS constant currency (CC) revenue growth was 2% QoQ, a tad above our expectation of 1.5% QoQ CC. Revenue growth was constituted of 1% QoQ volume growth, implying CC realization improvement of 1%. Adverse cross currency movements impacted revenues by 170bp, taking reported USD revenue growth down to 0.3% QoQ, at USD4,387m. YoY CC revenue growth during the quarter was 8.6% compared to 6.8% in the previous quarter. Strength in Digital bounced back up after seeing some weakness in 2QFY17. Revenue from Digital grew by 4.7% QoQ, and it now constitutes to 16.8% of total revenue. This compares with contribution of 16.1% in 2QFY17 and 13.7% in. Exhibit 1: YoY CC growth improves to 8.4%, but remains in single digits for the fifth consecutive quarter CC revenue growth (QoQ, %) CC revenue growth (YoY, %) 2QFY14 4QFY14 2QFY15 4QFY15 2QFY16 4QFY16 2QFY17 2QFY14 4QFY14 2QFY15 4QFY15 2QFY16 4QFY16 2QFY Source: MOSL, Company Exhibit 2: Breakup of revenue growth : USD revenue growth impacts Percentage Volume +1.0 Realization change +1.0 Cross currency movements -1.7 QoQ USD revenue growth (%) +0.3 Segmental Color Strong growth in some clouded by volatility in others On a YoY CC basis, both UK (+4.9%) and Asia Pacific (+3.9%) have been soft. The rest, excluding North America (+8.7%) have all grown in double digits. Sequentially, North America grew 2.2% QoQ CC, UK grew 1.7% QoQ CC and Continental Europe declined in CC terms QoQ by 1.1%. Double-digit sequential growth was seen in Latin America (+12.5%) and India (+10.3%) sequentially. Among verticals, Communication & Media declined by 4.9% QoQ CC and Life Sciences & Healthcare by 0.8% QoQ CC. However, these were because of oneoffs and aren t expect to drag going forward. BFSI (40.4% of total revenue) grew by 2.1% QoQ CC. Energy & Utilities saw a strong rebound, growing by 5.8% QoQ CC. Among Services, Products business grew by 21% QoQ CC after seeing a decline of 20% QoQ CC in 2Q. IMS picked up pace again growing by 9.5% QoQ CC. Growth in ADM continued to be soft at -1.3% QoQ CC. Enterprise Solutions & Consulting was flat during the quarter. 12 January

3 Exhibit 3: Double digit sequential growth in Latin America and India Geographies Contr. to CC QoQ CC YoY overall rev (%) Gr. (%) Gr. (%) North America Latin America UK Continental Europe India APAC MEA Exhibit 4: Communication and Healthcare drag growth Verticals Contr. to CC QoQ CC YoY overall rev (%) Gr. (%) Gr. (%) BFSI Retail & CPG Communication & Media Manufacturing Life Sciences & Healthcare Hi-Tech Energy & Utilities Travel & Hospitality Others Exhibit 5: Strong growth in Infrastructure Services and Asset Leveraged Solutions Services Contr. to CC QoQ CC YoY overall rev (%) Gr. (%) Gr. (%) ADM EAS + Consulting Testing Engg Services IMS Products BPO Flat margins, partly aided by one-time in the previous quarter EBIT margin was flat at 26%, marginally ahead of our estimate of 25.5% (-50bp QoQ). In the previous quarter, costs included USD26m paid to settle the Orange County lawsuit, the absence of which in 3Q resulted in a tailwind of ~60bp. In cost of services, Equipment & Software costs increased 150bp QoQ despite which margins remained flat. The cost was accompanied by a proportion increase in revenue that got reflected in the growth seen in India, Infrastructure Services and Asset Leveraged Solutions. PAT was INR67.8b, +2.9% QoQ, compared to our estimate of INR62.5b (decline of 5.1% QoQ) primarily because of slight operational beat and higher Other Income. 12 January

4 Exhibit 6: Margins 50bp ahead of our estimate SGA (% of Revenues) EBIT Margin (%) QFY14 4QFY14 2QFY15 4QFY15 2QFY16 4QFY16 2QFY17 Leadership changes Rajesh Gopinathan takes over as CEO, NGS as COO Rajesh Gopinathan has been appointed as CEO and MD. He would take over from N Chandrasekaran, who has been appointed as Chairman of Tata Sons effective February 21, Rajesh has been the CFO of TCS since February 2013, prior to which he was the Vice President Business Finance, where he was responsible for financial management of the company s individual operating units. N Ganapathy Subramaniam (NGS) has been appointed the as the President and Chief Operating Officer. He currently is the President of TCS Financial Solutions, and has been part of TCS and the industry for the past 34 years. He has played a global role, especially in the Banking and Financial Services sector. Cash generation strong Cash generation for TCS improved significantly as it generated INR79.6b in cash from operations, clocking an OCF margin of 26.8%. This has been a sharp improvement from 21.5% in. This was led by improvement in DSO of 3 days to 74 in, compared to 77 at the end of FY16. Including unbilled revenue, DSO stood at 88 in, compared to 90 at the end of FY16. Free cash flow at INR75.5b clocking at 111% of net profit. This compares with FCF/net profit of 89% in. Takeaways from Management commentary One-offs in Communication and Healthcare: Revenue declined sequentially in the verticals of Communication and Healthcare. In Communication, weakness was seen in UK, Europe and Asia Pacific; while in Healthcare the US slowed down. However, both these factors are one-off, and aren t expect to continue following the same trend going forward. Focused on reducing visa dependency: In light of recent regulatory developments, TCS highlighted that it has been a key partner to its clients, who have been facing business model challenges. It has been ramping up local recruitment efforts, partnering with universities, and running STEP programmes. TCS has been amongst the top net job creators in the US. It has been continually reducing dependency on visas; evident from the fact that it applied for a third of the visas this year, compared to the previous year. 12 January

5 Wages up to the mark: Onsite wages at TCV have been benchmarked against their prevailing locations, and adjusted for age and experience. There is a high convergence of salaries between locals and those in the US on visas. Typically, locals have been hired in senior capacities, while technical gaps have been filled by supply of resources from outside the US. Buoyancy in BFSI: BFSI, over the last 5-6 years has been focused on cost takeout, regulatory compliance and automation. However, they are now looking at growth, and investments in technology. The pipeline, and TCS positioning have been leading to a buoyant outlook in the vertical. Margin band maintained: TCS maintained its targeted EBIT margin band of 26-28%. It has been approaching the market in a well-balanced manner to achieve both growth and profitability. Despite some known and some unknown cost pressures, the intent is to maintain profitability in the target band. While some cost pressures can be addressed, the true impact on costs and profitability from regulatory changes will only be known once details around the legislation are made know. Cutting revenue estimates % With growth largely in line with estimates in, we haven t tempered much with our FY17 growth estimates. However, we have adjusted that for FY18E lower to factor for cross-currency impact. Our EBIT margin estimates are up slightly (20-25bp) factoring strong execution demonstrated over the last couple of quarters, coupled with positive commentary around the intent to maintain the band despite pressures. Consequently, our earnings estimates are mostly unchanged, with revenue moderation offsetting the slight margin uptick. Exhibit 7: Change in estimates Revised Earlier Change FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E INR/USD % 0.0% 0.0% USD Revenue - m 17,670 19,224 20,998 17,761 19,528 21, % -1.6% -1.5% USD revenue growth (%) bp -115bp 5bp EBIT Margin (%) bp 22bp 8bp EPS - INR % -1.2% 0.6% Valuation and view Over FY11-15, TCS had led the incremental revenues as well as operating profits not just domestically, but also in the global arena (compared to peers multiple times its size). However, weak areas like Diligenta, Japan and India / Latin America saw the company cede its growth leadership to peers such as CTSH and INFO last year. During the period of outperformance, TCS traction has been impressively broad-based, unlike select pockets of stress across its peer group. However, over the past 12 months, some factors that have led relative softness in performance v/s the company s expectations have had secular elements (Energy, Telecom and Insurance in FY16, followed by BFSI and Retail this year), as well as company-specific headwinds (India, Japan and Diligenta in particular). 12 January

6 Geographically, although the company sees some stability in Latin America and India, while Japan may still take a while before delivering sustained growth. The growth outperformance to industry peers has waned, but it is well invested building Digital capabilities to recoup that advantage. We expect acceleration in revenue growth from current ~7% YoY CC to ~10% in FY18, led by continued high growth on the increasing Digital base and eventual ramp ups that have hit FY17 momentum. Uncertain macro limits confidence to proceed with project based IT spending that is discretionary in nature, especially in verticals like BFSI and Retail. TCS exposure to both BFSI and UK is slightly higher than peers, implying that performance in near term may not see any sharp revival. Commentary by the management and outlook going forward however has been positive led by optimism around BFSI and opportunity in traditional business from consolidation. For the industry in last couple of years, changes at the very top have been understandably been accompanied with a round of flux (at INFO, WPRO, MTCL), and one cannot rule out the uncertainty from a potentially similar shakeout at TCS. We tread cautiously as a result of this uncertainty and ascribe a target multiple of 16x (v/s 17x earlier). Our growth expectations for Revenue / Earnings CAGR over FY16-19E stand at 8.3 / 8.8%. Our target price of INR2,550 discounts FY19 EPS by 16x, and implies 9% upside. Maintain Neutral. Key triggers Sustained pickup in BFSI Retail Digital-led resurgence in growth leadership Further recovery in margins in the near term Key risk factors Further deceleration in YoY CC growth from turbulent macro Rapid appreciation in INR Intensification of pricing pressure Exhibit 8: TCS 1 year forward PE chart 30 PE (x) Peak(x) Avg(x) Min(x) Dec-06 Mar-08 Jun-09 Sep-10 Dec-11 Mar-13 Jun-14 Sep-15 Dec-16 Exhibit 9: TCS 1-year forward PB chart PB (x) Peak(x) Avg(x) Min(x) Dec-06 Mar-08 Jun-09 Sep-10 Dec-11 Mar-13 Jun-14 Sep-15 Dec January

7 Exhibit 10: Comparative Valuation Company Mkt cap Rating TP Upside EPS (INR) P/E (x) RoE (%) FY17-19E CAGR (%) (USD b) (INR) (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E USD rev. EPS TCS 68.1 Neutral 2, Infosys 34.1 Buy 1, Wipro 17.3 Neutral HCL Tech 17.7 Buy TechM 7.1 Buy Tier-I Aggr January

8 Story in charts Exhibit 11: Outperformance to peers has waned FY11 FY12 FY13 FY14 FY15 FY16 1HFY17 Exhibit 12: amid fast decelerating revenues CC revenue growth (YoY, %) TCS Infosys Wipro (IT Services) HCL Tech 2QFY14 4QFY14 2QFY15 4QFY15 2QFY16 4QFY16 2QFY17 Exhibit 13: Revenue growth getting delinked to headcount Exhibit 14:...as competitive intensity gradually pulls down pricing Headcount USD revenues Picing indexed at 100 1QFY13 3QFY13 1QFY16 1QFY12 3QFY12 1QFY13 3QFY13 1QFY16 Exhibit 15: Operating at peak efficiency, reflected in utilization (assumed 4QFY16 onwards) Util Excl. Trainees (%) QFY14 4QFY14 2QFY15 4QFY15 2QFY16 4QFY16 2QFY17 Exhibit 16:..Margins continue to be within the targeted range SGA (% of Revenues) EBIT Margin (%) QFY14 4QFY14 2QFY15 4QFY15 2QFY16 4QFY16 2QFY17 12 January

9 Exhibit 17: Operating Metrics 2QFY15 4QFY15 1QFY16 2QFY16 4QFY16 2QFY17 Service Lines (%) ADM Engineering and Industrial Services Infrastructure Services Enterprise Solutions Global Consulting Enterprise Solutions & Consulting Asset Leverage Solutions Assurance Services BPO Industry Verticals (%) BFSI Manufacturing Telecom + Media Life Sciences & Healthcare Retail & Distribution Transportation Energy and Utilities Hi-Tech Others Geographies (%) America UK Rest of Europe Europe India APAC Latin America MEA Others Revenue Mix (%) Offshore Onsite GDC Utilization Excluding Trainees Including Trainees Total Employees 313, , , , , , , , , ,497 Trainee Additions 7,583 5,529 5,569 6,425 9,943 7,593 8,623 5,038 11,884 10,950 Lateral Additions 8,924 6,129 5,853 9,337 10,978 10,451 10,659 9,877 7,486 4,804 Overseas Additions 3,843 4,903 2,973 4,540 4,265 4,074 3,294 2,877 3,295 2,608 Gross Additions 20,350 16,561 14,395 20,302 25,186 22,118 22,576 17,792 22,665 18,362 Net Additions 8,326 4,868 1,031 5,279 10,685 9,071 9,071 9,071 9,440 6,978 Attrition (LTM %) January

10 Exhibit 18: Growth Metrics QoQ growth (%) 2QFY15 4QFY15 1QFY16 2QFY16 4QFY16 2QFY17 Service Lines ADM Engineering and Industrial Services Infrastructure Services Enterprise Solutions Global Consulting Asset Leverage Solutions Assurance Services BPO Industry Verticals BFSI Manufacturing Telecom Life Sciences & Healthcare Retail & Distribution Transportation Energy and Utilities Hi-Tech Others Geographies America UK Rest of Europe Europe India APAC Latin America MEA Others Offshore Onsite GDC Overall International business Domestic Business January

11 Financials and Valuations Key assumption E 2018E 2019E INR/USD Rate Revenues (USD m) 10,171 11,568 13,443 15,454 16,544 17,606 19,224 20,998 Offshore Revenue (%) Total Headcount 238, , , , , , , ,947 Net Addition 39,969 37,613 24,268 19,192 34,187 31,056 38,596 34,451 Per Capita Productivity 46,528 44,945 46,623 49,843 49,128 47,664 47,560 47,646 Util. excl. trainees (%) Util. incl. trainees (%) Income Statement (INR Million) Y/E Mar E 2018E 2019E Net Sales 488, , , ,484 1,086,462 1,188,069 1,344,965 1,478,291 Change (%) EBITDA 144, , , , , , , ,516 EBITDA Margin (%) Depreciation 9,036 10,792 13,243 18,698 18,879 19,834 19,364 21,345 EBIT 135, , , , , , , ,171 Other Income 4,041 11,174 15,891 31,393 30,498 42,544 27,574 33,790 Extraordinary items PBT 139, , , , , , , ,961 Tax 31,688 40,344 60,712 66,564 75,026 83,095 88,363 96,341 Tax Rate (%) Min. Int. & Assoc. Share 1,110 1,494 2,089 2,114 1, ,440 1,440 Reported PAT 106, , , , , , , ,180 Adjusted PAT 106, , , , , , , ,180 Change (%) Balance Sheet (INR Million) Y/E Mar E 2018E 2019E Share Capital 1,957 1,957 1,959 1,959 1,970 1,970 1,970 1,970 Reserves 323, , , , , , ,907 1,157,173 Net Worth 325, , , , , , ,877 1,159,143 Preference Shares 1,000 1, Minority Interest 5,276 6,561 6,905 9,136 3,542 3,550 3,550 3,550 Loans & Other Liabilities 12,306 10,894 12,561 19,004 14,092 14,361 16,362 17,718 Total Capital Employed 343, , , , , ,371 1,015,789 1,180,410 Gross Fixed Assets 107, , , , , , , ,450 Less: Acc Depreciation 42,852 53,644 66,887 85, , , , ,007 Net Fixed Assets 64,548 81, , , , , , ,444 Investments 0 33,765 37,673 7,283 7,831 2,670 2,670 2,670 Current Assets 347, , , , , ,285 1,047,044 1,219,475 Debtors 137, , , , , , , ,512 Cash & Bank 34,617 79, , , , , , ,983 Loans & Adv, Others 175, , , , , , , ,980 Curr Liabs & Provns 68,175 91, , , , , , ,178 Curr. Liabilities 68,175 91, , , , , , ,178 Net Current Assets 279, , , , , , ,520 1,026,297 Total Assets 343, , , , , ,371 1,015,789 1,180, January

12 Financials and Valuations Ratios Y/E Mar E 2018E 2019E Basic (INR) EPS Cash EPS Book Value DPS Payout (incl. Div. Tax.) Valuation(x) P/E Cash P/E Price / Book Value EV/Sales EV/EBITDA Dividend Yield (%) Profitability Ratios (%) RoE RoCE RoIC Turnover Ratios (%) Fixed Asset Turnover (x) Debtors (No. of Days) Leverage Ratios (%) Net Debt/Equity (x) Cash Flow Statement (INR Million) Y/E Mar E 2018E 2019E Adjusted EBITDA 144, , , , , , , ,516 Non cash opr. exp (inc) -28,759-30,664-46,910-57,762-45,755-41,442-62,229-63,990 (Inc)/Dec in Wkg. Cap. -49,352-13,501 12,834 25,257-32,355-58,999-37,214-24,220 CF from Op. Activity 66, , , , , , , ,305 (Inc)/Dec in FA & CWIP -41,584-6,733-64,233-49,941-38,294-20,777-45,026-45,384 Free cash flows 24, , , , , , , ,922 (Pur)/Sale of Invt 18,390-33,765-3,909 30, , CF from Inv. Activity -23,193-40,498-68,142-19,550-38,842-15,616-45,026-45,384 Inc/(Dec) in Net Worth ,778-45, Inc / (Dec) in Debt 1,588-1,412 1,666 6,444-4, ,001 1,356 Divd Paid (incl Tax) & Others -57,246-50,377-73, , , , , ,915 CF from Fin. Activity -55,658-51,788-71, ,670-95, , , ,559 Inc/(Dec) in Cash -12,785 44,418 77,461 41,217 94,309 56,057 92, ,362 Add: Opening Balance 47,401 34,616 79, , , , , ,620 Closing Balance 34,616 79, , , , , , , January

13 Corporate profile Company description TCS is the largest IT services company in India, with (LTM) revenue of over USD17.1b. It employs over 371,000 people and provides IT and BPO services to over 1,000 global clients. It is one of the preferred IT vendors for most Fortune 500/Global 1,000 companies. Exhibit 1: Sensex rebased Source: MOSL/Bloomberg Exhibit 2: Shareholding pattern (%) Sep-16 Jun-16 Sep-15 Promoter DII FII Others Note: FII Includes depository receipts Source: Capitaline Exhibit 3: Top holders Holder Name % Holding LIC of India 3.2 Source: Capitaline Exhibit 4: Top management Name Designation Exhibit 5: Directors Name Name Ishaat Hussain N Chandrasekaran Suprakash Mukhopadhyay Chairman Managing Director & CEO Company Secretary Aarthi Subramanian Aman Mehta O P Bhatt V Thyagarajan P A Vandrevala Clayton M Christensen Ron Sommer Vijay Kelkar Source: Capitaline *Independent Exhibit 6: Auditors Name Deloitte Haskins & Sells LLP Type Statutory Exhibit 7: MOSL forecast v/s consensus EPS MOSL Consensus (INR) forecast forecast Variation (%) FY FY Source: Bloomberg Source: Capitaline 12 January

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