The company's stock, a report by CLSA says, is well-positioned to achieve a 17 per cent compounded annual growth rate, overcoming the challenges faced by other large companies and remaining a good investment prospect.
As a comparison, the current m-cap of Reliance Industries, termed India's most highly valued company, is $74.6 billion.
Motilal Oswal, chairman and managing director, Motilal Oswal Securities, says, "comparing TCS with RIL is like comparing apples and oranges", but adds on a standalone basis, TCS valuations can go up by 20-30 per cent.
"Going ahead, innovation will be key for firms. In that case, TCS has much more going for it. RIL is an old business model firm with majority focus on refineries, gas etc.
"Besides 15-20 per cent growth in services and products firms is possible, however in a manufacturing sector it is a tad difficult," he said.
Large-cap plus
The CLSA report says what goes in TCS' favour is that it is a large-cap firm. After the recession, when clients looking at a multi-vendor environment, large-cap firms will always have a better opportunity.
"Invites for large-deal RFPs (request-for-proposals), propensity to invest in new service lines/solution development and ability to attract and retain talent: all come with scale.
Thus, IT services is a space skewed towards larger players. Over the years, the top vendors in Indian IT steadily gained share, moving from 29 per cent of India's total IT service exports in 2000 to 38 per cent by 2006 and about 45 per cent by 2010.
Such a skew precludes the possibility of some smaller services companies grabbing market share away from the larger players," said the report.
The other aspect favouring large-cap firms and TCS is the offshoring presence. Low cost delivery has been the key disruptive phenomenon in IT services and is likely to continue.
An important reflection of this disruption (and often repeated by us) is the convergence of market capitalisation between Indian techs like TCS/Infosys and Accenture.
When TCS listed, Accenture's market cap was 2.5 times TCS'.
However, now TCS' market cap is 35 per cent higher than that of Accenture.
This change in market cap dynamics captures the structural shift in the IT services market towards offshore and low-cost
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