Tata Consultancy Services Limited
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Briefing
Tata Consultancy Services Limited — the brief
Forensic posture: Material flags. TCS has a clean auditor's report and strong earnings quality, but carries ₹7,197 crore in contingent liabilities (6.7% of net worth) dominated by a ₹1,590 crore US litigation (CSC trade secrets case at Supreme Court) and ₹1,446 crore in indirect tax disputes; related-party transactions total ₹43,000 crore with a notable ₹3,959 crore payable to Tejas Networks offset by only ₹26 crore in FY26 purchases from that entity.
Auditor’s report (CARO 2020)
Auditor’s assessment Clean. Auditor: B S R & Co. LLP. Opinion: Unqualified. Fiscal year FY25-26.
Related-party transactions
Assessment Notable. Disclosed volume of ₹43,000 Cr across 21 related parties. Fiscal year FY25-26.
- ₹1,500 Cr Inter-Corporate Deposit Placed with Group Entity: TCS placed ₹1,500 crore in inter-corporate deposits with subsidiaries of Tata Sons Private Limited (specifically Tata Capital Limited ₹1,000 crore disclosed as material), representing a material cash deployment to a related group entity; in
- ₹3,959 Cr Payable to Tejas Networks (Advance Received): Tejas Networks Limited — an associate/JV of the Tata Sons group — carries a ₹3,959 crore year-end payable balance (unearned/deferred revenue and other liabilities), which is very large relative to only ₹26 crore in purchases during FY26 and
- Tejas Networks Purchases Collapsed 99.7% Year-on-Year: Purchases of goods and services from Tejas Networks Limited fell sharply from ₹7,508 crore in FY25 to just ₹26 crore in FY26, yet the company retains a ₹1,335 crore advance receivable and ₹3,959 crore payable to this entity — the divergence
Contingent liabilities
Assessment Concerning. Total disclosed: ₹7,197 Cr (6.7% of net worth). Fiscal year FY25-26.
- Indirect tax demands from various indirect tax authorities contested
- CSC trade secrets litigation; judgment awarded US $168M; petition at US Supreme Court pending
Corporate governance
Board of 8 directors, 63% independent. Chair: N Chandrasekaran. Chair and CEO roles are separated. Statutory auditor: B S R and Co. LLP. Fiscal year FY25-26.
“Inter-corporate deposits placed - Tata Capital Limited 1,000”
What retail misses·The US Supreme Court petition on the CSC trade secrets case (potentially ₹1,590 Cr exposure) and the sharp 99.7% collapse in Tejas Networks purchases coupled with a ₹3,959 Cr outstanding payable to that same entity do not feature in headline earnings and are buried in contingent liabilities and RPT annexures — neither moves the needle on reported profit, but both carry resolution risk.
Strengths noted in disclosures: Auditor's unqualified opinion with zero high, material, or minor flags — financial statements pass clean. · Earnings quality composite of 95/100 with low manipulation risk, cash-to-profit alignment, and top-decile profitability; Altman Z-score of 10.08 places the company firmly out of bankruptcy risk. · ₹28,291 Cr in dividends paid to holding company (Tata Sons at 71.74% stake) demonstrates robust cash generation; the ₹1,500 Cr inter-corporate deposit to group entities is a routine deployment of surplus liquidity.
Forensic signal
From the company's own filingsStrong: Valuation · Yield · Size · Weak: 52-Week