Tata Consultancy Services: Safe, and sound

"If there's one person one can bet on in India, he is Ratan Tata." A friend of mine told me this while we were gossiping about the stock markets and the state of the world economy. I partly agree with this. Let me say why "partly". Mr. Tata has taken far too many risks at the wrong time. If those acquisitions had taken place a year later, his debt would have been considerably lower. But that's the chemicals, steel and auto businesses. The IT business of Mr. Tata is as strong as ever. With a large lot of government projects and contracts in its kitty, TCS is roaring. It had an IPO in 2004. With a price band of Rs 810-Rs 850, the company gave bonus of 1:1. So, equivalent share price is 425 rupees (people paid 850 a share). The CMP of Rs 574 (a P/E of 11), and increased price, is still attractive given the prospects of this company. A long term investment, if one has to make, it is this.

Okay, I know when Mr Tata asked Rs 850 a share, it was too much. But then it had prospects like no other IT company in India.

I should also add here, that one can always wait for a cheaper price. With the global economy in a downturn, when stocks fall, they fall together. So, irrespective of the fundamentals of this debt ridden company, there is a possibility that you may get some cheaper shares. And when you see them cheap, don't let them go away. A good investment decision is always difficult to make. You may know a company to be good, but you may not get the right price. TCS is perhaps, the only sensex scrip which has not created wealth considering CMP yet for its public shareholders. (I am not considering the inflated -and now deflated- realty stocks like DLF.)

With the government gearing up for more e-governance ideas and innovations, and with the world getting more tech savvy, TCS is poised to a beautiful future. Good government and domestic projects on hand, it will be less affected by the US crisis. The domestic growth has the potential to shadow the international decline. But Mr Tata had worked up a plan to overcome this as well when TCS acquired Citigroup Global Services.