Winning Bizness Desk
Mumbai. Tata Consultancy Services, once the most dominant name in India’s IT services industry, has slipped from the top after nearly 14 years. The company’s market perception has weakened significantly as its stock valuation has fallen below rivals Infosys and HCL Tech for the first time in more than a decade. Analysts say this shift signals a deeper change in investor sentiment as TCS struggles to maintain its earlier growth momentum and market influence.
TCS valuation falls behind key rivals
The company’s current price-to-earnings ratio stands at 22.5, placing it below Infosys at 22.9 and HCL Tech at 25.5. This is a major reversal from the past, when TCS consistently enjoyed a premium valuation. Between 2011 and 2024, its average P/E ratio typically traded nearly 15 percent higher than the broader industry average. Even in September last year, the company held a P/E multiple of 32.6, but that premium has now disappeared as its performance slowed sharply.
Market weight erodes amid falling market cap
TCS has also lost significant weight in the stock market. Its share in the combined market value of the top five IT companies has dropped from 55 percent in March 2020 to 43.4 percent today. The company’s market capitalisation now stands at about Rs 11.3 lakh crore, out of the total Rs 26.1 lakh crore commanded by the top five players. This drop reflects a steady erosion in the company’s dominance within the sector.
Why TCS faced the steepest decline
While the entire IT sector has been under pressure after the pandemic, TCS has suffered the sharpest impact. From its record valuation last September, the company has lost around 27 percent of its market value. At that time, TCS was valued at Rs 15.44 lakh crore. The correction has pushed its P/E ratio down from a peak of 38.2 in September 2021 to 22.5 now. Analysts attribute this slide to slower business growth, weaker margins and rising competitive pressure from mid-sized and large peers.
Financial and insurance sector gains traction
In contrast, the banking, finance and insurance sector has strengthened its weight in the Nifty 50 index. After two years of lag, the sector’s weight has risen to 35.4 percent, the highest in three years. The sector’s share was 33.4 percent at the end of December 2024 and 34.5 percent a year earlier. Although still below its record 40.6 percent weight in December 2019, the upward trend underscores renewed investor confidence in financial stocks over IT companies.
Expert view on TCS performance
Experts believe the biggest factor behind TCS’s declining valuation is its slowing profit growth. According to G. Chokkalingam of Equinomics Research, TCS has shown much weaker profit expansion and sharper margin contraction compared with its competitors over recent quarters. In the last four quarters, the company’s net profit has grown only 4.4 percent year-on-year, while the top five IT companies collectively delivered 6 percent growth. Analysts remain cautious about TCS’s growth outlook for the coming quarters, suggesting that the pressure on its valuation may continue.
Key points in Brief
- TCS loses title of India’s most valued tech company after 14 years
- Company’s P/E ratio drops below Infosys and HCL Tech for the first time
- Market capitalisation falls 27 percent from last year’s peak
- Share in top five IT firms’ value slips from 55 percent to 43.4 percent
- Banking and financial sector gains stronger weight in Nifty 50
- TCS profit growth rises only 4.4 percent in past four quarters
- Analysts remain cautious about TCS’s near-term growth outlook
