TCS Reddit Mentions | ChartExchange

No, that's not the right lens to value TCS and compare it to companies that have structural moats, network effects, pricing power, and a very long reinvestment runway for growth. TCS, or almost any Indian IT company, lacks almost all the reinvestment and expansion engines.
The companies you have mentioned have some of the strongest pricing power on this planet. They have multiple expansion opportunities within their ecosystems.
Meta, for example, is a floating model. If one region gets saturated, they expand further. When one revenue stream gets saturated, they create a new stream of growth. They have the best ad-targeting pricing power and still have more than a decade of reinvestment runway because they operate in a very large TAM. They have both the innovation engine and the reinvestment engine, so even on the same base they can keep adding new layers and expanding. The Asian region itself is hardly monetized, and the WhatsApp ecosystem is just getting started, which is where the principal reinvestment can happen.
Apple has insane pricing power, and then they layered it with services to grow deeper and improve margins. Their reinvestment engine first came through products, then within products, and then through services.
Microsoft is the rarest of the rare because it has the DNA of successful cloning to create new reinvestment markets. Again, they have insane pricing power. It was available at 12-15 multiples only a decade ago, but then they got a massive reinvestment runway in a very large TAM through cloud, Azure, and now AI. There were structural reasons for those things to happen.
Now map that to TCS. Do they innovate? No. Do they have the DNA to do that? Absolutely not. Can they charge a premium and have pricing power? No. And whatever was left is getting more commoditized as well.
You can make such arguments only when there are signals from the business state that a new reinvestment cycle can happen. They had those cash flows from 2014-2015. Were they creating a new reinvestment runway? Absolutely not. They were just focusing on inflating EPS through buybacks at idiotic valuations and destroying shareholder value, while the rest was paid out as dividends.
The companies you are comparing TCS to, look at how many of them pay dividends, and in what proportion. I can give you endless reasons.
The too big argument applies only when certain variables are present. It depends on the TAM, the market share a company has within that TAM, the ROIC, the reinvestment runway, and the structural moat around the business model.
They create new TAMs. Alphabet invests in innovation, and now a trillion-dollar autonomous vehicle TAM has been created. The TPU TAM has been created. The cloud TAM was created. The digital advertising TAM already exists. Then you map how much of that TAM has already been captured by the company you are willing to buy.
And even the current IPO of NSE, for which the whole world is excited, is not going to create value because it's already operating at almost 90% of the TAM it serves. There is hardly any reinvestment runway left. BSE, on the other hand, still has the runway to take market share from NSE.
NSE is a great business model and has insane pricing power, but it lacks the reinvestment engine. Compounding at its core is about ROIC, the reinvestment engine, and the TAM. That's why the pools become so critical.
Even Amazon, because I'm giving you examples, so why not take all the MAG 7? Amazon still has an insane TAM. Only around 40% of its ecosystem is e commerce, so the first reinvestment engine is there itself. Then comes its advertising vertical, which is still in its early stages. Again, that's an insane high margin TAM. That's why it compounds, because it can keep reinvesting as it operates in massive TAMs.
Then you compare where the reinvestment is happening. Is it happening at higher margins and higher ROIC, or lower? If it's lower, it's against capital creation and moves towards capital destruction, which is what ITC has done to its shareholders.
Now take Bajaj Finance. It has a TAM to reinvest into for the next two decades because the TAM itself is currently around 900 billion, and by 2035 it is expected to reach around 2.3 trillion. Yet it still has only around 5-6% of that TAM, so the reinvestment engine can keep operating for a very long time.
Now layer that with the moat. How strongly can it invest, defend the moat, and keep expanding? Because capitalism is brutal. It always attracts competition.
On the other hand, I don't remember the exact figure, but Asian Paints TAM is only around 80-100 billion, and Asian Paints already occupies almost 50-60% of that TAM. So there isn't a meaningful reinvestment runway left after that, and the stock was trading at 100x multiples.
Look at Asian Paints. For almost a decade, it has been trying to expand by going into lighting, tiles, wallpaper, and sanitaryware because if they don't expand the TAM and create new reinvestment runways, the compounding stops.
Now, the majority of the things they are trying are not working, and their core business model is operating in a saturated TAM. So what are they doing now? They are trying to layer high-end premium versions and services because if they don't, the share price will stagnate.
And this is exactly what will happen to all the investors who paid ridiculous multiples of 100-120x for this company in 2022. It will almost be a lost decade for those investors if Asian Paints is unsuccessful in creating new reinvestment runways.
And reinvestment runways exist in every direction. Whether you have a reinvestment runway through pricing power, through profits, through services, through new products, or through expanding into entirely new TAMs.