Introduction to TCS’s DCF Financial Model
In this post, I construct a robust 10-year Discounted Cash Flow (DCF) financial model for Tata Consultancy Services (TCS). Remember that a DCF model is a valuation method that estimates the intrinsic value of an investment based on its projected future cash flows.
For TCS, this approach involves forecasting the company’s free cash flows over the next 10 years and discounting these future cash flows back to their present value using an appropriate discount rate, specifically TCS’s weighted average cost of capital (WACC) of 11.10%. This process allows for an objective assessment of TCS’s worth, independent of market fluctuations.
To build TCS’s financial model, I employ a granular approach for forecasting. This includes projecting revenue growth based on global IT services market trends, TCS’s market share outperformance, and INR depreciation, with growth rates ranging from 4% in FY26 to 9% in FY31–FY35. These projections incorporate realistic annual growth assumptions that account for near-term macroeconomic challenges, AI-driven transformation, and long-term market stabilization, reflecting the natural evolution of growth as the IT services sector matures.
Beyond revenue, I forecast all the cost line items of the income statement. To complete the valuation, I estimate TCS’s cost of capital, project the capital expenditure the firm may require in the next 10 years, and also determine the working capital requirements over the forecast period. This comprehensive analysis provides a detailed financial perspective on the company's future.
So with that in mind, let’s begin.
Download the financial model
Before we proceed pls download the Excel model of TCS below. Note that it contains 7 different sheets: assumptions sheet, revenue schedule, cost and expenses schedule, depreciation schedule, capex schedule, net working capital schedule, and finally the big valuation sheet.
Once downloaded, track the model with me as you read along: