The Indian IT industry is just something that seemed impossible until recently. Tata Consultancy Services, the company that has ruled for over 14 years, has lost its crown. For the first time since 2011, TCS is now trading at a lower valuation than its competitors, Infosys and HCLTech.
This is not just another market fluctuation. This represents a fundamental shift in how investors view India’s largest IT service provider.
Why Has TCS’s Valuation Been Dropped?
TCS’s trailing price-to-earnings multiple has fallen to 22.5 times. Compare this with Infosys at 22.9 times and HCLTech at 25.5 times, and you can see the problem clearly.
Between 2011 and early 2025, TCS enjoyed an average multiple of 25.5 times. This gave the company a roughly 15% premium over the industry average of 22.2 times. Investors were willing to pay more for TCS shares because they believed in superior performance and market position. That premium has now disappeared completely.
The Market Share Story
The numbers are still a concerning story for TCS shareholders. The company’s market share among the top five listed IT firms has dropped significantly. Today, TCS accounts for about 43.4% of the combined market capitalisation of the top 5 IT companies.
Back in March 2020, this number stood at a commanding 55 percent. That is a massive erosion of market dominance in just five years.
Currently, TCS’s total market capitalisation is ₹11.3 trillion. The combined valuation of the top 5 IT firms stands at ₹26.1 trillion.
Record High To Current Fall
TCS reached its record high market value of ₹15.44 trillion in September last year. Since then, the company has lost nearly 27% of its market value. This translates to approximately ₹4.14 trillion wiped off the books.
The entire IT sector faced headwinds, with the group’s overall market capitalisation falling about 20% from its December 2024 peak. However, TCS’s decline has been steeper than that, which is raising red flags.
Why Is This Happening?
The main reason behind TCS’s valuation slide is clear. The company has been reporting slower profit growth compared to its competitors. In recent quarters, TCS showed a much sharper slowdown than Infosys and HCLTech.
Margin Contraction
Along with slower growth, TCS is also facing margin pressure. Its profit margin has contracted more severely than its rivals, eating into the bottom line.
G Chokkalingam, founder and chief executive officer of Economic Research and Advisory Services, explains the situation clearly. TCS valuation reflects investor concern over its earnings outlook. He said in recent quarters, TCS reported a much sharper slowdown in profit growth and margin contractions than its peers. Investors expect this trend to continue, leading to a decline in TCS’s valuation.
What Does This Mean For Investors?
Loss of Benchmark Status: TCS had been the standard in the industry. TCS was the first company that analysts turned to when they wanted to know the well-being of the IT industry in India. The pricing power and operational excellence were benchmarked against the performance of the company.
That status quo has been questioned. Investors are no longer ready to pay a premium on the TCS shares when the competitors are providing higher growth and margins.
The Valuation Derating: Valuation derating implies that investors have been attaching a lower price to every rupee of earnings that TCS produces. This was due to lowered expectations of future growth.
The valuation has been derating at a faster rate than that of its peers, and this implies that the market is particularly worried about the future of TCS and not the IT industry in general.
Can TCS Recover?
The big question at this point is whether TCS can turn this around. The firm must show enhanced growth in profits and practice better margin management in the coming quarters.
Investors will be keen to see indications of an improvement in operations. TCS may continue to suffer a discount in valuation until it demonstrates that it can compete with the performance of Infosys and HCLTech.
To achieve its premium valuation back, there are some things that must occur at TCS. The company needs to accelerate profit growth, defend and increase margins, acquire new large contracts, and prove technological leadership in new areas such as AI and cloud computing.
It will not be simple making it down the road back to the top, but TCS has both the resources and talent to make it happen.
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