TCS' Wide Moat Well Enforced by Strong Switching Costs

Tata Consultancy Services is a leading global IT services provider, providing the typical menu of offerings--from software implementation to digital transformation consulting to servicing entire business operations teams. Unlike most of its peers, which earn a narrow moat, in our view, we think Tata merits a wide economic moat, as we believe the company benefits from switching costs and intangible assets, similar to other peers in the industry, as well as cost advantage. While the company will likely struggle amid the coronavirus pandemic, we think that the company’s stable moat trend will stay secure. Meanwhile, forays into the higher-value realm of industrials engineering will help ensure Tata is an above-average beneficiary of substantial growth trends within the IT services industry at large.