Best Bluechip Stock: Reliance vs TCS

Editor's note: Reliance and TCS are strong power houses that are backed by the Ambanis and Tatas, two of the most important business families in India.

These two companies are leaders in their respective industries with Reliance having interests across various industries including oil and gas, retail and telecommunication.

TCS, on the other hand, is globally recognised IT services company renowned for its strong focus on technology and innovation.

Let's see how these two companies have performed over the last few years and what the future holds for them.

In May 2024, we explained in detail how the two companies are performing across various parameters. Today, let's see how they have performed in the first half of financial year 2025.

The Nifty 50, is home to industry leaders that have carved their names in history.

Among these stars, Reliance Industries (RIL) and Tata Consultancy Services (TCS) shine brightly.

Both hail from well-established corporate houses, the Tatas and the Ambanis, and boast impressive market capitalisations.

While Reliance dominates the energy and petrochemicals space, TCS reigns supreme in information technology.

Today, we delve into these contrasting powerhouses to see which is a better large-cap company.

Business Overview

# Reliance Industries

Reliance Industries is a massive Indian conglomerate with a presence in various industries, including energy, petrochemicals, retail, entertainment, telecommunications, and textiles.

Reliance majorly carries out exploration, development and production of oil and gas, petrochemicals, refining of crude oil, and marketing of petroleum products.

It also India's largest retailer with a vast network of stores across various formats like groceries, electronics, and fashion.

Jio revolutionised the telecom space, making interest accessible and affordable.

It is also investing in building the most comprehensive ecosystem of new energy and new materials like solar and hydrogen in India to support the government's green energy drive.

Overall, it is a significant contributor to the Indian economy and one of the largest employers in India.

# Tata Consultancy Services (TCS)

TCS is the flagship company of the Tata group and is a leading multinational information technology (IT) services and consulting company.

It offers a wide range of services including digital transformation, business, technology, and engineering, artificial intelligence (AI), and cloud based services and solutions.

It also offers pre-built software and platforms that are tailored and custom-made to meet the client's requirements.

TCS operates in over 150 locations across 46 countries with an employee base of over 0.6 million (m) and caters to a diverse clientele.

The company's clients are spread across banking, financial services, consumer business, life science, healthcare, manufacturing, communication, energy, and technology sectors.

It is investing heavily in new technologies and in training its employees continuously on these technologies to help its clients stay competitive in the global market.

Overall, being the largest private sector employer in India, and major IT exporter, TCS is playing a crucial role in India's growth story.

Particulars	Reliance	TCS
Market Cap (in Rs billion)*	18,125.90	14,455.90

Source: Equitymaster|*as of 30th October 2024

If we compare these two large-cap companies in terms of market cap, then Reliance has a larger market cap of Rs 18,125.9 billion (bn) as against TCS, which has a market cap of Rs 14,455.9 bn.

Both TCS, and Reliance were a part of Nifty 50 for over 15 years now and both have always competed to be among the top players in the index.

In the last one year, shares of TCS have given higher returns to their shareholders when compared to Reliance.

The shares of TCS grew by 19% in the last one year, as against a 15% return of Reliance.

However, they couldn't beat the market index Nifty 50, which gave a 27% return.

If we compare the companies based on their 5-year performance, then Reliance is slightly ahead of TCS with a 85% return, as against the 81% return of TCS.

Despite the recent market correction, both the companies have given high returns in long run.

With Reliance investing heavily across retail and new energy solutions, the company was one of the most traded stocks on the stock market.

TCS, on the other hand, being a technology giant and a dividend paymaster, is also among investors' favourites.

#Revenue

Reliance earns over 50% of its revenue from its oil to chemicals (O2C) business, followed by retail, digital services, and other segments.

Over the years, Reliance's revenue mix has evolved, and the retail sector is one of the fastest-growing businesses for the company.

TCS, on the other hand, earns most of its revenue from IT consulting.

Within IT consulting, the revenue mix is further categorized into enterprise solutions, development and maintenance of applications, and business process outsourcing (BPO).

Revenue

Net Sales (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	H1 2025
Reliance	59,75,350	46,69,240	69,59,630	87,78,350	91,44,720	47,16,980
TCS	16,15,410	16,73,110	19,57,810	22,90,680	24,53,150	12,68,720

Source: Ace Equity

Over the last five years, the revenue of Reliance and TCS has grown at a CAGR of 9%.

For Reliance, the growth is multidimensional. It has an established presence in the O2C business and operates the world's largest refinery off-gas cracker complex of 1.5 million MTPA capacity.

Its subscriber base of 470.9 m in its digital services business and continuous improvement in the average revenue per user (ARPU) over the last few years, have supported the revenue growth.

Apart from this, its fast-growing retail business in tier 2 and tier 3 cities has also aided revenue growth.

For TCS, its proven ability to offer full-service capability has helped it win deals across a wide spectrum of verticals.

Hence, despite uncertain global macro-economic conditions, it has the highest number of deal wins and a robust order pipeline providing revenue visibility in the medium term.

In the last 6 months, Reliance and TCS have witnessed strong growth in revenues. Their half year revenues are already higher than last year's half year revenue.

This shows both the companies will witness a steady revenue growth in financial year 2025 when compared to financial year 2024.

For Reliance, robust growth in digital services, and retail segment aided the revenue growth.

In contrast, for TCS, strong demand from existing and new clients drove the revenue in the first half of 2025.

#Profitability

To assess the profitability of a company, we must look at earnings before interest tax depreciation and amortisation (EBITDA) and net profit growth.

In the last five years, the EBITDA and net profit of Reliance have grown by a CAGR of 9.7% and 11.8% respectively, whereas for TCS, the EBITDA and net profit grew by a CAGR of 8% and 7.3% respectively.

High growth in digital and retail business has helped Reliance grow its profits at a higher rate. For TCS, the new deal wins, and operating efficiency has aided the profit growth.

While Reliance has higher profit growth, TCS has higher profit margins. In the last five years, the gross profit margin and net profit margins averaged at 29.2% and 19.7% respectively.

For Reliance, the EBITDA and net profit margin averaged at 16.5% and 7.9% respectively.

In the last 6 months both Reliance and TCS's EBITDA took a hit. Their half year profits in financial year 2025 are slightly lower than their profits in financial year 2024.

For Reliance, the operating profits fell primarily due to the O2C business. Due to high supply and low demand the margins weakened dragging the company's profitability down.

In case of TCS, higher employee costs have affected the profits and margins.

Despite a small drop in profits, both companies are optimistic about their growth.

For TCS, digital transformation and cloud migration will drive the profits in the medium term. For Reliance, on the other hand, fast growth in retail and digital services will push the profits upwards in the medium term.

Profitability

EBITDA (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	H1 2025
Reliance	10,21,730	9,70,640	12,33,890	15,38,960	16,22,330	7,78,230
TCS	4,67,010	4,96,800	5,70,750	6,27,080	6,87,180	3,33,930
PAT (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	H1 2025
Reliance	3,98,800	5,37,390	6,61,840	7,36,700	6,96,210	3,65,490
TCS	3,24,470	3,25,620	3,84,490	4,23,030	4,60,990	2,40,600
Gross Profit Margin	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	H1 2025
Reliance	15.50%	18.00%	15.60%	15.80%	17.70%	16.50%
TCS	29.80%	30.30%	29.80%	27.80%	28.50%	26.30%
Net Profit Margin	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	H1 2025
Reliance	6.00%	10.00%	8.40%	7.60%	7.60%	7.70%
TCS	20.70%	19.80%	20.10%	18.80%	19.10%	19.00%

Source: Ace Equity

#Debt Management

Having debt as a part of capital is not wrong; however, having too much debt can be a cause for concern as it can affect the company's profitability.

TCS is a debt-free company. It generates enough cashflows to fund its investments and hence doesn't have to rely on outside sources for funds.

Technology is an ever-evolving sector, and TCS is continuously investing in developing new technologies and upskilling its employees to deliver superior services to its clients.

Recently, it came up with an entire range of AI solutions to meet its clients requirements promptly.

Reliance, on the other hand, has a debt-to-equity ratio of 0.44x. and its net debt at the end of March 2024 stood at Rs 1,160 bn.

The company is investing heavily in expanding its retail business. It currently has over 18,000 stores across 200 cities in the country. It plans to add more stores in Tier 2 and Tier 3 cities to expand its retail business.

It is also investing in the digital services business and is rolling out the new Jio AirFiber across 5,500 towns in India.

Apart from this, it is also investing in new energy and material businesses such as solar and hydrogen to help the government reach its target of net zero.

Reliance funds most of its capex through debt. Hence, it has elevated debt levels. However, the company is focussing on reducing its debt.

In September 2024, the company's net debt increased slightly to Rs 1,164.2 bn, as against Rs 1,160 bn in March 2024.

It majorly invested in its O2C and new energy business to increase its revenue and profits from this segment.

During the last 6 months, the capex in Jio has significantly reduced as it plans to focus on a conservative financial framework through the investment cycle.

Debt Management

Debt to Equity Ratio (x)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	H1 2025
Reliance	0.7	0.4	0.3	0.4	0.4	0.4
TCS	0	0	0	0	0	0

Source: Ace Equity

#Financial Efficiency

Though Reliance and TCS operate completely different businesses, we can measure their financial efficiency through two ratios, namely, return on capital employed (RoCE) and return on equity (RoE).

These ratios help us understand how much return the company is generating from the capital invested. A high ratio is considered good.

TCS has the upper hand in terms of financial efficiency as it generates higher returns on the capital invested.

The five-year average RoE and RoCE of TCS are 43.7% and 59.4%, respectively, whereas for Reliance, the RoE and RoCE are 9.8% and 10.8%, respectively.

Financial Efficiency

ROCE	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Reliance	10.40%	8.80%	9.70%	10.90%	14.10%
TCS	50.00%	52.60%	60.20%	64.40%	69.50%
ROE	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Reliance	9.50%	9.70%	9.20%	9.90%	10.50%
TCS	37.60%	38.50%	44.10%	47.30%	51.00%

Source: Ace Equity

#Dividend

A company that pays dividends consistently to its shareholders is considered stable.

However, if a company doesn't pay high dividends, it doesn't mean it isn't stable. This means that the company is investing the money to grow its business rather than giving dividends to its shareholders.

In terms of dividend, TCS has an upper hand. TCS is a dividend paymaster and has a history of paying high dividends to its shareholders. In the last five years it consistently paid high dividends.

Over the last five years, its dividend payout ratio and dividend yield have averaged 65.1% and 2.4%, respectively.

TCS also pays a regular interim dividends to its shareholders. In the last six months, the company paid two interim dividends totalling to Rs 20 per share.

Reliance, on the other hand, is consistently increasing its dividend. In the last five years, its dividend has grown by a CAGR of 10.4%. The average dividend payout and dividend yield over the last five years is 9.1% and 0.4%, respectively.

The company doesn't pay interim dividends to its shareholders. However, recently, it issued bonus shares of 1:1 ratio to all its shareholders.

TCS has no debt. Moreover, it generates high cashflows which are sufficient to run and expand its business. Hence TCS distributes excess cashflows to its shareholders.

Reliance, on the other hand, is investing in new energy and materials and is expanding its retail business. Hence, it pays lower dividends to its shareholders.

Dividend

Dividend Per Share (Rs)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
Reliance	6.1	7	8	9	10	10.40%
TCS	75.7	38.9	43.5	116.3	73	-0.70%
Dividend Yield	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Reliance	0.60%	0.30%	0.30%	0.40%	0.30%
TCS	4.00%	1.20%	1.20%	3.60%	1.90%
Dividend Payout Ratio	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Reliance	10.30%	8.80%	8.20%	8.30%	9.70%
TCS	84.40%	43.20%	40.90%	99.50%	57.30%

Source: Ace Equity

#Valuation

To estimate the worth of a company we must look at the price to earnings (P/E) ratio and price to book (P/B) value.

A high P/E and P/B ratio compared to its peers indicates the company is overvalued, and low ratio indicates it is undervalued.

Although it is difficult to compare two companies from different industries in terms of valuation, TCS is overvalued when compared to Reliance.

The P/E of TCS and Reliance is 30.3x and 23.5x, respectively, whereas the P/B ratio is 14.2x and 2.1x, respectively.

Due to the recent market correction, the valuation of both the companies slightly reduced when compared to May 2024.

However, the two companies are overvalued when compared to their five-year average and industry average.

Valuations	Reliance	5-Year Average	TCS	5-Year Average
P/E (x)	23.5	25	30.3	28.4
P/B (x)	2.2	2.1	14.2	12.4

Source: Ace Equity

Which Nifty 50 Stock is Better: Reliance or TCS?

TCS is leading in terms of high-profit margin, debt management, financial efficiency, and dividend payment.

Reliance, on the other hand, is leading in terms of profit growth.

The company is investing to expand its retail and digital services business. It is rapidly expanding its stores across the country.

Apart from affordable range, it is investing in high-end premium labels to cater to the luxury market as well.

For its digital services, it is rolling out 5G and Jio AirFiber across the country.

Being a major player in the energy business, Reliance will benefit from rising demand for refined petroleum products, power and increasing urbanisation.

Moreover, Reliance also has a presence in the growing renewable energy sectors such as solar and hydrogen.

All this will drive the growth of Reliance in the medium term.

TCS being one of the largest IT company in India, the rapid adaptation of digital technologies like cloud computing, artificial intelligence, and automation will drive the growth.

In addition, government initiatives like Digital India are promoting IT adaptation across various sectors.

Recently, both Reliance and TCS partnered with Nvidia for AI chips, to accelerate the AI adoption in the country.

Overall, both companies are primary beneficiaries of the growth prospects in their respective industries.

However, one shouldn't ignore macroeconomic headwinds such as global economic slowdown, and adoption of cleaner fuels which could hamper the growth of these companies.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.