Tata Consultancy Services (TCS), a division of Tata Sons, could be looking at an initial public offering of a staggering Rs 3,000-4,000 crore, senior investment bankers close to the IPO process said.
If it materialises, this could be the largest ever capital offering to hit the primary market in India. Recently, Bharti Tele-Ventures has raised close to Rs 834 crore in one of the largest IPOs.
This estimate is based on the preliminary valuation of TCS which is likely to be in the range of Rs 30,000-40,000 crore. "The preliminary valuation of TCS is arrived at after considering certain key ratios like market capitalisation to sales and to operating profit for TCS as compared with its peers in the infotech industry," sources said. As per the Sebi guidelines, the infotech company will have to offload a minimum 10 per cent of its equity to the public which would hence works out around Rs 3,000-4,000 crore irrespective of the number of shares being offered.
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When contacted, R Gopalakrishnan, executive director of Tata Sons, said that the size of the initial offering is a matter of speculation. "As we have yet to take any final decision on the IPO, I do not want to comment on the issue," he said here on Wednesday.
Top merchant bankers, which are vying for the mandate, are yet to do a formal valuation of TCS, but have already worked on preliminary estimates. Valuation of the infotech business of Tata Sons is a key factor since currently TCS is only a division. The equity structure of TCS will also have to be firmed up for the process of its incorporation as a company before the IPO, sources said.
The valuation of TCS is based on a comparative valuation of its peers like Infosys Technologies, Wipro and Satyam Computers.
Infosys, which has a market capitalisation of around Rs 25,400 crore, clocked revenues of Rs 1,923.46 crore for the nine-month period ended December 2001 with operating profits of Rs 809.97 crore. Wipro clocked a turnover of Rs 2,531.1 crore for the same nine month period with a operating profit of around Rs 803.5 crore and has a market capitalisation of Rs 38,500 crore.
Satyam Computers the other major infotech heavyweight on the bourses has a market capitalisation of Rs 9,200 crore with a revenue of Rs 1,247 crore and an operating profit of Rs 487.38 crore for the nine month period ending December, 2001.
TCS on the other hand had clocked revenues of Rs 3,312 crore for the previous financial year with an operating profit of Rs 1,200 crore and is expected to end the current year with revenues of around Rs 4,100 crore and operating profit in the region of Rs 1,500 crore.