Dalal St expects TCS to be priced at Rs 850

Marketmen expect the initial public offering (IPO) of Tata Consultancy Services Ltd (TCS) to be priced at Rs 850 rupees a share or above.

The book-build IPO of India's biggest software company for 55.45 million shares has been offered in a range of Rs 775-900 a share. The IPO, which opened on July 29, closes Thursday.

As per the National Stock Exchange (NSE) website, the IPO has been subscribed 4.08 times as of 1500 IST on Wednesday, with bids for 226.18 million shares at both NSE and Bombay Stock Exchange.

"I expect the issue to be priced at Rs 850 or above," said Manish Shah, head of retail and Internet broking, Motilal Oswal Securities.

Shah said that even at Rs 850, the valuations were not "exactly cheap for now" but the company's long-term prospects were good.

Added Vijay Bhushan, head of Bharat Bhushan Stock Broking: "For the time being, it looks like the final price will settle around Rs 850, though the picture (regarding price) will get better tomorrow (Thursday). We are advising our retail clients to bid at Rs 900."

Marketmen said that while institutional investors had bid between Rs 825-850 a share, most retail investors were now bidding at the top end of Rs 900.

This is because retail investors do not want to miss out on allotment by bidding at a lower price, they added.

"I expect the issue to be priced not below Rs 850," said Bharat Dhanki, director, Dhanki Securities. "The possibility of the issue being priced at the upper end of the price band (Rs 900) is also very high, as retail investors typically apply in droves on the last day."

Dhanki said that since most retail investors borrow funds to apply for shares, it was another reason for their bids to come at the top end of the price band.

"They would not want to risk losing out by bidding at a lower cost as they would still have to pay interest cost on the borrowed funds," he said.

According to NSE, bids for 42.44 million shares have come at Rs 850 a share, while bids for 163 million shares have been in the band of Rs 800-850.

Bids for 61 million shares have come between Rs 851-900, while there have been only a small number of bids between Rs 775 and Rs 799.

At Rs 850 a share, the TCS IPO will mobilise around Rs 4713 crore. The issue is being lead managed by JM Morgan Stanley, DSP Merrill Lynch, and JP Morgan India.