| Draft prospectus filed for India's biggest pvt sector IPO; 63.7mn shares on offer at Rs875-950. | |
| The draft red herring prospectus for the long-awaited initial public offer (IPO) of Tata Consultancy Services, the largest IT services company in Asia, was filed today with the Securities and Exchange Board of India (Sebi). A Tata Sons board committee approved the filing of the prospectus yesterday. | |
| Tata group executives declined to divulge the exact size and timing of the issue but sources said 63.7 million shares would be offered to the public, that the shares would have a face value of Re 1, and that the issue was purely a domestic float. The size of the issue could be Rs 5,500-6,000 crore, making it the largest private-sector IPO in India. | |
| The Re 1 face value shares are likely to be hawked at a price of Rs 875-950. The exact price band of the book-built issue will be decided later. DSP Merrill Lynch, J M Morgan Stanley and J P Morgan are the book runners for the issue. | |
| If the TCS IPO is priced at a premium of Rs 875-950 per share, as is widely expected in the markets, the company, on its existing paid-up capital in 455 million shares, will be valued at Rs 40,000-43,225 crore. Even if the share is listed at the issue price, it will top the market capitalisation sweepstakes in the software industry. At today's stock price, Wipro has a market capitalisation of Rs 35,492 crore and Infosys Technologies has a market capitalisation of Rs 35,123 crore. | |
| The company will finalise the timing of the issue after the Union Budget in the first week of July. | |
| Asked why Tata Sons had decided on the IPO now, given the state of the stock markets, a senior Tata executive said: "We've only filed the prospectus. We'll take approval and if market conditions are good, we'll go ahead, if not, we won't. IT stocks have held up very well. At last count, they were at a level higher than what they were before the market crash." | |
| Sources said the issue""a combination of offer for sale and fresh shares""could hit the market in mid-July. A major portion of the issue, close to 75 per cent, will be on offer for sale. Tata Sons would be offloading a 10-15 per cent stake in TCS in the market, sources said. | |
| The net proceeds of the fresh issue of shares will be used to pay the purchase consideration to Tata Sons for the transfer and the remaining proceeds will be deployed for general corporate purposes like investment in other industries such as telecom. | |
| The company will keep 60 per cent of the issue for qualified institutional investors (QIBs), 15 per cent for high net worth individuals (HNIs) and 25 per cent for retail investors. "If there is any shortfall in domestic demand, the QIBs can subscribe to up to 100 per cent of the issue," said a source. The company has reserved 5.54 million shares for employees of TCS and Tata Sons. | |
| TCS, which is currently a division of Tata Sons, will be hived off as a company. The Bombay High Court has already approved the scheme of arrangement between Tata Sons and TCS, which will lead to the transfer of the IT services business to Orchid Print, which has been renamed TCS Ltd, a shell company. Tata Sons holds a 90 per cent stake in TCS Ltd, with the balance being held by other companies, including Indian Hotels and Tata Tea. After Sebi approves the IPO prospectus, the Tata group will kick off the process of transferring the TCS division to TCS Ltd. The authorised share capital of the TCS Ltd is Rs 60 crore and the current paid-up capital is Rs 45.55 crore. | |
| Indian Hotels today informed the Bombay Stock Exchange that the company intends to divest up to 2,00,000 equity shares of Re 1 each held by it in TCS as part of the proposed IPO. | |
| The group, which has been working on a grand plan to consolidate its IT businesses, is likely to set the ball rolling on merging its IT companies with TCS after the IPO. The group's IT companies are Tata Infotech, Tata Elxsi, CMC and Tata Technologies. | |
| TCS is the first Indian infotech company to chalk up a turnover of over $1 billion. In 2003-2004, it clocked a turnover of over Rs 7,000 crore and notched up a net profit of over Rs 1,800 crore. In terms of turnover, TCS ranks 23rd among listed companies, just below Adani Exports. In terms of net profit, TCS ranks seventh, after GAIL India. In March 2004, it employed 28,000 people. | |
| Over the last few years, several investment banks have valued TCS and the highest known valuation was $20.7 billion, arrived at by Credit Suisse First Boston at the height of the infotech boom in 2000. | |
| TCS' IPO coincides with the centenary celebration year of three Tata stalwarts, including Tata group founder Jamshedji Nusserwanji Tata.
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TCS' Rs 5,500-6,000 cr float in July
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First Published: Jun 11 2004 | 12:00 AM IST
