TCS seen listing in Rs 950-1,050 range

Shares of Tata Consultancy Services (TCS), India's largest software exporter, are seen listing in the Rs 950-1,050 range, according to some fund managers and dealers Tuesday.

The TCS shares are likely to be listed on the Bombay Stock Exchange and National Stock Exchange by the fourth week of this month.

The chief investment officer of a foreign mutual fund said, "I expect the shares of TCS to list in the range of Rs 1,000-1,050 per share, which will be at a premium of 18-24 per cent to the offer price of Rs 850. This is because the IPO has seen a lot of bidding. Eventually, investors are going to look at the stock's valuation vis-a-vis that of Infosys and Wipro".

Saturday, TCS announced Rs 850 per share as the cut-off price for its book-built initial public offer. The IPO, including the greenshoe option of 8.3 million shares, was subscribed 7.7 times, and netted Rs 5,420 crore at the issue price. The issue received a record 1.3 million bids.

"TCS shares should get listed at least 20 per cent higher than the cut-off price as this is the fair value of the stock," said an analyst from a domestic brokerage firm.

Analysts expect the TCS stock to trade at 20 times multiple of its 2004-05 earnings. This is at a discount to its peers, Infosys Technologies and Wipro. Currently, Infosys trades at a multiple of about 23-24 of the company's 2004-05 earnings, while Wipro trades at a multiple of 26-25.

At Rs 850 per share, TCS discounts 25 times its 2003-04 consolidated earnings per share of Rs 33.72, and has a market capitalisation of around Rs 40,700.

Most of the dealers and fund managers said the TCS stock's movement will largely be dependent on its valuation. However, there may be a change if the company makes any positive announcement.

Paras Adenwala, fund manager, Birla Sun Life Mutual Fund said, "The opening price of the TCS stock will definitely be higher than the offer price. However, the size of the premium is difficult to tell. I will not hazard a guess on that. However, it will surely open at a premium. Beyond that, the price movement depends on the valuation."

"Given the current valuations of the company, the TCS stock should get listed at Rs 950. The future rise or fall of the stock will also depend on the demand from investors," said a fund manager of a leading domestic mutual fund. The fund expects the cut-off price in the Rs 825-900 range.

The TCS IPO was subscribed 2.2 times at the highest end of the price band of Rs 775-900.

According to A.K. Sridhar, chief investment officer, UTI Mutual Fund, "The TCS IPO at Rs 850 is fairly priced. It is neither overpriced nor under priced. But seeing the huge appetite for the IPO, it will definitely list at a premium."

He, however, did not forecast the premium at which the share may list on the bourses.

According to brokers, the TCS shares should at least get Rs 200-250 premium. "We are expecting the TCS shares to list at Rs 1,100, but it may close lower at Rs 1,000 or 1,050," said a broker from Sushil Finance Consultants Ltd.

According to merchant banking sources, the allotment of the shares may get completed by August 20 and the listing may take place by August 26.