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| The revival in the stock market and the success of the Maruti IPO is probably indicating to the Tatas that the time is ripe to list Tata Consultancy Services (TCS).
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| A listing by TCS will be greatly beneficial to the investing public and the economy. The Tatas would have probably gone in for a TCS listing earlier, were it not for the downbeat mood in the stock markets.
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| Conventional wisdom holds that by listing TCS, the Tatas will be able to leverage its value and garner substantial investor resources for expansion of other group companies. But this may be problematic.
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| A publicly listed TCS will have large institutional shareholders, including FIIs. They will watch over investments by the company and keep asking if these are in the best interests of TCS shareholders.
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| For example, if TCS was listed several years ago and had decided to invest in the emerging telecom service business, institutional shareholders may well have taken a dim view of it then.
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| But there is a deeper reason why public listing may not be good for TCS. The best Indian software companies are under increasing margin pressure and having to do all they can to keep shareholders happy.
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| This is resulting in a shorter outlook and maximum focus on current performance. The short-term outlook, prompted by what is called the tyranny of quarterly results, can have a negative long-term impact on these companies.
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| Are they investing sufficiently in technology without which innovations cannot come? These provide a key route up the value chain. Investment in technology brings return only in the longer term.
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| Some entry barriers are indeed created by the scale that these companies have been able to achieve and the efficiency of their delivery model, but these are rather easily overcome.
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| There are also counter arguments. Some analysts hold that regular shareholder scrutiny will be good for TCS. It is also asked as to what great investment TCS has been able to make in technology, by not having to answer to shareholders, given the freedom to do the right things in future, even if that freedom has not been put to the best use in the past.
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There is some urgency in all this as the leading Indian software companies need to reinvent themselves, as the returns from their highly successful model are plateauing. There is some unanimity on the view that they have only one way to go
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