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TCS price band capped at Rs 900

Mumbai, July 19: The Tatas intend to offer shares in the much-awaited maiden issue of Tata Consultancy Services (TCS) — expected to raise Rs 5,000 crore — in a price-range of Rs 775 to Rs 900 apiece.

Merchant bankers today filed the offer-document with the registrar of companies. Their approval is expected to be a mere formality after the Securities and Exchange Board of India cleared the issue last week.

“It is a great price, even if it is fixed at the upper end of Rs 900,” Ajit Sanghvi of MSS Securities said about the issue, the first big offer after the UPA government took charge.

Many in the market had believed the Tatas would cash in on the improved sentiment on infotech companies and settle for a price between Rs 900 and Rs 1100.

“There’s enough liquidity for the issue,” operators said. After the flurry of public offers that absorbed Rs 17,000 crore in March and early April, primary markets shrivelled as scores of firms put off maiden issues.

Undeterred, the Tatas decided to swim against the tide and filed TCS’ red herring prospectus with Sebi last month. The pace quickened as they wanted the launch of the issue to coincide with the birth centenary of J. R. D. Tata on July 29.

In all, 5.54 crore equity shares with a face-value of Re 1 each will be issued. There will be a fresh lot of 2.28 crore shares, while 3.37 crore shares will be put on the block by Tata Sons and other shareholders of the company.

The big question in the minds of Tata shareholders is whether they will get preferential allotment. The company has not spoken about it nor does the prospectus carry any mention of it. What is clear though is that the TCS issue will spawn millionaires, just the way Infosys and several other software majors did. TCS employees are luckier. They will get loans to buy shares from a Rs 90-crore kitty set up for this purpose.

On a net profit of Rs 1,700 crore in 2003-04 and a post-issue equity of Rs 47.83 crore, the earnings per share is estimated at Rs 35.54. This would translate into a price earnings ratio of 25 — attractive for an infotech major.

MSS Securities’ Sanghvi says there will be no turnover tax on purchase of TCS shares in the IPO. Any sale after a year would be a long-term capital gain and, therefore, tax free under provisions of the Finance Bill.

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