The Telegraph
Since 1st March, 1999
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Tatas set ball rolling for blockbuster TCS issue

Mumbai, June 10: The Tatas today finally bit the bullet and took the first step to offer the Indian public a stake in its Rs 7,000-crore software giant — Tata Consultancy Services (TCS).

The Tatas filed the red herring prospectus for the initial public offering (IPO) of the country’s largest software exporter, which promises to raise Rs 5000-6000 crore — making it the largest-ever public issue by a private company, dwarfing the Rs 3000-crore Reliance issue in 1993-94.

The market has been waiting eagerly for the TCS issue with mavens saying it would galvanise the somnolent bourses just the way the Maruti Udyog issue did in May 2003.

The buzz in the market began early in the day, when Ishaat Hussain, a board member at Tata Sons, the main holding company for the Tata group, said the merchant bankers would file the prospectus with Sebi ‘within the next 48 hours’. The red herring prospectus was eventually filed at 4:30 pm.

TCS will be offering 5.54 crore equity shares of one rupee each, including a fresh issue of 2.27 crore shares which will be offered through the book-building route.

Market operators felt the book would be built around Rs 1000-1100 per share.

The Sebi approval for the issue will be valid for three months, giving the Tatas the opportunity to time the entry into the market. The speculation in the market is that the issue will, most probably, come in July or August, depending on market conditions.

Although it will the biggest public issue by a private sector company, it’s only half the size of the ONGC issue in March that garnered over Rs 9,000 crore by selling the government’s 10 per cent stake.

The TCS issue comprises the offer for sale of 3.26 crore by Tata Sons Ltd and certain other shareholders of TCS, and a greenshoe option by Tata Sons for 8.31 lakh shares each.

The company had a turnover of over Rs 7,000 crore in 2003-04 with a net profit in excess of Rs 1,700 crore. The offer of a 7.17 per cent stake is from existing shareholders like Tata Sons, Indian Hotels and Jamsetji Tata Trust.

The IPO will consist of 4.99 crore shares, including 2.99 crore to qualified institutional bidders (QIBs), 74.86 lakh to non-institutional bidders (high net-worth individuals), and 12.47 lakh to retail bidders, it said.

The company has reserved 55.45 lakh shares for the employees of TCS division, TCS Ltd and Tata Sons. The net proceeds of fresh issue of shares will be used to pay the purchase consideration to Tata Sons for the transfer. The rest of the proceeds will be deployed for general corporate purposes.

The authorised share capital of the company is Rs 60 crore and the current paid-up capital is Rs 45.55 crore. The equity capital after the offer would be Rs 47.83 crore, says the prospectus.

The issue will be listed on the Bombay Stock Exchange and the National Stock Exchange.

The book-running lead managers are J.M. Morgan Stanley Pvt Ltd, DSP Merrill Lynch and JP Morgan (India) Pvt Ltd. Karvy Computershare Pvt Ltd will be the registrar to the issue.

Job quotas

TCS is uneasy about the government’s attempt to foist job reservation on the private sector.

“I do not think we will be forced to do anything (by the government). A company has to be competitive,” said S. Ramadorai, chief executive officer, in Delhi today. He said the ‘core and specialised’ areas need to maintain standards and the competitive edge. Job reservations would compromise this.

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