JM Morgan, DSP Merrill sounded out

TCS spadework for IPO gets off the block

Anju Ghangurde & Priya Srinivasan

Mumbai, Sept 20: Tata Consultancy Services (TCS), a division of Tata Sons, appears to have initiated the spadework for its proposed initial public offering (IPO). TCS, industry sources say, has sounded out top-notch investment banking firms including JM Morgan Stanley and DSP Merrill Lynch, though others are also likely to be in the fray.

The TCS official spokesperson, when contacted, said discussions are on with many investment banking firms but declined to comment on the identity. He also added that it was too premature to comment on the proposed IPO. No official confirmation could be got from JM Morgan Stanley and DSP Merrill Lynch. Another investment bank being mentioned in the context of the TCS offering is Kotak Mahindra, though there is no confirmation on this.

Market observers say that based on expected earnings, indications are that the issue size is likely to be in the range of $100-$150 million for a 10 per cent dilution in the domestic market, if one benchmarks the company against infotech majors already listed on the Indian markets and overseas.

Analysts feel that the company will initially dilute about 10 per cent in the domestic market and pursue an overseas offering immediately after or maybe simultaneously.

While market observers say an offering in the immediate future is rather unlikely given the current market conditions and the global sentiment in the wake of the terrorist attacks in the US, indications are that TCS had, some months ago, been targeting the third to fourth quarter of 2001 for a possible entry into the capital market.

In a recent press briefing, TCS CEO, S Ramadorai had said that one of the key reasons for an IPO, when it does take place, would be to create the currency for an acquisition. The process therefore is likely to be intensified once an acquisition target is finalized. “The general direction is to take the company public but whether that will be today or tomorrow cannot be answered now,” Mr Ramadorai had stated.

TCS is also among those suitors shortlisted for the final round of bidding for acquiring a controlling interest in CMC. The Government of India, which currently controls 83.31 per cent of CMC’s equity capital, intends to disinvest 57.31 per cent of its holding to a strategic partner with an appropriate role in management. KPMG India is advising the Government of India for the disinvestment of its holding in CMC.

CMC Limited, which falls under the administrative control of MIT, GoI, commenced its operations as “Computer Maintenance Corporation” in 1976. The public sector company took up the challenge to service installations left by IBM, when it wound up operations in India in 1978. It took over the maintenance of over 800 installations spread across the country and subsequently commenced maintenance of computers supplied by a host of other foreign manufacturers.