If the final price is `discovered' within the given range, the issue size would be somewhere between Rs 639 crore and Rs 767 crore. "However, this is just the indicative range, and the final pricing could even be higher than Rs 540 per share," vice-chairman Vineet Nayyar told the media on Wednesday. The upper range notwithstanding, the issue is poised to be the biggest-ever infotech IPO in the country.

According to the company, the initial price range has been arrived at after considering various valuation parameters such as comparative valuation, future growth rates, price-earning-ratio and also after taking into consideration the advice of lead managers to the issue.

The main objectives of the current IPO are to invest in joint ventures and strategic alliances, to part finance mergers and acquisitions so as to accelerate future growth and to raise capital for ongoing capital expenditure plans and working capital requirements.

HCLT is the first company to offer only 10 per cent equity in the IPO after Sebi recently relaxed the stipulated minimum 25 per cent IPO listing norm in favour of infotech companies.

Kotak Mahindra Capital and ICICI Securities are the joint book running lead managers to the issue, while DSP Merrill Lynch and JM Morgan Stanley are the lead managers.

With the aim of generating greater investor participation, HCLT will be using NSE as well as BSE's countrywide V-SAT networks during the book building process and will cover 11 cities. According to NSE vice-president Ashish K Chauhan, the bourse has already received more than 350 requests from more than 100 members for participation in the book building.

Of the shares on offer, 25 per cent is reserved for retail investors. 15 per cent is through book building while the balance is through the fixed price portion. Retail investors who do not get allotment in the book building portion, can opt for automatic application for the fixed price portion.During the year ended June 1999, HCLT had earned a net profit of Rs 96 crore from a total income of Rs 722 crore. During the period under consideartion, its return on net worth was at 48 per cent.

INSIGHT:

Test of strength
The recent experience with IT IPOs have shown the kind of demand there is for these issues. Polaris Software and Hughes Software attracted Rs 1,800 crore and Rs 6,000 crore worth of subscriptions, more than the amounts on offer. HCL Technologies is expected to set a new record being among the larger IT companies and more profitable ones. The fact that Hughes Software is commanding a huge grey market premium is bound to have a further impact on HCL Technologies prospects.

However, some doubts have been expressed regarding the possibility of mis-pricing of software IPOs, considering both the huge demand and the subsequent listing price. The hopes that bookbuilding will address the problem of IPO underpricing seem to be belied. The pricing, and the consequent demand for HCL Technologies will be watched with interest to bear out the truth of that statement.

-- Aaron Chaze