Debutante TCS

Updated: Aug 27 2004, 05:30am hrs
The TCS scrip has had a successful listing in not the best of times. Market sentiment has been subdued due to rising oil prices, inflation and a truant monsoon.

Despite these negatives, the fact that the scrip closed at a premium of 16% over its issue price of Rs 850 on the Bombay Stock Exchange on Wednesday and was over-subscribed 7.7 times indicates that there is a market out there for good quality scrips.

Paradoxically, TCS debut had a negative impact on tech stocks with those like Infosys, Satyam and Wipro coming under selling pressure.

Many of these scrips had witnessed a rise in prices in anticipation of the TCS listing. The fact that several investors who got the initial public offering (IPO) allotment also decided to cash in was reflected in the scrip registering the highest turnover on the cash market close to 6 times its nearest rival accompanied by a decline in price after listing.

TCS successful debut has naturally shaken up the pecking order of IT biggies in the country. With a market capitalisation of Rs 47,230 crore, the new star of the Tata group has displaced Infosys from its numero uno position.

Whether it can retain that position, however, is a different matter altogether. There is still some distance it needs to cover to match Infosys superior financials in terms of revenue growth, operating profits, margins and so on.

Despite all of this, the scrips price earnings ratio of 23.4 is roughly comparable to that of Infosys.

No doubt, this reflects TCS ability to execute bigger orders and a broader range of service offerings.

With more than three decades of experience, its clients include Fortune 500 companies based in 55 countries.

The company employs 24,000-odd consultants in 100 offices in 32 countries. However, to retain its No 1 perch, it must go up the value chain much beyond using the services of cyber coolies alone. To be fair, this is not just a problem for TCS alone.

This is a strategic imperative for Indias IT industry as a whole as they seek a bigger place in the global sun.

Much also depends on what the Tatas propose to do with their new crown jewel, which is one of the more important accretions to the list of high quality scrips on the bourses.