Merchant banking sources indicated that the IPO is not expected to take place by the end of this year, as was earlier expected. This is partly due to the newly constituted guidelines of the Securities and Exchange Board of India (Sebi), which require a company to submit the research report 45 days before the filing of the offer document. This 45-day period, said sources, is likely to act as a deterrent to most companies planning an IPO, including TCS.
Given that the entire process of filing of offer document, roadshows etc., would consume nothing less than six months, the TCS IPO is likely to take place by early next fiscal, sources said.
According to a Tata group spokesperson, Tata Sons has not fixed any time line for the TCS IPO.
TCS Ltd, currently a division of Tata Sons, will be demerged and corporatised as an independent entity contingent upon the happening of IPO. It is Asias largest software services firm with revenues of $1 billion. An IPO, say analysts, could put a valuation in the range of $6-7 billion for TCS.
The Mumbai High Court has already granted approval for the scheme of arrangement between Tata Sons and TCS, which will result in transfer of the division to Orchid Print, which has been renamed TCS Ltd. The transfer of the division to Orchid Print was approved by Tata Sons shareholders at the extraordinary general meeting (EGM) on January 3, 2003.
The TCS IPO is expected to bring a windfall for Tata Sons, as the scheme provides for a purchase consideration of Rs 2,300 crore for the transfer of TCS. However, all this is contingent upon an IPO happening.
The corporatisation of TCS will be in line with global trends to achieve effective and focused management, size, greater financial strength and flexibility.
An IPO would provide an opportunity to Tata Sons and its shareholders to realise the value of their holdings through the sale of their shares after TCS gets listed.