The Hindu Business Line : Nervous market may see TCS delay IPO

TATA Consultancy Services (TCS) is likely to postpone its initial share sale in the wake of a jittery equities market, investment banking sources have said.

Said the TCS spokesman, "We do not comment on market rumours. We have never made an IPO announcement and that hasn't changed."

However, the market has been abuzz with talks of a forthcoming Rs 4,500-crore-Rs 5,000-crore issue that was likely to sizzle the market in June-end. TCS is likely to appoint DSP Merrill Lynch, JP Morgan, JM Morgan Stanley and Kotak Mahindra as lead managers to the issue. The division of Tata Sons was likely to file its red herring prospectus with market watchdog SEBI by May-end.

"With the market in a bear grip, I do not think there is any appetite for such big issues in the current scenario. It will be sometime before the market gains its lost sheen, that too after the new Government signals positive momentum in its reform process," an investment banker close to the TCS IPO issue said.

"At this point, I personally think that TCS might hold on to their issue for some more time given the current market conditions," said Mr Gurunath Mudlapur, Chief Strategist at Khandwala Securities.

"Due to the turmoil, the current valuations are almost 60 per cent of what they used to be earlier. Moreover, most of the investors have lost money and there are not too many investors identifiable who can invest with confidence in the primary market. Till there is clarity in the market, TCS may not go ahead with the issue," he said.

The 30-share BSE Sensex shed more than 11 per cent on Monday after posting the highest intra-day drop on fears that economic reforms were likely to slow down with the Leftist-supported Government taking charge. The Sensex closed provisionally at 4,505.87 points, its lowest close since last October. The rupee also dropped 0.8 per cent before recovering on central bank support.

"The market seems not to be favouring the TCS IPO. ... It has been shelving its IPO for so many years, every time it plans something concrete, the market tanks," a software analyst with a top local brokerage said.

TCS, which is currently a division of Tata Sons, will be demerged and corporatised as an independent enterprise contingent upon the IPO. The Bombay High Court has already approved the scheme of arrangement between Tata Sons and TCS, which will result in transfer of the Orchid Print division that has been renamed TCS Ltd.