The Hindu Business Line : May spur shuffle in other IT stocks

WHAT happens when India's largest information technology company goes public? According to some, the Tata Consultancy Services' (TCS) initial public offer of equity would start a major portfolio reshuffle by investors.

"It would obviously lead to a lot of switching from other stocks," said an IT sector analyst with a leading domestic brokerage. He foresees several investors selling part of their holding in IT stocks such as Infosys, Satyam, Wipro, I-flex and Polaris to own TCS shares.

TCS is reportedly the first Indian IT company to cross the $1-billion mark in revenues. The analyst said several IT companies are currently over-owned. "Foreign institutional investors own nearly 50 per cent of Infosys and 16 per cent is owned by the Indian public. Definitely some of those holdings will get liquidated to buy TCS shares," he said.

The TCS issue, said to be comprising nearly 55 million shares of face value Re 1 and expected to raise about Rs 5,000 crore from the public, is likely to be the biggest issue by an Indian private company. Some analysts expect the price band to be between Rs 750 per share and Rs 1,000 per share.

ICICI Bank's April equity issue that raised over Rs 3,000 crore currently holds the record for the largest offer in the private sector.

"Such a large issue would drain liquidity from the market. It may depress the indices for a while as people would liquidate from their portfolios to raise money for the IPO," a fund manager with a domestic mutual fund said. The fund manager said in spite of the fact that TCS' is a long-awaited offer; its success would depend on the first quarter results and the forthcoming Union Budget.

"If the first quarter results are good and the issue hits the market after that, it would be hugely successful. It will however take a while for the company to gain the market's confidence compared to a tried and tested Infosys or Wipro," she said.