The Hindu Business Line : TCS files draft prospectus for IPO — 5.5 crore shares on offer; face value at Re 1; provision of greenshoe option

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TCS files draft prospectus for IPO — 5.5 crore shares on offer; face value at Re 1; provision of greenshoe option

Our Bureau

Mumbai , June 10

TATA Consultancy Services (TCS) has finally filed its draft prospectus for initial public offer (IPO) with the Securities and Exchange Board of India (SEBI). The red herring prospectus was submitted to the market regulator late Thursday evening.

The total number of shares on offer is 5.5 crore (55,452,600). This is divided into two lots. The first lot of 2.27 crore share are fresh shares being issued by TCS Ltd. The rest are shares on offer for sale from Tata Sons and other shareholders of TCS. The issue also has provisions of a greenshoe option of 83.17 lakh shares.

The face value of these shares would be Re 1, said sources close to the merchant bankers. The issue would be entirely on the book building method.

The price band in which the shares would be offered and the actual dates of the offer would be announced post-SEBI's approval of the prospectus, according to merchant banking sources. SEBI usually takes about 20 days to give its approval. "The actual dates of the offer would be dependent on market conditions," said the source.

Sixty per cent of the offer is proposed to be reserved for qualified institutional buyers. Not less than 16 per cent is being reserved for non-institutional buyers and the remaining would be allocated on a pro-rata basis to retail investors. The issue has full eligibility for participation by foreign institutional investors.

Around 55.45 lakh shares have been reserved for employees of TCS Division, TCS Ltd and Tata Sons, according to sources. The proceeds from the issue would be primarily used to pay Tata Sons for the transfer of ownership and the remaining proceeds would be deployed for general corporate purposes.

The greenshoe option shares would be transferred to the stabilising agent. This would be used to avoid volatility in the shares, post their listing in the stock exchanges. The issue is to be listed on Bombay Stock Exchange and National Stock Exchange.

DSP Merrill Lynch and JM Morgan Stanley are the lead running book managers to the issue. J.P. Morgan is also part of the syndicate of lead running book managers. Karvy has been mandated to be the Registrar and Adfactors would be handling the public relations for the issue.

Though the price band has not been revealed, merchant bankers say that this would be the largest issue in the private sector. The IPO is being touted as the $1-billion deal within TCS. Merchant banking sources also pegged the size of the deal as around Rs 5,000 crore.

The company has reported to have made a net profit of Rs 1,800 crore on a turnover of Rs 7,000 crore for the financial year ended March 2004.

TCS is said to currently employ over 28,000 software engineers, spread across branches in 32 countries and global clients. It has over 800 foreign nationals working for it, according to analyst reports. The company has global delivery centres in the US, the UK, Hungary, Japan, Australia and Canada, among others.

The client list of the company includes global giants ABN Amro, Citibank, Ford Motor, Kellogg's, Boeing, General Electric, among others.