Feb 26, 2000|
Infotech Valuations: making method out of madness
Would you believe that it would require only 5.7% of the likely market capitalisation of TCS for the Tatas to buy out the entire non-Tata shareholding of Tisco, Telco, Tata Tea, Indian Hotels, Tata Power, Tata Chemicals, Tata Hydro and Tata Elxsi...
The market seems to be standing on its head. Itís the same old story: the market loves tech, but things are not so hot for the other sectors.
Equitymaster carried out an exercise by taking the market capitalisation of the two software giants Infosys and Wipro and estimated the market capitalisation of Tata Consultancy Services (TCS), Indiaís largest software exporter. We took into account the software employees of both Wipro and Infosys and took the average of the market capitalisation per employee. This was multiplied with the employees of TCS to arrive at the figure of Rs 2,285 bn.
All figures in Rs bn unless specified
If one were to take into account the peak prices of Infosys and Wipro only 4% of TCS's market capatilisation would be enough for the Tata group to take its group companies private.
Even if Tata Sons (TCS is a division of Tata Sons) pays the capital gains tax of 10% (without any benefit of indexation) it would require only 5.70% of the market capitalisation of TCS to take Telco, Tisco Tata Tea, Indian Hotels, Tata Power, Tata Chemicals, Tata Hydro and Tata Elxsi private!
By the way, in case the Tata group does go ahead with this exercise we at www.equitymaster.com will send them a bill for our investment banking and restructuring advice! We will not take the fees in the form of infotech shares. We have more faith in hard cash!
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