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Tata's likely to cash in on infotech boom, TCS to go public - Views on News from Equitymaster
 
 
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  • Mar 16, 2000

    Tata's likely to cash in on infotech boom, TCS to go public

    The Tata group is reportedly examining the possibility of taking either Tata Sons or Tata Consultancy Services (TCS) public.

    TCS is the biggest infotech company with a net profit of Rs 50.70 bn in 1998–99. It is almost thrice the size of Wipro and 3.70 times the size of Infosys. At present, it is a division of Tata Sons which holds stakes in other group software companies such as Tata Infotech, Tata Interactive Systems, Tata Honeywell, Tata Elxsi and Tata Technologies apart part from the flagship Tata companies Tisco and Telco.

    We at, www.equitymaster.com had carried out an assessment almost a month back estimating the market capitalisation of TCS on the basis of the existing market capitalisation per employee of both Wipro and Infosys and had arrived at a conclusion that it would require only 5.7% of the likely market capitalisation of the TCS for the Tatas to buy out the entire non–Tata shareholding of Tisco, Telco, Tata Tea, Indian Hotels, Tata Power, Tata Chem, Tata Hydro and Tata Elxsi! (For full details on the methodology please see in view search: ‘Making method out of madness’).

    A listing for TCS would enable the employees of TCS an opportunity to cash in on the stock options that would be offered to them. Also, it would enable the company to use the market capitalisation of the company for acquisitions abroad. If Tata Sons were to go public, it would enable the company to use the money generated from the fresh issue of shares to hike the stakes in other Tata companies.

    It is also possible that Tata Sons could spin off TCS first which could in turn go for a Nasdaq listing. Whatever the decision, the fact remains that the current high market capitalisation of software companies has managed to convince one of the more conservative business groups to go public with one of the jewels in their crown.

     

     

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