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Tatas to use TCS proceeds for promoting group companies

By Our Special Correspondent

MUMBAI, JULY 21. Tata Sons Ltd., the holding and investment company of the Tata group, will use the IPO (Initial Public Offering) proceeds of Tata Consultancy Services Ltd. (TCS), for promoting other Tata companies by increasing its stake in these companies.

"We will use the proceeds to restructure the financials of Tata Sons and continue to promote Tata companies. We will also increase our stake in other Tata companies,'' Ratan Tata, Chairman, TCS, said while launching the mega public issue of TCS here today. "All of us are proud of this issue. In the new avatar we continue to play a predominant role in the global IT services market,'' Mr. Tata added. The IPO would give TCS a separate corporate identity, believed Mr. Tata, saying, "We really came to a conclusion that a corporate identity is better than known as a private company,'' which led TCS to go public.

Tata Sons, including other Tata group companies, will continue to hold 86.91 per cent of the post-issue capital in the company if the greenshoe option is not exercised. The bids for the IPO of 55.45 million equity shares will open on July 29. The entire issue is being made through the book building process. The price band for the issue has been fixed at Rs. 775 and Rs. 900 per equity share of Re. 1 each. The issue at these indicative prices will aggregate between Rs 4,297.57 crores and Rs. 4,990.73 crores. Of the 55.45 million equity shares, the company is making a fresh issue of 22.78 million shares and the remaining 33.68 million shares are on offer for sale by Tata Sons and other shareholders of the company.

There will also be a greenshoe option of 8.32 million equity shares of Re. 1 each to be offered by Tata Sons aggregating between Rs. 644.60 crores and Rs. 748.60 crores. Of the total offer, the company has reserved 5.55 million equity shares for allotment to employees and directors of the company. The net offer to the public will be 49.91 million shares, which amounts to 10.43 per cent of the post offer capital. If the greenshoe option to issue an additional 15 per cent of the offer were accepted, the company would be making a total offer of 63.78 million equity shares, amounting to 13.33 per cent of the post-equity capital of Rs. 47.83 crores.

TCS is a leading global IT services provider and was the first billion-dollar Indian IT services organisation by annual revenues. Since its inception in 1968, TCS has pioneered many of the developments in the Indian IT services industry.

Addressing the press conference, S. Ramadorai, Chief Executive Officer, said, "We intend to maintain and enhance our position as a leading global IT services organisation by offering a comprehensive portfolio of IT services and investing further in our competitive strengths.''

While expanding its global capabilities, TCS intends to maintain its focus on the Indian market. The company believes that India is strategically important growth market offering opportunities to build competencies in terms of developing domain expertise leverage its assets and most importantly develop its employees to be deployed on complex projects globally.

In 2003-04, TCS reported revenues of Rs.7,122.73 crores and a profit after tax of Rs.1,612.45 crores. In the first quarter of the current fiscal year, the company reported revenues of Rs. 2,134 crores, up 40 per cent over previous year's first quarter figure of Rs.1,526 crores. The net profit, before minority interest, too moved up by 71 per cent to Rs.519 crores compared to last year's first quarter net profit of Rs.303 crores.

Besides the size of its operations and its status of being a pioneer in IT services, according to Mr. Ramadorai, the other competitive strengths of TCS are track record of executing large, end-to-end, mission critical projects, long-term client relations, extensive global footprint, world-class quality, strategic focus on Indian markets and strong management team.

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