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7/30/2004
01:33 PM
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Tata Consultancy Looks Formidable With $1 Billion In Cash

Tata Consultancy is looking to raise more than $1 billion in an IPO, as the 28,000-employee offshore outsourcer joins other fast-growing, publicly traded Indian IT firms.

Tata Consultancy Services' public stock sale that began Thursday will give it a major infusion of cash that could make the fast-growing Indian firm an even-tougher competitor. The 28,000-employee outsourcer, which counts General Electric and General Motors among its customers, launched a one-week public offering period on India's National Stock Exchange and Mumbai Stock Exchange, floating up to 13% of the company's shares at a price range between $16.28 and $18.90.

Indian news media are reporting more than 90% of shares reserved for institutional investors have been sold. At the low end of that price range, it would raise just over $1 billion and value the company around $7.8 billion.

TCS hopes to follow in the footsteps of rivals Wipro Technologies and Infosys Technologies Ltd., two Indian IT service providers that have used public offerings to fund rapid expansion. TCS already has passed $1 billion in annual revenue--as have Infosys and Wipro--and an injection of capital could make it even more formidable on the international IT-services scene. "If TCS uses its new capital to become more aggressive, it could shake up the global IT sourcing market," Gartner analyst Partha Iyengar says in a recent report.

The offering could help TCS compete more effectively in India's tightening labor market, where employee poaching among competitors is rampant. TCS is reserving 10% of the shares issued for its employees at market rates in India. The company, which has offices in 32 countries and development centers in 10 countries, says its revenue has grown at a compound annual rate of 27% the last four years.

The Indian stock market is so friendly to tech firms these days that it has some U.S.-based companies with significant business there considering listing on the country's stock exchanges. Sierra Atlantic Inc., based in Fremont, Calif., provides outsourced software development and is mulling a public offering in India. "It's a much more favorable environment," says Marc Hebert, executive VP. Sierra maintains a development center in the Indian city of Hyderabad. Hebert says any offering would be at least 18 months away.

"Right now, valuations are much higher in India because the interest in technology is higher," says Manu Bammi, CEO of SmartAnalyst Inc., which provides financial research from its offices in India. He notes that the Securities and Exchange Board of India has recently adopted a number of reforms that put Indian markets more on par with U.S. exchanges in terms of transparency and accountability.

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