Financial Daily from THE HINDU group of publications
Saturday, Jun 12, 2004
Info-Tech - IPOs
Markets - IPOs
Transfer of ownership Tata Sons to get Rs 2,300 cr from TCS
Mumbai , June 11
TATA Consultancy Services (TCS) will pay Rs 2,300 crore to Tata Sons for the transfer of ownership.
According to the offer document for the initial public offering of TCS, Tata Sons would be paid the sum on the completion of the IPO and failure to pay the amount within three days of TCS Ltd receiving trading permission from the stock exchanges; would entail interest payment at the rate of approximately six per cent per annum.
TCS believes that there would be increased speed and responsiveness post the transfer as the board of management and management team would be focussed exclusively on their business. Also, the company would be able to directly access the capital markets and issue debt or equity securities. "We will also be able to use our equity shares for acquisitions and thereby have greater flexibility in our acquisition strategies," states the offer document.
The details of the transfer was negotiated between TCS and Tata Sons and the High Court of Judicature at Bombay sanctioned the Scheme under Sections 391 to 394 of the Companies Act on April 7.
Jamsetji Tata Trust and Navajbai Ratan Tata Trust would hold 1.99 and 1.14 per cent of the equity of the company, after the issue - whether or not the greenshoe option is exercised. Sheba Properties, a subsidiary of Tata Motors would be left with 0.29 per cent; Kalimati Investment Company, a subsidiary of Tata Steel would hold 0.21 per cent; Af-taab Investment Company, subsidiary of Tata Power would be left with 0.16 per cent after the issue.
Group companies such as Tata Chemicals (0.24 per cent), Indian Hotels (0.06 per cent), Tata Industries (0.05 per cent), Tata Tea (0.04 per cent) would continue to hold part of the equity of TCS Ltd.
Up to 0.5 per cent of the post issue paid up capital of the company could be granted as part of the employee share purchase scheme (ESPS), according to the offer document. All employees of Tata Sons currently engaged in TCS Division would be employed by TCS.
In addition to the shares issued under the ESPS, select employees of TCS, its subsidiaries and Tata Sons will be eligible to receive one-time cash payment based on certain criteria determined by management.
Based on these criteria, the total cash payment to employees is expected to be up to Rs 90 crore, according to the red herring prospectus.
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