The employees of Tata Consultancy Services (TCS) must have watched with quiet despair the windfall fortune that came to the employees of Infosys and Wipro who became millionaires after their companies went public in the early nineties. TCS, the first Indian IT company to enter the $1billion league, did not go public at that time.

However, TCS has filed a draft prospectus on May 10, 2004, seeking SEBI's approval for going public.

The great Indian IT story kickstarted in 1968 with the formation of a four-man outfit named Tata Consultancy Services, better known in IT circles by its acronym, which represented a division of Tata Sons, the holding company of the Tata group of industries. TCS went about quietly growing from strength to strength but not much about its success was known to the public at large as Tata Sons is a closely-held company, and closely-held companies need not disclose their financials to the public.

Perhaps, the only figure that has been disclosed about TCS is the fact that it crossed the billion -dollar mark in terms of revenues last year, while Infosys and Wipro joined the billion-dollar club only in March 2004 - and haven't stopped celebrating, yet.

We also know that the Tata stake in Tata Sons is a meagre 14 per cent. The biggest stake-holder in Tata Sons is the construction magnate Shapoorji Pallonji who holds about 19 per cent and the balance of the majority stake is held by various trusts and charitable institutions.

The interests of business entities like the Tata group of companies and that of trusts and charitable institutions, though noble, are different. This has been a stumbling block for Tata Sons pursuing its goals as a purely business entity. And that is perhaps why it took so long for TCS to go public.

TCS, will now be hived-off as a company. The Bombay High Court has already approved the scheme of arrangement between Tata Sons and TCS, which will lead to the transfer of the IT services business to Orchid Print, which has been renamed TCS Ltd, a shell company. Tata Sons holds a 90 per cent stake in TCS Ltd, with the balance being held by other companies, including Indian Hotels and Tata Tea. After SEBI approves the TCS prospectus, the Tata group will kick off the process of transferring the TCS division to TCS Ltd. The authorised share capital of TCS Ltd is Rs60 crore and its current paid-up capital is Rs45.55 crore.

The total shares on offer are 5.5 crore (55,452,600). This is divided into two lots. The first lot of 2.27 crore share will be fresh shares issued by TCS Ltd. The rest of the shares on offer are from Tata Sons and other shareholders of TCS. The issue also has provisions of a green-shoe option of 83.17 lakh shares.

The face value of these shares would be Re1, according to sources close to the company's merchant bankers. The issue would be entirely on the book building method. The price band in which the shares would be offered and the actual dates of the offer will be announced after SEBI grants its approval tothe prospectus.

60 per cent of the offer is proposed to be reserved for qualified institutional buyers. Not less than 16 per cent is being reserved for non-institutional buyers and the remaining would be allocated on a pro-rata basis to retail investors. The issue has full eligibility for participation by foreign institutional investors.

Around 55.45 lakh shares have been reserved for employees of TCS Division, TCS Ltd and Tata Sons, according to sources. The proceeds from the issue would be primarily used to pay Tata Sons for the transfer of ownership and the remaining proceeds would be deployed for general corporate purposes.

The green-shoe option shares would be transferred to the stabilising agent. This would be used to avoid volatility in the shares, post their listing in the stock exchanges. The issue is to be listed on Bombay Stock Exchange and National Stock Exchange.

A company goes to the public to raise resources for undertaking new projects or expansion activities. Here, about two thirds of the resources will go to the shareholders of Tata Sons and the remainder utilised for expansion, which in all probability will be acquisitions of other software companies.

For the investor, this does not sound like a heartening story. Yet a Tata share is a Tata share. The investor knows that the moneys will be put to genuine use. Prithvi Haldea of Prime Database, which has been tracking the primary market for more than a decade has this to say about the TCS offer, "History is in the making. TCS is the largest IPO in the Indian capital market - thrice in size to the Reliance Petro issue. People have been awaiting this IPO since the last six or seven years. Tatas never seemed to be in a hurry. There was lot of cross-holding and the company had to do some clean up before going ahead with the issue. This issue is not for money raising but for pride."

"The issue, which is large in size, and with a big name behind it, can lead to a turnaround of the primary market. While people may not chase price but value, the face value being Re1 would make it affordable for small investors," Haldea added.