Tata Sons to sell 2.34 crore shares of TCS at Rs 4,001 each in block deals: Report

Tata Sons, the investment arm of Tata Group, plans to sell 2.3 crore shares of Tata Consultancy Services (TCS) through block deals. The total number of shares on offer amounts to 0.64 per cent of TCS' total outstanding equity. Tata Sons holds a 72.4 per cent stake in TCS as of Decemcer 31, according to exchange data.

The stake sale comes as domestic stock markets hover at record highs, with TCS and the blue-chip Nifty 50 index, of which it is a part, hitting 10 and 15 record highs this year, respectively.

TCS shares will be sold at a floor price of Rs 4,001 apiece, a 3.7 per cent discount to its Monday closing price of Rs 4,152.5, Reuters reported, adding that JP Morgan and Citigroup will be joint bookrunners for the stake sale.

Major shareholders of ITC, Paytm, and Zomato have sold their stake in the companies via block deals - where more than 500,000 shares are traded in a single transaction - in the past few months.

On Monday, shares of TCS declined Rs 72.75 to settle at Rs 4144.75.

In Q3, TCS recorded a 1.96 per cent year-on-year (YoY) rise in consolidated net profit at Rs 11,097 crore compared with Rs 10,883 crore in the same quarter last year, hurt by Rs 958 crore or $125 million one-time charge towards the settlement of a legal claim. The profit growth was lower than analyst projections of 7-11 per cent growth.

Excluding settlement of legal claims, the profit for the quarter came in at Rs 11,774 crore, TCS said in a BSE filing. The IT firm's consolidated revenue for the quarter rose 4.04 per cent YoY to Rs 60,583 crore from Rs 58,229 crore in the same quarter last year.

In February, UBS gave a 'buy' call for TCS with a revised target of Rs 4,700 from Rs 4,050 earlier, as it felt that "the leader is back" and that the stock market was ignoring the fact that the largest IT firm could lead peers in sales growth by 100-150 basis points, in addition to reporting an improvement in FY25 margins.

UBS said that the market was not completely taking into account the impact of the large deal ramp-up and scope of margin improvement through utilisation, pyramid restructuring etc. It believed the market could be positively surprised by margin expansion in the coming quarters.

UBS said, given a divided consensus, the market was not pricing this in a superior revenue growth, as the stock stayed at the lower end of its long-term trading premium against peers. The brokerage upgraded the TCS stock to 'Buy'. "TCS' current multiple premium over peers is below the historical average, and any outperformance makes the case for a re-rating, providing comfort in using the current multiple," it said.

UBS said TCS may outperform its peers on revenue growth front in FY25 by ramping up large deals, revival of the BFSI segment, by winning managed services deals and likely return of cloud and discretionary spending (as per IT partner conversations).

(With inputs from Reuters)