IPO Insights: Tata Technologies
Thursday, Nov 23, 2023
IPO Insights: Tata Technologies
Tracing the evolution of one of the most reliable investment sources for every Indian, a purpose-led organization, The Tata Group delivers value through products and services. The initiative of the group which was incorporated in 1994, is now set to embark on an exhilarating journey with its Initial Public Offering (IPO). Tata Technologies has stood upfront when it comes to automakers' design, it knows perfectly well about engineering and validating products that are greener, safer, and more sustainable for the world. It has been the go-to for reliability in spontaneous moments, the backbone of the global engineering services company has an edge when it comes to catering to premium cars of Jaguar Land Rover with its long-term relationship.
It's not just the automotives but it also works with aerospace and industrial heavy machinery industries helping them elevate tech through design, development, and client-centric solutions. From digital innovations to cost-effective product development, they cover it all, meeting client needs flawlessly.
IPO Outlook and Offer Details
With such an advancement in their programs and knowing their target markets well, it has been time for Tata Technologies to finally open for subscription on November 22, 2023, and close on November 24, 2023. The IPO price band is set at ₹475 to ₹500 per share. The minimum lot size for an application is 30 Shares. It will be offering 9.57 crore shares with a face value of ₹2 per share. The issue will entirely be an offer for sale of 6.09 crore shares, hence there will be no fresh share sales in Tata Technologies, which means that the company will receive no money from the offer.
The objective of the IPO is to list the equity shares on the stock exchange and give an exit to some shareholders. It had also issued bonus shares in the ratio of 1 for 1 in January 2023. According to market observers as well, shares of Tata Technologies Ltd are available at a premium of ₹352 in the grey market today. The company has reserved 10% shares for existing Tata Motors shareholders and 0.5% for the employees. While all this is going on, the investment bankers are very confident of the ‘high-quality business’ from the House of Tatas since analysts are backing the ₹3,042 crore issue due to its prospects, business model, and mostly its pricing. The grey market is also the most optimistic it’s ever been in the recent past as it predicts 70% listing gains.
Peer Comparison
Looking around the other corners as well, The growth has been a tad slow, as compared to its industry peers be it LTTS and KPIT Cummins, but Tata Tech has seen improvement in the last three years because of traction in select accounts.
Also, This should surely not be compared to Tata Consultancy Services (TCS) or Tata Elxsi though as they operate in different niches and segments since TCS focuses mainly on software, while Tata Technologies has 30+ years of specialization in safely integrating the mechanics and software across vehicle platforms for a faster and safer world. Tata Elxsi on the other hand, provides design-led digital engineering and technology development services, making it a close peer to Tata Technologies overlapping the auto sector but Tata Elxsi also has a presence in broadcast communication and healthcare sectors, unlike Tata Tech.
Financials and Future Outlook
Now throwing light into the statistics after knowing well about its peers we can see the growth potential in the company comparable to the industry. The company’s revenue has tremendously increased by 25.81% and profit after tax (PAT) rose by 42.8% between the financial year ending with March 31, 2023 and March 31, 2022. It has posted growth in its top and bottom lines for the reported periods. Also, The services business contributed 80.00% and 78.62% of their revenue from operations for FY23 and H1FY24.
This IPO is a significant step towards debt reduction for the Tata Group, with Tata Motors expecting to get zero debt by March 2024, with Jaguar landrovers riding on the road to get them net cash positive. Though Post issues as well Tata Motors will continue to own a little over 53% of the company, with their current stake being 66.79%.
The Tata Legacy
The IPO being the first of the group in around two decades now, is expected to attract significant funds in the market and hence it may come out with a strong subscription number. It is going to be oversubscribed manifold and therefore allocations are expected to be minimal. And this time too, the applicants may have the least possibility of sharing allotment. It is like Imagining to invest in a legacy that blends innovation, reliability, and sustainability. The issue is reasonably priced indicating “Tata” legacy.
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