Tata Technologies IPO

The subsidiary of Tata Motors, Tata Technologies Limited, has finally made the decision to go public on November 22, 2023 and will close on November 24, 2023. In July 2023, the company received its green signal from SEBI for its DRHP filed in March 2023 to issue an IPO with 60,850,278 equity shares as an Offer for Sale. The company has announced its offer for shares worth around Rs. 3,042.51 crores as an OFS. Tata Technologies Limited also announced the price band for its upcoming IPO as Rs. 475 to Rs. 500. Retail investors can browse the newly released Red Herring Prospectus for detailed knowledge about the offer. This is the first company in the Tata brand to launch an IPO within the last two decades. What is your view on Tata Technology IPO? Let’s get down to details.

Tata Technologies IPO Details and Objectives

IPO Date	22 Nov 2023 – 24 Nov 2023	Minimum Investment	₹15,000
Listing Date	05 Dec 2023	Maximum Investment	₹195,000
Face Value	₹2 per share	Total Issue Size	₹3,042.51 Crores
Price	₹475 to ₹500	Fresh Issue	–
Lot Size	30 Shares	Offer For Sale	₹3,042.51 Crores
Listing At	BSE, NSE	Retail Discount	–

About the Offer 

With the upcoming Tata Technologies Limited IPO launch, this company is planning to sell around 60,850,278 equity shares as an Offer for Sale. Tata Motors Limited, Alpha TC Holdings Pte Limited and Tata Capital Growth Fund I are the selling shareholders participating in the offer-for-sale process.  

Furthermore, JM Financial Limited and BofA Securities India Limited are the Book-Running Lead Managers who assisted Tata Technologies Limited in preparing the DRHP. Link InTime India Private Limited is the registrar for the upcoming offer.  

The lot size for retail investors is 30 shares and the minimum investment is Rs. 15,000. The price band of this upcoming IPO is set as Rs. 475 to Rs. 500.  20.28 lakh shares have been reserved for employees of Tata Technologies.

The company along with its underwriters have set the face value as Rs. 2 per equity share for its upcoming IPO launch. The shares will be listed on the NSE and BSE on December 5, 2023. 

Also Read: IPO investment strategy

About Tata Technologies Limited

Tata Technologies Limited is a prominent engineering service company and provider of digital and product development solutions. The company offers ready-to-use and customised solutions to International OEMs (Original Equipment Manufacturers) and tier-1 suppliers. This company leverages its deep-rooted knowledge of the automobile industry to serve customers from industries like heavy machinery construction, transportation and aerospace. 

Tata Technology Limited’s business line can be broadly categorised into services and technology solutions. Under the former, this company outsources engineering services and digital transformation services to international clients. This enables the global clients to conceive, design and deliver better products to suit their consumer needs. The service offerings are complemented by third-party software and value-added services under the technology solutions vertical. 

Tata Technologies Ltd. is globally connected with its workforce which comprises more than 11,000 employees across the globe. Its delivery model spread through Europe, Asia-Pacific and North America involving 27 countries with 19 global centres. Its clients include the likes of Airbus, Ford, Honda, McLaren, VinFast and Cabin  Interiors and  Engineering Solutions, among others.

According to the Tata Technologies DRHP, the total revenue of Tata Technologies Limited grew from Rs. 20,674.30 million in FY 2020 to Rs. 25,007.01 million in FY 2022. Following tax deductions, the company’s profit stands at Rs. 4369.91 million in FY 2022 from Rs. 2515.67 million in FY 2020. 

After a gap of 19 years and 5 months since the TCS IPO in 2004, another Tata group company is preparing to launch its inaugural IPO through an Offer for Sale (OFS). This upcoming offering has generated significant attention ever since it submitted its Draft Red Herring Prospectus (DRHP). Despite lacking specific pricing details, it has made notable waves in the unregulated and unofficial Grey Markets. TTL, with the entire proceeds directed to the sellers of the equity shares, signals its intention to explore the advantages of listing and facilitate an exit for some of its stakeholders, namely Tata Motors, Alpha TC Holdings, and Tata Capital Growth Fund. Importantly, the company has clarified that it is not in urgent need of funds. 

Strengths

Before investing in Tata Technologies IPO, you must be aware of the company’s strengths and associated risks. These factors will help you make a strategic investment decision. 

Let’s take a look at the strengths that make Tata Technologies IPO worth investing in. 

• Deep-rooted expertise in the automobile industry that helps enterprise optimisation needs and product development requirements of conventional OEMs and new vehicles across the supply chain. Its long-term relationship with certain anchor clients exposes the company to opportunities to improve its value chain and refine automobile-related skills. 
• Being able to stay afloat with the latest trends in the automotive sector helps this company manufacture and offer after-sales services for OEMs. This helps the latter develop competitive electric vehicles in a short period. 
• The company also hosts a diverse clientele that includes anchor accounts, EV manufacturing companies and traditional OEMs. As of December 2021, this company’s client base involves more than 35 automotive traditional OEMs, 12 new-age energy vehicle companies and tier 1 suppliers. 
• Tata Technologies Limited runs under the mentorship and guidance of an experienced board of directors and Promoters.
• The company follows an international delivery model which ensures one-to-one client engagement and scalability.

Risks Associated

Besides the above strengths, certain factors work as risks to the business and finances of Tata Technologies Limited. The following points highlight the risk factors that you must consider before investing in this upcoming IPO. 

• Tata Technologies Limited has to follow the regulations set by the Competition Act 2002 for all its activities. Any proceedings regarding the enforcement of rules by the Competition Commission of India may involve additional scrutiny and prosecution due to the company’s leading position. 
• The presence of significant differences between Ind AS, GAAP, IFRS and the US might impact an investor’s assessment of the financial conditions of Tata Technologies Limited. The financial metric present in the DRHP might not be able to paint a clear picture of the company’s finances for foreign investors. 
• Unpredictable political or social disturbances like war or natural calamities like outbreaks of disease or natural disasters in India or any other country can adversely affect the company’s cash flow, financial conditions and operation. 

Also Read: Risk of investing in IPO

Outlook and Valuation

Regarding financial performance, TTL has reported total income/net profit of Rs. 2425.74 cr. / Rs. 239.17 cr. (FY21), Rs. 3578.38 cr. / Rs. 437.00 cr. (FY22), and Rs. 4501.93 cr. / Rs. 624.04 cr. (FY23) on a consolidated basis. With total revenue of Rs. 2587.42 cr, it had a net profit of Rs. 351.90 cr for the first half of FY24, which concluded on September 30, 2023. The company has reported an average EPS of Rs. 12.26 and an average RoNW of 18.68% for the last three fiscal years. Based on its NAV of Rs. 70.27 as of September 30, 2023, as well as on post-IPO NAV, the issue is priced at a P/BV of 7.12.  

Given that this is an entirely secondary issue, the paid-up equity capital for TTL will remain unchanged at Rs. 81.13 crores post-IPO. Considering the upper band of the IPO pricing, the company is seeking a market capitalization of Rs. 20,283.43 crores.  

The company has demonstrated Profit After Tax (PAT) margins of 10.05% in FY21, 12.38% in FY22, 14.14% in FY23, and 13.93% in H1-FY24. These figures indicate a positive trend in profit margins over the specified periods, reflecting a favorable financial performance. If we calculate the price-to-earnings (P/E) ratio by attributing annualized FY24 earnings to the post-IPO paidup equity capital, the asking price stands at a P/E of 28.82. In this context, the IPO seems reasonably priced, aligning with the historical “Tata” legacy. 

Should You Invest? 

Tata Technologies Limited like its parent company holds a deep knowledge and expertise about the automobile industry. The company also hosts strong digital capabilities led and monitored by its proprietary accelerators that ensure the smooth working of its systems.  

The company also serves a diverse range of clients from automobile and associated industries fulfilling their demands for new energy vehicles and traditional OEMs. However, there are also some risk factors investors should check like the company’s reliance on large clients, concentration risk in the automotive sector and liabilities arising out of a system failure or security breach.  

To conclude, owing to being a member of the big conglomerate, Tata Group of Industries, the Tata Technologies Limited IPO has garnered a lot of investor interest. However, it is important to note that like all equity and equity-related instruments, Tata Technologies IPO carries certain risks. Therefore investors must be aware of their risk appetite and financial goals when making a decision. 

Tata Technologies IPO FAQs