Tata Technologies IPO opens today: The initial public offering (IPO) of Tata Technologies, the first public issue by the Tata Group in almost 20 years, kicked off for subscription on Wednesday, November 22. The three-day stake sale will conclude on November 24.
Ahead of the issue opening, Tata Technologies has mopped up ₹791 crore from 67 investors including Goldman Sachs, SBI Mutual Fund, among others through the anchor book.
To raise ₹3,042.51 crore via its IPO route, Tata Technologies is selling its shares in the range of ₹475-500 apiece. Investors can bid for a minimum of 30 equity shares in one lot and its multiples thereof.
If one goes by the grey market trends, Tata Tech IPO can debut on stock exchanges at a premium of around 70%
The grey market is an unofficial platform wherein the IPO shares can be bought and sold till the listing. Most investors generally get a bit of help from the grey market to guess the possible listing price of any public offer.
Should you apply or avoid?
Analysts remain positive about the Tata Tech IPO and have suggested subscribing to it as the issue seems reasonably priced versus peers and offer favourable risk reward for the investors.
Swastika Investmart: Subscribe for long-term
The company has deep expertise in the automotive industry and differentiated capabilities to deal with emerging trends. It is a well-recognised brand with experienced promoters. Also, it has showcased strong financial growth in its past performance, said Shivani Nyati, Head of Wealth at Swastika Investmart.
However, Nyati noted that there might be some concerns, like any other business, like dependence on a few top clients and third-party vendors, risk related to foreign exposure, and a competitive industry.
“Well, the IPO is coming at a very attractive valuation of 32.5 times, and it’s a great opportunity for investors. Thus, one should surely apply for this IPO for listing gain as well as for long-term benefits,” the analyst said.
Sharekhan: “The Tata Group is coming out with an IPO after a gap of almost two decades and the IPO seems reasonably priced versus peers and offer favourable risk reward for the investors. Tata Technologies future outlook is promising given its proven track-record, established capabilities in ER&D services and focus on adjacencies of Aerospace and transport and construction heavy machinery,” the brokerage firm said in a note.
SBI Securities: Subscribe
“At the upper price band of ₹500, Tata Technologies is trading at 32.5 times FY23 P/E (price-earnings) multiple. Its peers are trading at a relatively expensive valuation with FY23 P/E multiple of 108.9 times for KPIT, 68.5 times for Tata Elxsi and 40.1 times for LTTS,” SBI Securities said.
IDBI Capital: Subscribe
The company’s revenue and profit after tax has grown at a CAGR of 36% and 62% over FY21-FY23. The first half of fiscal 2024 has seen 34% and 36% year-on-year revenue and profit after tax growth and the brokerage expects robust earnings growth going forward.
“It is valued at 33 times FY23 earnings per share (EPS) versus peer average of 63 times FY23 EPS,” it said, with a ‘Subscribe’ tag on the issue.
Sushil Finance: Subscribe
Keeping in mind the favorable and unfavourable factors, the investor can look at long term investment in this techno giant, said analysts at Sushil Finance with a ‘Subscribe’ rating.
The brokerage believes that Tata Technologies is well placed to encash on the growth opportunities in ER&D space and looking at the relatively cheaper valuations, it recommend investors to ‘Subscribe’ to the issue.
About the OFS issue
The IPO is a 100% offer for sale (OFS) of 6.08 crore equity shares, in which Tata Motors will offload 4.62 crore shares, Alpha TC Holdings will sell 97.1 lakh shares and Tata Capital Growth Fund will sell 48 lakh shares.
The selling shareholders will be entitled to receive the entire proceeds from the offer as it is an OFS issue. The IPO size has been trimmed from 9.57 crore equity shares to 6.08 crore shares now.
Analysts have pegged the post issue market cap to be between ₹19,269 crore and ₹20,283 crore.
The Tata Group company has reserved 10% for Tata Motors’ eligible shareholders. Also, about 50% of the issue is set aside for qualified institutional bidders, 15% for non-institutional investors, and the remaining 35% for retail investors.
Last month, the company had announced the sale of a 9.9% stake in the Dalal Street-bound company to TPG Rise Climate for ₹1,613.7 crore. This ascribed an equity valuation of ₹16,300 crore for Tata Technologies.
Key strengths:
– Deep expertise in automotive industry.
– Differentiated capabilities in new age automotive trends – electric vehicles (EVs), connected and autonomous.
– Marquee set of clients across anchor accounts, traditional OEMs and new energy vehicle companies.
– Global delivery model enabling intimate client engagement and scalability.
– Well-recognised brand with experienced Promoter, board of directors and management team.
Key concerns:
– This offer consists of only an offer for sale.
– Its revenues are highly dependent on clients concentrated in the automotive segment. Also, the company derives a major portion of its revenues from its top 5 clients.
– The business relies on skilled engineers and a management team.
– Intense competition in the market for engineering services could affect its pricing.
Company overview
Incorporated in 1994, Tata Technologies Limited is touted to be a leading global engineering services company offering product development and digital solutions, including turnkey solutions, to global Original Equipment Manufacturers (OEMs) and their tier 1 suppliers.
The company has deep domain expertise in the automotive industry and leverages this expertise to serve clients in adjacent industries, such as Aerospace and Transportation and Construction Heavy Machinery.
On the financial front, the company’s total income grew at a CAGR of 36.16% over FY21-23. and grew about 33.84% in the first half of FY24 (H1FY24) year-on-year. The company operated on an EBITDA Margin of 18.6% for FY23 and 18.39% H1FY24. The profit after tax margin came in at 14.14% for FY23 and 13.93% for H1FY24.
