Tata Technologies IPO will hit Dalal Street for subscription on Wednesday, November 22. The Tata Group entity is selling its shares in the fixed price band of Rs 475-500 apiece with a lot size of 30 shares and its multiples. The three-day bidding for the issue will conclude on Friday, November 24.
Tata Technologies is a global engineering services company by Tata Group, which offers product development and digital solutions. Incorporated in 1994, the Tata Motors promoter entity offers turnkey solutions, to global original equipment manufacturers (OEMs) and their tier-I suppliers across the globe.
The IPO of Tata Technology entirely consists of an offer-for-sale (OFS) of up to 6,08,50,278 equity shares with a face value of Rs 2 each to raise a total of Rs 3,042.51 crore and the company will not receive any proceeds from the isuse. Its promoter Tata Motors Ltd and other shareholders-Alpha TC Holdings and Tata Capital Growth Fund I- are participating in the OFS.
Tata Technologies has reserved 20,28,342 shares for eligible employees of the company, while 60,85,027 shares or 10 per cent of the offer has been reserved for the shareholders of Tata Motors. 50 per cent of the net offer has been reserved for qualified institutions, while retailers and non-institutional investors will get 35 per cent and 15 per cent, respectively.
Tata Technologies raised Rs 791 crore from 67 investors through the anchor book. It allocated of 1,58,21,071 equity shares at a price of Rs 500 per share. Global investors like Goldman Sachs, Government Pension Fund Global, BNP Paribas Funds, Prudential Assurance Company, HSBC Global, Florida Retirement System, Oaktree Emerging Markets and others participated in the anchor book.
Tata Technologies is the first IPO by the Tata Group in almost two decades, after Tata Consultancy Services. Explaining the objectives of the issue, Tata Techno The company intends to achieve the benefits of listing the equity shares on the stock exchanges, along with giving an opportunity to selling shareholders completely/partially exit the company.
Tata Technologies creates value for customers by assisting them in the development of products that are safer, cleaner and improve the quality of life for the end customers. With deep domain expertise in the automotive industry, it has gained high expertise to serve clients in adjacent industries, such as aerospace, transportation and heavy construction machinery.
For the six months ended on September 30, 2023, Tata Technologies reported a net profit of Rs 351.90 crore with a total revenue of Rs 2,587.42 crore. The company clocked a net profit of Rs 624.04 crore with a revenue of Rs 4,501.93 crore for the financial year ended March 31, 2023.
Citigroup Global Markets India, JM Financial and BofA Securities India are the book running lead managers of the Tata Technologies IPO, while Link Intime India has been appointed as the registrar for the issue. Shares of the company will be listed on both BSE and NSE. Here's what a host of brokerage firms say about the IPO of Tata Technologies:
Swastika Investmart
Rating: Subscribe
Tata Tech has deep expertise in the automotive industry and differentiated capabilities to deal with emerging trends. It is a well-recognized brand with experienced promoters. Also, it has showcased strong financial growth in its past performance, said Swastika Investmart.
"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. The IPO is coming at a very attractive valuation of 32.5 times, and it's a great opportunity for investors. One should apply for this IPO for listing gain as well as for long-term benefits," it said.
Arihant Capital Market
Rating: Subscribe
Tata Technologies Limited provides a diverse range of services encompassing IT consultancy, SAP implementation, and CAD/CAM engineering and design consultancy. Strong partnerships, including with Dassault and Siemens, and utilization of Microsoft AZURE products enable global expansion, said Arihant Capital Markets.
"Tata Technologies has outpaced Tata Elxsi, L&T Technologies, and KPIT Technologies in revenue CAGR over the last three years. At an upper band valuation of Rs 500, the issue's valued at a PE ratio is 32.5x based on FY23 EPS. We recommend subscribing to the issue for both short-term listing gains as well as long-term investment prospects," it said.
IDBI Capital
Rating: Subscribe
Tata Technologies range of services includes IT Consultancy, SAP implementation, CAD/CAM engineering and design consultancy. It generates 80 per cent from services, 11 per cent from products and 9 per cent from Education as of FY23. Vertically, the company generates the majority of revenues from automotive, said IDBI Capital.
Apart from automotive, it will be a key beneficiary of tailwinds in aerospace led by capacity expansion plans of aircraft manufacturers and MRO activities. Its revenue and PAT has grown at a CAGR of 36 per cent and 62 per cent over FY21-FY23, respectively. It is valued at 33 times FY23 EPS, it added with a 'subscribe' recommendation on the issue.
Anand Rathi Research
Rating: Subscribe for long term
Tata Technologies had strong revenue and margin growth in the past over the years. It is a leading global engineering services company with deep expertise in the automation industry. At the upper price band, the company is valuing at P/E of 32.5 times with a market cap of ₹20,283 crore post issue of equity shares and return on net worth of 20.8 per cent, said Anand Rathi Research.
"Its comprehensive portfolio of services for the automotive industry addresses the product development and enterprise optimization needs of traditional OEM’s and new energy vehicle companies, together with their associated supply chains. On the valuation front, we believe that the company is fairly priced," it added with a 'subscribe for long-term' rating.
Reliance Securities
Rating: Subscribe
Tata Tech is a pure-play manufacturing focused ER&D Company, primarily focused on the automotive industry with additional growth drivers including a heightened focus on smart manufacturing, reducing product development time and cost, connecting the digital thread and enhancing customer experience, said Reliance Securities.
They benefit from long-term relationships with both TML and JLR which strengthens to tap the large opportunity in automotive ER&D markets, adjacent verticals to tap the wide business network. Considering the healthy business prospects, strong parentage, superior financials with improvement in margins and ratios provides a valuation comfort, it said with a 'subscribe' tag.
SBICap Securities
Rating: Subscribed
At the upper price band of Rs 500, Tata Technologies is trading at 32.5 times FY23 P/E multiple. Its peers are trading at relatively expensive valuations, said SBICap Securities. "We believe Tata Technologies is well placed to encash on the growth opportunities in ER&D space and looking at the relatively cheaper valuations, we recommend investors to 'subscribe' to the issue," it said.
Ventura Securities
Rating: Subscribe
With the gradual recovery in the global economy, rising manufacturing capex and shift in manufacturing from US/Europe/China to India due to cost inflation and China+1 strategy, we are expecting strong in Tata Tech’s financial performance in the coming years. Considering the growth opportunities and strong fundamentals of Tata Tech, we recommend a 'subscribe' rating, said Ventura.
Sushil Finance
Rating: Subscribe
The company derives a large portion of its revenue from top five customers such concentration may prove to be risky if they are to face any kind of volatility in their business operations. The clients are highly concentrated in the automotive sector which has previously seen a lot of volatility and as such this may affect the company’s performance, said Sushil Finance.
"The listed peers like KPIT Technologies trading at P/E 80.3 times and L&T Technology is trading at P/E of 37.5 times and industry average P/E is 59.7 times. Keeping in mind the favorable and unfavourable factors, the investor can look at long term investment in this techno giant," it said.
Asit C Mehta Investment interrmediates
Rating: Subscribe
Tata Technologies is leveraging their deep manufacturing domain knowledge to deliver value-added services to its clients in support of its digital transformation initiatives including product development, manufacturing, and customer experience management, said Asit C Mehta Investment interrmediates.
"The company’s deep expertise in the automotive industry, marquee set of clients across anchor accounts, traditional OEMs and new energy vehicle companies ensure a positive outlook for the future. At the upper price band of Rs 500, stock has valued at PE multiple of 32.53 of its FY23 Diluted EPS. We recommend subscribing to the issue from a medium to long-term perspective," it said.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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