Tata Technologies share trade 'suspended' in unlisted market ahead of IPO

Tata Technologies will hit Dalal Street with its initial public offering on Wednesday, November 22, 2023. This effectively means those who couldn't trade in the Tata Group company's shares in the unlisted marketd can now only bid for the IPO when it opens next week.

According to dealers active in the unlisted market, the share transfer of Tata Technologies has been 'barred' as soon as the company filed its red-herring prospectus. The dealers have not been able to buy or sell shares since Monday, November 13, the day RHP was filed by the company.

Some analysts have also expressed their disappointment over 'freezing' of the pre-IPO shares much ahead of the standard practice. Usually, unlisted or pre-IPO shares are barred from trade on the day allotment, when the mandatory lock-in for the pre-IPO shares is enforced, but Tata Technologies has been an exception.

Narottam Dharawat, founder of Mumbai-based Dharawat Securities said that unlisted brokers were not able to transfer shares into buyer's demat account as the ISIN status of the company was changed to 'suspended' for Tata Technologies. Listing bound companies usually communicate the complete information to existing shareholders about the activation of the lock-in period.

"It is very surprising that the company or the Registration and Transfer agent (RTA) did not send any e-mail or official communication before the lock-in was effective on Tata Technologies shares," Dharawat added. "Even the date of lock-in was not communicated."

Dealers are expecting the price band of Tata Technologies to be around Rs 500-525 per share or even Rs 550, leaving decent room for appreciation for the investors. Tata Technologies will be the first IPO by the Tata Group in nearly two decades, after Tata Consultancy Services Ltd (TCS).

However, Tata Technologies' shares traded at 840-850 in the private market before the trading in shares was suspended in the meantime. Dealers are expecting a strong listing pop for the stock on the debut. Tata Technologies is currently commanding a premium of Rs 290-300 per share in the grey market.

Dinesh Gupta, co-founder of Delhi-based boutique firm UnlistedZone said that Tata Technologies is going hog limelight strong parentage of the Tata Group. There is a lot of excitement about this IPO and its peers are trading strong and premium valuations, adding more to the euphoria.

"The annualized EPS of Tata Technologies is likely to come around Rs 16 per share and its peers including KPIT Technologies and Sterlite Tech are trading at a multiple of 50-55 times over the annualized EPS. Thus, Tata Technologies' should have a fair value of Rs 800-900 per share on listing."

For the half year 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's net EPS stood at Rs 8.67 for the period with a return on net worth at 12.33 per cent for the period.

Tata Technologies's IPO consists entirely of an offer-for-sale (OFS) of 6,08,50,278 equity shares with a face value of Rs 2 each. The company is likely to raise around Rs 3,000-3,200 crore via IPO route.

Dharawat said that unlisted markets included the optimism or euphoria of the counter as well. He also expects stock to be listed in the range of Rs 800-900, roughly around the last price in the unlisted market, if the market sentiments continue to remain supportive.

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