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As we are heading toward the year’s end, we had 42 IPOs hitting the primary market in the last 10 months. The IPO Pipeline from Tata Group is expected to keep Dalal Street bustling.
A much-awaited new entrant from Tata Group is Tata Technologies. It’s been nearly two decades since the last IPO from Tata Group. The last IPO was Tata Consultancy Services (TCS) in the year 2004. This article will throw light on the Tata Technologies IPO and help you determine whether to take the call to Buy or Avoid it.
Let’s get started!
Table of Contents
1.)About Tata Technologies
2.)Tata Technologies IPO details at a glance
3.)Tata Technologies IPO – Category-wise Allocation and Lot Size
4.)Tata Technologies IPO – Performance of Tata Technologies
5.)Tata Technologies vs Listed Industry Peers – Comparison of Accounting Ratios
6.)What is the Valuation of Tata Technologies IPO?
7.)What are the Risks in Tata Technologies IPO?
8.)Tata Technologies IPO – What is in store for Retail Investors?
9.)Tata Technologies IPO – Should You Buy?
1.)About Tata Technologies
Tata Technologies Limited is an Indian multinational product engineering company founded in 1989. It was set up as an automotive design unit of Tata Motors. In 1994, it was split out as a distinct business, but Tata Motors remained its largest customer and retained the bulk of its shares.
Tata Technologies first filed the draft prospectus with SEBI in March 2023. Now, it is all set to debut in the primary market on 22nd November 2023. It is an offer for sale and it will off-load a 15% stake.
2.)Tata Technologies IPO Details at a Glance
| Issue Size | 3,041.52 Crores |
| Number of Equity Shares | 6,08,50,278 shares |
| Minimum Lot Size | 30 shares |
| Subscription opening date | 22-Nov-23 |
| Subscription closing date | 24-Nov-23 |
| Price Band | ₹ 475 – 500 |
The entire IPO of Tata Technologies Ltd is an offer for sale (OFS), so there would be no pumping of funds into the company. The OFS selling will be by the promoter shareholders and the investor shareholders. Tata Motors (promoter shareholder) offers 462.75 Lakh shares.
Tata Capital Growth Fund-I and Alpha TC Holdings (Investor Shareholder) offer 97.17 Lakh shares and 48.58 Lakh Shares respectively. Currently, the promoters of Tata Technologies Ltd have a 66.79% stake in the company. Post-IPO, it will be reduced to 51.79%.
JM Financial, Citigroup Global Markets, and BOFA Securities will manage the listing. Link Intime India Private Ltd will be the registrar of the issue.
3.)Tata Technologies IPO – Category-Wise Allocation and Lot Size
| Category | Allocation of Shares | Allocation (%) |
| QIB | 2,63,68,455 | 43.33% |
| Retail | 1,84,57,918 | 30.33% |
| NII (HNI) | 79,10,536 | 13.00% |
| Tata Motors Ltd Shareholders | 60,85,027 | 10% |
| Employees | 20,28,342 | 3.33% |
Qualified institutional bidders (QIBs) and Non-Institutional Investors (NIIs) will have 43% and 13% allocation in the net offer, respectively. Retail investors will get 30% of the net offer reserved for them. Tata Technologies has reserved 3.33% for eligible employees of the company, while 10 % of the offer has been reserved for the shareholders of Tata Motors.
| Application | Lot | Shares | Amount |
| Retail (minimum) | 1 | 30 | 15,000 |
| Retail (maximum) | 13 | 390 | 1,95,000 |
| NIIs / HNIs (minimum) | 14 | 420 | 2,10,000 |
| NIIs / HNIs (maximum) | 66 | 1980 | 9,90,000 |
| QIB | 67 | 2,010 | 10,05,000 |
Retail investors may apply for up to thirty equity shares, or one lot, for a minimum of ₹15000. A retailer may place a maximum bid of ₹1,95,000 for 13 lots, or 390 equity shares.NIIs investors need to bid for a minimum of 14 lots or 420 shares worth Rs 2,10,000 while they can apply for a maximum of 66 lots, amounting to Rs 9.90 lakh. For the QIB category, the minimum lot size is 67 and there are no upper limits applicable for this category.
4.)Tata Technologies IPO – Performance of Tata Technologies
It is very important to look at the performance of the company to assess the Tata Technologies IPO. Tata Technologies provides engineering and technology services to automobile, aerospace, and heavy machinery makers. The company has 19 global delivery centres which are spread over 27 countries. It has a workforce of over 11 K – 12K people.
| Metrics | March 31, 2023 | March 31, 2022 | March 31, 2021 |
| Revenue (Rs in Million) | 44141.77 | 35,295.80 | 23,809.11 |
| YoY growth in Revenue from operations (%) | 25.06 | 48.24 | -16.52 |
| Profit After Tax (Rs. In Million) | 6240.37 | 4369.91 | 2391.73 |
| Earnings per equity Share (EPS) | 15.38 | 10.77 | 5.89 |
| EBITDA (Rs. in Million) | 9086.86 | 6944.64 | 4305.36 |
| 3-Year Revenue Growth (% per annum) | 36 |
| 3-year EBIT Margin (%) | 14.88 |
| 3-Year ROCE (%) | 18.86 |
5.)Tata Technologies vs Listed Industry Peers – Comparison of Accounting Ratios
The following peer group has been determined based on companies listed on Indian stock exchanges whose business profile is comparable to the Tata Technologies businesses in terms of size and business model.
| Name of the company | Tata Technologies | KPIT Technologies | LandT Technology | Tata Elxsi |
| Face Value | 2 | 10 | 2 | 10 |
| Revenue from operations for Financial Year 2023 (₹ million) | 44,141.77 | 33,650.38 | 80,136 | 31,447.23 |
| Basic EPS for Financial Year 2023 (₹) | 15.38 | 14.1 | 110.8 | 121.26 |
| P/E for Financial Year 2023 | NA | 80.31 | 37.47 | 61.55 |
| RONW for Financial Year 2023 (%) | 20.87% | 22.91% | 23.54% | 36.21% |
| NAV per Equity Share as of March 31, 2023 (₹) | 73.65 | 61.58 | 470.66 | 334.92 |
| Market capitalization as of March 31, 2023 (In ₹ million) | NA | 2,50,097.45 | 3,56,802.39 | 3,71,111.5 |
6.)What is the Valuation of Tata Technologies IPO?
The current earnings per Share is 15.38. The price band for the IPO is 475 – 500. So, the P/E ratio works out in the range of 30.88X – 32.5X. When compared to Peers, only L&T Technology is close to the value. Tata Elxsi and KPIT Technologies are highly over-valued. Tata Technologies is somewhat fairly valued when compared to other companies in the same sector.
7.)What are the Risks in Tata Technologies IPO?
Tata Technologies focuses on its top 5 clients including its chief client (Tata Motors). These top clients account for the major portion of the revenue.
The automobile segment’s client concentration has a significant impact on revenues. An economic slowdown or factors affecting this segment may hurt the operations of the company.
The company is expecting a significant amount of future revenue to come from new energy vehicle companies, many of whom may be startup companies. The business may suffer from uncertainties regarding its finance plans, future product roadmaps, creditworthiness, growth management capabilities, and ownership changes.
The company may experience negative cash flows in the future as they already had negative cash flows in the past, which could in turn harm operations and liquidity. Some of the Tata Group companies (TCS and Tata Elxsi) operate in a similar line of business, which may lead to competition with these entities and could potentially result in a loss of business opportunities for the Company.
8.)Tata Technologies IPO – What is in Store for Retail Investors?
The analysis of the standalone metrics and its comparison with peers depict that the performance is at an average level. The company also poses some risks relating to the potential growth. Post-listing, there will be some momentum.
The stock price may be evaluated in the initial 3 months. After 3 – 6 months i.e., after publishing quarterly results, things may settle down. The noise may subside and you will get to know whether Tata Technologies IPO will create wealth for you (shareholders).
It is advisable not to jump on the bandwagon as it is difficult to cut through the noise and evaluate the company.
9.)Tata Technologies IPO – Should You Buy?
The Brand Name “Tata Group” is an added advantage to Tata Technologies. Though the company crosses lines within the Group companies, Tata Technologies is a pure-play engineering, research, and development company. Down the lane, the progress of the company will decide whether the Tata Technologies IPO is a good or bad bet for the long run.
In addition to this, reading the article “What should you look for when investing in an IPO?” will give you better clarity about the Pros and Cons of investing in an IPO.
Instead of searching for financial advice and stock market-related queries on social media sites like Quora, Facebook, Twitter, etc, it is better to clear your doubts with a professional financial planner.
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