The Indian stock market is abuzz with anticipation of the upcoming Tata Technologies IPO. This will be the Tata Group’s first IPO in two decades. As investors and market enthusiasts keenly await details on the Tata Technologies share price, a comprehensive understanding of the company’s journey, its current standing, and future prospects is crucial.
What Is The History Of Tata Technologies?
Tata Technologies, a player in the engineering services domain, especially in the automotive and aerospace sectors, has a rich history. Established in 1989 as the automotive design arm of Tata Motors, it was spun off separate entity just five years into its inception. This strategic move allowed Tata Technologies to diversify and venture into aerospace engineering and other innovative sectors.
Despite its expansive growth and diversification, Tata Motors continues to be both its largest shareholder and its primary customer. An intriguing aspect of Tata Tech’s journey is its competitive dynamics. It perceives Tata Elxsi, another firm within the Tata conglomerate, as its competitor. This suggests a overlap in the services offered by both entities.
Historically, Tata Motors had made attempts to offload its stake in Tata Tech, primarily to alleviate its debt burden. However, the landscape changed with the announcement of the upcoming IPO. This move will not channel fresh capital into Tata Tech. Instead, it will facilitate Tata Motors and two other investors in divesting their stakes.
Is It Listed? Can You Buy Tata Tech Shares?
As of now, Tata Technologies remains has not been listed on the stock market. The significance of its impending listing is magnified by the fact that the Tata Group, a stalwart in the Indian business landscape, is gearing up for its first IPO in nearly two decades. This move is not just a testament to Tata Technologies’ growth but also a reflection of the Tata Group’s strategic vision.
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While you cannot buy Tata Technologies’ shares on the stock market at present, you can invest in Tata Motors, which would give you an indirect interest in the IPO-ready firm. On the other hand, you could buy the stock on the grey market, though this would require specialised instruments.
When Is Tata Technologies IPO?
Tata Technologies’ IPO is set to open on Wednesday, November 22 and close on Friday, November 24. The IPO will be an offer for sale, where Tata Motors, Alpha TC Holdings and Tata Capital Growth Fund will divest 6.08 crore equity shares, which is lower than the 9.57 crore shares it had originally planned to put on sale.
10% of shares will be reserved for employees of Tata Technologies and Tata Motors shareholders.
Critically, Tata Motors, a pivotal entity in this narrative and a listed company, announced its second-quarter results on November 2. Tata Motors could not have declared its results within a three-week window of the Tata Technologies IPO opening.
What Is Tata Technologies Share Price?
Tata Technologies IPO has established the price band for its maiden public issue at ₹475-₹500 per share.
This is in line with market experts’ estimates that put the Tata Technologies IPO price band between ₹400 to ₹542 per equity share. This valuation is anchored in Tata Motors' recent divestment of a 9.9% stake, which implicitly valued Tata Tech at a staggering ₹22,015 crore.
A deeper dive into the numbers reveals more. If Tata Technologies opts for the lowest price-to-earnings multiple of 37x, the derived market capitalization would touch ₹22,015 crore. This places the market cap range between ₹16,300 crore (the current valuation as per the recent transaction) and the aforementioned ₹22,015 crore. These figures provide a ballpark estimate for investors, but the final numbers will be pivotal.
Tata Technologies: A Financial Snapshot
Performance Overview: Tata Technologies, in FY23, experienced a deceleration in its revenue and profit growth compared to the preceding fiscal year. Nevertheless, the company’s financial health remains robust, evident from its debt-free status. The revenue for FY23 surged by 25%, reaching a commendable Rs 4,418 crore. Furthermore, the profit after tax witnessed a significant jump, registering a growth of 63% to stand at Rs 708 crore.
Growth Metrics: Over the span of FY21-23, Tata Technologies demonstrated impressive growth rates. The company’s revenue showcased a compound annual growth rate (CAGR) of 30%. This robust revenue growth subsequently led to a 46% EBITDA CAGR. The culmination of these growth rates is reflected in the profit after-tax CAGR, which stands at a remarkable 61.5%.
Comparative Analysis: When juxtaposed with its industry peers, Tata Technologies emerges as a frontrunner, especially in terms of revenue growth. Over the last three fiscal years, its revenue CAGR has outpaced that of notable peers such as Tata Elxsi, L&T Technologies, and KPIT Technologies. In terms of profitability, Tata Technologies’ EBITDA margin of 23.7% aligns closely with the industry benchmark.
Return Ratios: A pivotal indicator of a company’s financial efficacy is its return ratios. Tata Technologies’ Return on Equity (RoE) underwent a positive transition from 19.8% in March 2022 to 23.7% by March 2023. Similarly, the Return on Capital Employed (RoCE) showcased an upward trajectory, moving from 16.7% in March 2022 to 19.5% in March 2023.
Who Owns Tata Technologies?
Ownership dynamics offer insights into a company’s strategic direction. Tata Motors, the automotive giant, is the linchpin shareholder of Tata Technologies. However, the ownership landscape witnessed a shift with Tata Motors divesting a 9.9% stake. This divestment was not uniform. TPG Rise Climate SF Pte Ltd, a private equity fund with a climate-centric focus, acquired 9% of this stake. The remaining 0.9% found a home with the Ratan Tata Endowment Foundation, further solidifying the Tata Group’s interest in Tata Technologies.
Other investors include Tata Motors, Alpha TC Holdings and Tata Capital Growth Fund.
The IPO’s Grey Market Premium
For Tata Technologies, the grey market premium (GMP) has been a topic of interest among investors and market observers. According to market observers, the GMP for Tata Technologies IPO stands at ₹340. This means that the unlisted stock market anticipates the stock to list at a price that’s ₹340 higher than the upper price band of the IPO.
In simpler terms, if the IPO is priced at the higher end of its band, ₹500, the grey market expects it to list at ₹500 + ₹340 = ₹840. This expectation for a ₹340 listing gain from the upcoming Tata Technologies IPO signals the confidence and anticipation surrounding this Tata group company’s public offering.
However, it’s essential to note that the GMP is not an official figure and is based on unofficial trading. It can be influenced by various factors, including overall market sentiment, company fundamentals, and global cues. While GMP can provide an early indication of the stock’s performance, it’s not always a guaranteed reflection of how the stock will actually perform on its listing day.
Tata Technologies’ share price and its imminent IPO are more than just numbers. They represent the culmination of decades of innovation, strategic decisions, and market dynamics. With Tata Tech’s potential role in the burgeoning EV sector and its positioning as a comprehensive EV engineering solution provider, this IPO is not just a financial event but a landmark in India’s automotive and engineering narrative.
As global giants like Tesla carve their niche in India, Tata’s strategic moves in the EV sector, with Tata Tech potentially at its helm, will be a saga that every investor, analyst, and market enthusiast will watch unfold.
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