Tata Technologies IPO to open on November 22, price band fixed at ₹475-500

Tata Technologies IPO to open on November 22, price band fixed at ₹475-500
Source: IANS
  • This is the first IPO from the House of Tatas in 19 years, after TCS listed in 2004.
  • Investors can bid for a minimum of 30 shares and in multiples thereof.
  • It’s a complete offer for sale with its promoter Tata Motors and others offloading stake.
Tata Technologies’ ₹3,042 crore initial public offer (IPO) will open for subscription on November 22 and close on November 24. It has fixed a price band of ₹475-500 for the issue. Investors can bid for a minimum of 30 shares and in multiples thereof.

This is the first IPO from the House of Tatas in 19 years, after TCS listed on the bourses in 2004. And, it’s also the third biggest IPO to hit the markets this year after Mankind Pharma and Nexus Select Trust.

The issue is a complete offer for sale by the promoter Tata Motors, and other investors like Alpha TC Holdings and Tata Capital Growth Fund I. Tata Motors will be offloading 11.4% stake in Tata Technologies, and not the 20% as mentioned in its DRHP earlier. Last month, Tata Motors sold 9.9% stake to TPG Rise-led investors for ₹1,613.7 crore.

About the company

Tata Technologies is a global engineering research and development (ER&D) company offering outsourced engineering and digital transformation services to manufacturing clients. Its anchor clients include its promoter Tata Motors and its subsidiary, Jaguar Land Rover. It also has a clientele in electric vehicles and keen on the growth opportunities in the aviation sector.

It also re-sells third-party software applications, and provides value-added services such as consulting, implementation, systems integration and support. It also provides ‘phygital’ education solutions in manufacturing skills in the latest manufacturing technologies.

The book running lead managers expressed confidence in the demand from the issue. “Based on the investor meetings, we are confident of good response from retail investors as well as HNIs for the IPO. It’s a high quality business from the Tatas,” Arvind Vashishta, managing director, head of India equity capital markets, Citigroup said at the IPO press conference.

Along with Citi, J M Financial and BofA Securities are the book running lead managers of the issue. Link Intime India is the registrar of the issue.

Financials & Risk Factors

In FY23, the company’s revenue from operations grew 25% and its net profit grew 47% from the year before. Its EBITDA margins also expanded to 18.6% in FY23 from 18.2% in FY22.

“We used the growth in topline and margins to build a business with cash flows. We have taken advantage of the growth journey to build efficiencies into the system. Our capital-light business model also helped expand the bottomline,” Savita Balachandran, CFO of Tata Technologies said at the IPO press conference.

Its listed peers are KPIT Technologies, L&T Technology Services and Tata Elxsi.

Revenue from operations₹4,414 crore₹3,529 crore₹2,380.9 crore
Net profit₹624 crore₹436.9 crore₹239 crore
Source: RHP

The company said in its RHP that it derives a material portion of revenues from top five clients which include its anchor clients. And any deterioration of their business, it may have a material adverse effect on its business.

Apart from entering into related party transactions, it also competes with its group companies like Tata Consultancy Services and Tata Elxsi.

It also expects significant revenues to come from new energy vehicle companies, many of them maybe startup companies. “Uncertainties about their funding plans, future product roadmaps, ability to manage growth, creditworthiness and ownership changes may adversely affect our business, financial condition and results of operations,” Tata Technologies said.

Its recent expansion of its education business, liability to damages for clients on account of system failures and more; any change in tax holidays to SEZs and licensing agreements with Tata Sons are the other risk factors listed in it.

While it has undertaken one criminal proceeding, it has two such proceedings against it along with 17 tax proceedings, and 4 statutory or regulatory proceedings — amounting to ₹141 crore.

Its promoter Tata Motors however has undertaken 80 criminal proceedings and 4 material civil litigations amounting to a liability of ₹2,797 crore. It also has 34 criminal cases against it and 817 tax proceedings, one statutory or regulatory proceeding and two disciplinary actions by SEBI or exchanges amounting to ₹4,503 crore.