Is Tata Advanced Systems Coming Out with its IPO in 2024?

Tata Group, a conglomerate known for its diverse portfolio and business operations, is on the brink of significant milestones as it plans to launch around five upcoming initial public offers (IPO) soon.

In recent weeks, we covered detailed editorials on each of these companies and went down the rabbit hole to understand how big the prospects are for these companies.

You can check these articles here if you haven't already -

• One More Tata Group Stock to Ride Gains in the EV Ecosystem
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• Tata Group Upcoming IPOs: Is Big Basket the Next Amazon of Groceries?

Adding to the list of Tata stocks that could potentially come out with their IPOs soon, Tata Advanced Systems (TASL) also emerges as a focal point of interest.

With the way Tata group has been announcing plans about demerging Tata Motors and taking companies public, we could possibly see Tata Advanced Systems come out with its IPO soon.

Understanding Tata Advanced Systems' role within the Tata Group and its impact on sectors like aerospace and defence is crucial.

Which is why we're exploring TASL's operation in detail, offering a concrete exploration of the its activities, partnerships, and prospects.

As and when the company does come out with its IPO, this can be a handy guide to refer...

Background of Tata Advanced Systems

TASL is a strategic entity within the Tata Group and a subsidiary of Tata Sons. It specializes in the aerospace & defence industry.

Established in 2007, TASL is aligned with Make in India initiatives to promote the manufacturing of critical aerospace and defence solutions.

Here's how the company's capital structure looks right now -

Particulars	Authorized Capital	Issued Capital	Subscribed Capital	Paid Up Capital
Total amount of Equity Shares (in rupees)	27.9 bn	21.1 bn	21.1 bn	21.1 bn

The turnover of the company, as defined under the Companies Act, 2013, stood at Rs 3.4 bn as of March 2023, while the net worth stood at Rs 2.5 bn.

The company operates in the B2B sector. It primarily focuses on aerospace, maritime, and defence tech markets.

TASL provides critical infrastructure for urban security & surveillance, and disaster preparedness.

TASL has partnered with leading global aerospace and defence firms like Airbus and Satellogic.

The Tata group company is well-positioned to capitalize on growing demands for defence and space sectors.

Airbus and Tata Advanced Systems Create Milestones

The 'Make in India' commitment was demonstrated by Airbus as it partnered with TASL and Mahindra Aerospace Structures to make and provide parts for Airbus planes in January 2024. It will produce planes like the A-320 series, A350, and A-320 series at its advanced Hyderabad and Nagpur factories.

Every Airbus commercial aircraft now incorporates components and technologies manufactured in India such as the A220 Escape Hatch Door.

Airbus is actively working to develop the broader Indian aerospace ecosystem under an industrial contract with TASL.

MoU with the Karnataka Government

On 19 February 2024, Air India and Tata Advanced Systems signed an MoU with the Karnataka government. It proposed an Rs 23 bn investment across various projects which is expected to generate 1,650 jobs.

TASL has planned three projects with a Rs 10.3 bn investment which includes aircraft conversion (Rs 4.2 bn), gun manufacturing (Rs 3.1 bn), and R&D (Rs 3 bn) creating 450 jobs.

TASL aims to source half of its gun facility's parts locally in Karnataka.

What's the Deal between Satellogic and Tata Advanced Systems?

The deal between TASL and Satellogic is to develop optical sub-meter resolution EO satellites in India. The beginning of this collaboration will start with TSAT-1A.

TASL and Satellogic will set up a satellite assembly plant and integrate multiple payloads on a single satellite to gather varied data for defence and commercial purposes.

The deal will contribute to India's technological advancement in space capabilities. It will strengthen the support capacity building in the space sector.

The partnership with Satellogic highlights the commitment to increasing India's defence capabilities and space technologies.

Satellogic's CEO and Founder, Emiliano Kargieman said,

• "This collaboration with Tata Advanced Systems Ltd. will accelerate space capacity building for one of the largest nations globally".

The goal of this partnership is to advance commercial space capabilities and enhance access to applications using security, sustainability, and energy.

Tata Advanced and the Role it Plans in Defence Innovations...

TASL has supplied military All Wheel Drive Trucks to the Indian Armed Forces since 1958.

An evaluation process is followed by the company to assess the products before supplying them to the Indian Army.

TASL is currently evaluating and enhancing its product configurations to meet the defence needs. It demands load carrier vehicle, radar & replenishment, and command control.

On 5 January 2024, the Indian army chose Tata Wheeled armoured personnel carriers (WhAPC) for UN peacekeeping missions abroad. It aims to improve safety in high-risk areas by providing mobile security.

Tata Advanced Systems IPO Speculations

Given the recent IPO speculations surrounding Tata Group, it is anticipated that TASL might also consider launching an IPO.

This move would connect with the trend of Tata Group companies entering the public market, as ongoing with other companies like Big Basket, Tata Play, among others.

TASL shows impressive revenue figures which stands at Rs 33.5 bn as of March 2023.

Financial Snapshot of Tata Advanced (Rs Billion)

Particulars	FY19	FY20	FY21	FY22	FY23
Gross Sales	5.4	13.3	16.8	30	34.6
Total Income	5.6	13.5	17.3	30	35.8
PAT	0.6	0.6	-0.8	0.8	0.5
Total Assets	22	33.7	61.2	78.4	91.6
Total Liabilities	15.6	25	48	63.5	74
Total Debts	4.4	8.1	22.3	21.9	32.7
Cash flow from operations	-0.9	-0.05	-1.8	0.4	-2.1
Cash flow from investing Activities	-5.9	-1.8	-5.7	-4.4	-4.7
Cash flow from finance activities	6.7	-5.7	7.9	3.7	8.2

Data Source: Ace Equity

• Gross sales increased from Rs 5.4 bn in March 2019 to Rs 34.7 bn in March 2023, showing significant growth.
• Net Profit After Tax (PAT) has fluctuated during the five years.
• Total debt increased from 2019 to 2021, nearly doubling from Rs 8.19 bn to 22.3 bn. Then onwards the overall trend remained upward, reaching 32.7 bn by March 2023. This indicates that TASL relied more on debt financing over this period.
• Company faced challenges in maintaining profitability because Tata sons invested money for capital expenditures and experienced losses in FY21. It also relies heavily on key customers which impacts profitability due to concentrated order books.

Financial Snapshot of Financial Ratios of Tata Advanced Systems

Description	FY19	FY20	FY21	FY22	FY23
Debt to Equity	0.7	0.4	1.2	0.8	1.2
Current Ratio	1.2	1.1	1.1	1.1	1.1
ROCE	7.6	5.4	1.1	6.2	5.4
RONW	11.9	5.2	-4.4	3.6	2.2
ROE (%)	11.2%	3.4%	-4.3%	3.1%	2.2%
Equity Dividend (%)	0.0	0.0	0.0	0.0	0.0

Data Source: Ace Equity

The financial ratio table is analysed and summarized with implications as below:

• The debt-to-equity ratio fluctuated between 0.4 to 1.2 over the four-year span, indicating varying levels.
• A lower ratio in FY20 suggested reliance on debt financing, which can be viewed positively by future potential IPO investors concerned about financial risk.
• Current ratio is stable through the years indicating a healthy liquidity position.
• Return on capital employed (ROCE) ranged from 1.1 to 7.6 through the previous years, showing fluctuations in capital efficiency and profitability. The ROCE at 5.4 in FY23 indicates average capital utilization and profitability.
• Return on net worth (RONW) is positive in FY23 which indicates the company's ability to generate profits from the investments.
• Change in return on equity (ROE) from 2019 to 2023 shows a diminishing trend.
• TASL has not declared any dividends for the last several years. The company chose to retain its profits for reinvestment in business operations or strategic initiatives.

Overall, TASL's financial position indicates positive profitability trends in recent years, which provides a reasonable foundation for a potential IPO listing.

However, ongoing monitoring of financial performance and financial management will be essential to maintain investor confidence in future for support of successful IPO.

In Conclusion

Tasl shows impressive financial performance over the years. It shows promising growth through increasing trend of gross sales and total income.

The partnerships of TASL aims to open doors to new opportunities, markets, and innovations.

There are challenges observed in maintaining profitability in the past years, however, the company has shown resilience and improvement. It is evident through its positive return on net worth in FY23.

Looking ahead, TASL's potential IPO listing could attract investor interest given its strong revenue figures, strategic partnerships, and make-in-India focus.

Though there are speculations regarding TASL IPO in 2024, it remains unconfirmed.

Investors are encouraged to stay updated for the latest developments, as the potential listing might have strong impact in the aerospace and defence sectors.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...