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  • Jan 19, 2023 - Tata Technologies to Launch an IPO Soon. 5 Key Details

Tata Technologies to Launch an IPO Soon. 5 Key Details

Jan 19, 2023

Tata Technologies to Launch an IPO Soon. 5 Key Details

Editor's note: The Tata group has been around for more than 150 years, and it is considered one of the most respected and trusted business groups in India.

After almost 18 years, the group is coming out with an IPO (initial public offering). The group has initiated the process for the same and has hired two advisors to list Tata Technologies.

It has not yet announced a date for the Tata Technologies IPO, but this upcoming IPO is expected to be one of the most popular in recent years, and that's why it is getting so much attention and hype.

The company will raise somewhere between Rs 35-40 billion (bn), giving it a valuation of Rs 162-200 bn, according to reports.

The IPO will allow the company to raise capital from the public, which can be used to fund expansion and growth plans. It also provides an opportunity for the public to invest in the company, which can be seen as a sign of confidence in the company's future prospects.

In December 2022, we explained in detail, the five important thinks to take note about the Tata Tech IPO.

Continue reading to know more...

Tata Technologies to Launch an IPO Soon. 5 Key Details

The Indian primary market is buzzing with activity, as a slew of big companies are coming out with their initial public offers (IPO).

This week, we saw three IPOs open for subscription. These companies were Sula Vineyards, Landmark Cars, and Abans Holding.

While all these companies and upcoming IPOs are getting the attention now, all are about to be side-lined when the Tata group comes out with its IPO.

The hype for a Tata group company's IPO is real. Tata group is known to delivered and reward shareholders by way of dividends, buybacks, etc. Not to mention stock appreciation.

The last IPO of a Tata group company was 18 years ago. It came out with TCS IPO way back in 2004. It looks like the IPO silence of the group may end soon.

Earlier in September 2022, we wrote to you about Tata Play IPO. Recently, Tata Play became the first Indian company to submit a 'pre-filed' draft document (confidential IPO papers) with the market regulator on 29 November 2022.

In the article, we had also mentioned

"In fact, Tata Play isn't the only Tata company to go public in this financial year.

Reportedly, Tata Technologies - an arm of Tata Motors is also planning to go public this year."

According to reports, Tata Technologies is now readying IPO plans.

Tata Technologies IPO

Earlier this week on 12 December 2022, Tata Motors' board accorded in principle a partial divestment of the company in Tata Technologies, its wholly owned subsidiary, through an IPO.

The timeline of divestment has not been specified. The regulatory filing done by the company states the company will come out with the IPO at an opportune time.

Tata Technologies IPO will be subject to market conditions, applicable approvals, regulatory clearances, and certain other considerations.

The company said that it will make further announcements of all material developments relating to IPO, as and when required, as per market regulator's regulations.

Since Tata Motors would sell its stake through the IPO, the proceeds will help the reeling automaker recover its losses. The IPO might turn out to be one of the much-needed moves for Tata Motors as the company has reported losses consistently for the last seven quarters.

So we know Tata Motors is in losses. But what about Tata Technologies?

About Tata Technologies

Tata Technologies is a Tata group company that provides services in engineering and design, product lifecycle management, manufacturing, product development, and IT service management to automotive and aerospace original equipment manufacturers and their suppliers.

It is a subsidiary of Tata Motors. The company is active in North America, Europe, the Middle East, and the Asia Pacific region.

Financial Performance of Tata Technologies

The financial statements of Tata Technologies paint a volatile picture. In the past five years, growth in revenues hasn't been consistent.

Profits too, have reduced. But the fall in profit is not to a large extent. In fact, in the financial year 2020-21 when revenue fell by 16%, its net profit rose.

Financial year 2021-22 was a dream year for the company. In this period, its revenue increased by 47.4% on a year-on-year basis. A corresponding effect can also be seen in the profit margins.

The growth in revenue was due to a relaxation in regulatory and health guidelines that enabled improved business activities coupled with new business opportunities in South East Asia.

Tata Technologies is a zero-debt company. However, for the financial year 2021-22, it has negative free cash flows.

Financial Snapshot

Particulars (Rs in m) FY18 FY19 FY20 FY21 FY22
Total Income 27,797.6 29,864.3 28,969.4 24,327.5 35,856.2
Growth -2.1% 7.4% -3.0% -16.0% 47.4%
Operating profit 4,209.9 5,470.9 5,153.3 4,305.4 6,944.4
Operating profit margin 15.1% 18.3% 17.8% 17.7% 19.4%
Net profit 2,458.1 3,526.0 2,515.5 2,391.8 4,369.7
Net profit margin 8.8% 11.8% 8.7% 9.8% 12.2%
Total Debt 673.7 0.0 0.0 0.0 0.0
Free Cash Flows 2,045.5 3,481.1 1,812.2 11,226.8 -1206.6
Data Source: Ace Equity

Now let's take a look at what the future holds for Tata Technologies.

Future Prospects of Tata Technologies

Warren Harris, managing director and chief executive officer of Tata Technologies said that the company expects to grow by 20% in the next 12 months and at a compounded annual growth rate (CAGR) of 15% the year after that.

Organically, by 2025, the company can grow its business to over US$ 800 million (about Rs 66,167.5 m). This is a growth of 69% from the turnover reported in the financial year 2021-22.

It has an active list of targets for aiming at inorganic growth. The company is also looking at growth through mergers and acquisitions. The company is planning on leveraging its hold on electric vehicles and looking forward to benefiting from the digital boom in the automotive and aviation space.

The company has tied up with GKN Automotive - a global leader in driveline systems and advanced e-Powertrain technologies.

The tie-up with GKN is like an endorsement from the entire market as 50% of EVs sold globally have some parts consisting of GKN. The company is developing software and embedded electronics as part of the tie-up.

Investment Takeaway

After taking into consideration the financial performance and prospects of the company, it can be seen that the company is moving towards growth.

However, a lot of details like its core revenue-generating segment, peers, etc. are unknown. Hence, investors will have to patiently wait for when the company files its draft red herring prospectus (DRHP) and then consider whether to apply or not.

But one thing is certain...Tata Group and it's long-standing in the market has made Tata Technologies a lucrative investment opportunity.

Stay tuned to get more updates about Tata Technologies IPO.

Stay tuned to get updates on all upcoming IPOs in the market.

Happy Investing!

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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How should you go about investing in the best performing IPO stocks in India right now?

The best performing IPOs have already delivered outsized returns. So there is a good chance these stocks might be overpriced.

Before you invest your hard-earned money, make sure you check out the valuations first. Studying the business is equally important. One should only invest in fundamentally strong stocks with bright prospects.

What is GMP?

GMP stands for grey market premium. It is the amount, over and above the issue price, that traders are willing to pay or ask for to trade IPO shares. The GMP can tell you how an IPO will perform on its listing day.

If you are applying for an IPO, take a look to see what could happen on listing day. But remember GMP shouldn't be the only factor influencing your decision on whether or not to hold or exit the stock.

If you are an investor, then we would say take the GMP with a pinch of salt. A factor as volatile as GMP can't be a deciding factor.

Therefore, you should never apply for an IPO just because it commands a good GMP. You should apply for an IPO because you believe in the company's earning potential. Hence more weightage should be given to the fundamentals of the company.

What is an IPO Price Band?

IPO Price Band is the price range within which investors can bid for the shares. The minimum price is called the floor price and the maximum price is called the cap price.

In case the company revises the price band, the offer period gets extended for at least three additional working days.

Any revision in the price band and the revised offer period, if applicable, is shared by notification to the stock exchanges by issuing a press release and on the websites of the book running lead managers.

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