In 2022, India saw an overwhelming response in terms of IPO volumes but a sizable slowdown in overall proceeds by almost 56% compared to 2021. On the other hand, 2022 had a bright spot, with one of the largest IPOs, Life Insurance Corporation, raising $ 2.7 billion. Amidst stymied investor sentiments due to weak market scenarios and dismaying post-IPO performances, the Tata Technology IPO announcement popped up.
IPOs and IPO Performances
Tata Technologies Share Price and Updated IPO Details
Tata Motors subsidiary Tata Technologies filed an addendum on 4 October 2023 with SEBI to its DRHP. According to the addendum filed with SEBI, Tata Tech, one of the most-awaited IPOs on the Street, will now have 9.57 crore shares in its planned initial public offering (IPO) with a face value of ₹2 per share.
The Tata Motors subsidiary filed the DRHP (draft red herring prospectus) on 10th March. The Tata Technology IPO structure may include an Offer for Sale (OFS) and new shares.
Tata Motors, which has a 74.69% stake in Tata Tech, will sell up to 81.1 million shares or 20% stake in the company, while Alpha TC Holdings will sell 9.7 million shares and Tata Capital Growth Fund I will sell 4.9 million shares. The company will disclose granular details of the IPO once SEBI approves the DRHP.
The company has reserved a quota for employees whose maximum bid amount must be under Rs. 5 lakh and a Tata Motors shareholders’ quota where the maximum bid amount will be Rs 2 lakh. The company has engaged financial institutions such as JM Financials, Citi, and BofA Securities to assist in the IPO process.
Tata Tech IPO Details
|IPO Date||November 22 -24, 2023|
|IPO Size||₹3,042.51 Cr (OFS of 60,850,278 shares )|
|Issue Price Band||₹475 to ₹500 per share|
|IPO listing at||BSE and NSE|
|Face Value per Equity Share||Rs. 2/- (after the corporate action in Jan 2023)|
Investor Share of IPO
The Utilization of the IPO Proceeds
Tata Technologies will not receive any proceeds from the Offer for Sale from the Selling Shareholders. Each Selling Shareholder will get their respective proportion of the proceeds after deducting their portion of the offer-related expenses and the relevant taxes.
On December 12, 2022, Tata Motors approved the Board of Directors’ decision to divest a portion of its stake through the Tata Technologies IPO. Tata Motors, the parent company, owns 72.48% of Tata Ltd., according to the company’s Annual Return for 2021-22.
Shareholding Pattern of Tata Technologies
Let us explore if the news of Tata Technologies IPO will successfully revive dwindling investor sentiment or will fade away with time. In this article, we will delve deeper into the fundamental analysis of the company, including its line of business, financial performance, and so on. It will help you in taking your final call on Tata Technology IPO.
About Tata Technologies Ltd Company
Tata Technologies Limited, a subsidiary of Tata Motors, existed in 1989. In 1994, the wholly owned subsidiary of Tata Motors was spun off as an individual business unit with 17 delivery centers across the globe. It is headquartered in Singapore with regional HQs in Pune, India, Warwick in the UK, and Detroit in the US.
The CEO, Warren Kevin Harris, leads the company, which is about to debut on the bourses with Tata Technologies IPO. Tata Technologies is leading the global electric vehicle revolution to align itself with changing consumer preferences.
The company used proven methodologies to become a leading product engineering and digital services company. To develop sustainable solutions, it offers original equipment manufacturers (OEMs) in the aerospace, engineering, automotive, manufacturing, and IT industries.
With a diverse talent pool from 18+ countries, Tata Technologies Ltd is a public Limited company with an Authorized share capital of Rs. 60.70 Cr and Paid capital of Rs. 41.81 Cr as of March 31, 2022. Tata Technologies has a cumulative global workforce of 9300+ employees servicing 100+ international clients across 17 Asia-Pacific, Europe, and North America delivery centers.
Tata focuses on four key industries:
- Industrial Machinery
Its services and areas of expertise include:
- Engineering, Research, and Development (ER&D) services
- Digital Enterprise Solutions (DES)
- Education Offerings
- Products and Value-added Reselling
Key Business Highlights
- Tata Technologies confirmed a 47% increase in revenue and a 74% boost in profits after tax in FY22, the best-ever YOY growth.
- Tata Technologies likely will benefit from OEMs’ increasing investment budgets in R&D, automation, digital, and cloud technologies. The global engineering research and development market is expected to grow by 11% CAGR to $1.9 trillion by 2023.
- It ranked in the Automotive ER & D 2021 leadership zone for providing turnkey solutions in end-to-end Electric Vehicle manufacturing, lowering manufacturing costs.
Financial Analysis of Tata Technologies Limited
The company has been debt-free for the last three years and has a strong balance sheet with cash of Rs.7.8bn as of March 2021. The receivables have increased in the previous few years, increasing working capital.
While revenue growth has been tepid over the last 5 years mainly due to a slowdown in R&D spending in the global automotive space, which also impacted operating margins, it has maintained margins over 15%.
Revenue for FY21 primarily decreased due to the impact of the COVID-19 pandemic and the overall slowdown in the auto industry in general and China in particular. However, Tata Technologies has maintained decent RoE and RoCE numbers in the last 5 years and has been debt-free for the previous 2 years.
For the year ended March 31, 2022, Tata Technologies delivered revenue of USD 473.5 M (INR 3529.6 Cr), with an operating profit of USD 86.5 M (INR 645.6 Cr) and PAT of USD 58.0 M (INR 437.0 Cr). It equated to year-on-year growth of 47% in revenue, 65% in operating profit, and 74% in after-tax profit in USD.
In FY22, Tata Technologies’ operating margin was 18.3%, up 200 basis points from the FY21 operating margin of 16.3%, while the cash balance increased from $115 M to $165 M, a 43% increase yearly.
The Services order book increased to $250 million as of 31-Mar-22, a 29% uptick over the Services order book as of 31-Mar-21. Their Days Sales Outstanding (DSO) reduced from 95 days in FY21 to 77 days in FY22.
What made Tata Motors consider Tata Technologies’ IPO?
The Board of Directors gave in-principle approval to sell a portion of its stake in Tata Technologies Ltd through an IPO. Some of the factors driving
- Tata Technology Ltd derives a significant portion of its total revenue from captive accounts such as Jaguar and Land Rover. The non-captive accounts share increased to 64% in FY 2022, up from 46% in FY 2020. As a result, it reduced the over-reliance on captive accounts (TML and JLR) for revenue generation.
- Tata Motors could not build and deliver Jaguar Land Rover vehicles despite high demand due to a shortage of semiconductors.
- Tata Motors posted a net loss of Rs. 945 Crore in Q2, the seventh consecutive quarter of net loss. Tata Motors’ net auto debt, including leases, increased by 19% to Rs. 48,679 crores in 2022.
- Tata Motors has set a lofty goal of achieving near-zero net automotive debt by 2024. It could be accomplished by selling some non-core assets. The proceeds of Tata Technologies IPO are expected to assist the automaker in recouping its losses.
- In 2018, Tata Motors dropped a $360 M deal with Warburg Pincus to sell its 43 % stake in Tata Technologies. The company cited inordinate delays in regulatory approvals from SEBI for dropping the deal.
- Increased emphasis on non-automotive sectors to develop a roadmap to reduce its exposure to the global uncertainties that dominate the auto industry. Changing the revenue mix with an idea to earn consistent revenue in the future.
Forecasting the success of the Tata Technologies IPO is impossible. It would be subject to market volatility, regulatory clearances, statutory approvals, and other critical considerations.
Despite the pandemic’s inflationary pressure and extreme challenges, Tata Technologies has delivered stellar results and piqued investors’ interest. In recent years, Tata Technologies Ltd has served up record revenues, operating profits, and profit after tax (PAT). Not only has the company outgrown its operating margins, but it has also generated significant cash flow.
Tata Technologies’ electric vehicle solutions have helped reduce product development time by almost 30%. Tata Technologies Ltd has garnered many awards and accolades that testify to its ability to withstand global competition. At the Economic Times ET Brand Equity Award for the best B2B Marketing campaign, Tata Technologies Ltd qualified for Gold, which endorses the brand value of Tata Group. Tata Group is India’s most valuable brand. It ranked 86th in the Brand Finance Global 500 list, clocking an impressive 12% jump from the previous year.
Despite the above accomplishments, the future of Tata Technology IPO cannot be predicted with certainty due to geopolitical tensions, interest rate hikes, market volatility, and the ongoing semiconductor crisis.
When will the Tata Technologies IPO launch?
Is Tata Technologies Share Price listed on a Stock exchange?
Read more: About Research and Ranking