Tata Technologies IPO is one of the biggest buzzing at Dalal Street. As the Tata Group is gearing up for an initial stake sale after almost two decades, its first issue after TCS.
One of Dalal Street’s biggest buzzes is the Tata Technologies IPO. A few wealthy investors acquired shares in the soon-to-be-IPO Tata Consultancy Services Ltd (TCS), the software exporter, as the Tata Group prepared for its first issue nearly twenty years later—the initial stake sale.
At a price of Rs 401.81 per share, or Rs 1,467 crore, TPG Rise Climate SF acquired 3,65,09,794 equity shares, or 9% of Tata Technologies IPO, on October 25, 2023. At the same issue price, Ratan Tata Endowment Foundation, the company’s charitable arm, also purchased 36.51,390 equity shares, or 0.90 percent of the total value, valued at Rs 1,467.16 crore.
In the two transactions listed above, Tata Motors, the promoter, sold its shares. Less than a month before the IPO opened for bidding, TPG Rise Climate SF and Ratan Tata Endowment Foundation purchased shares at a discount of roughly 20% from the upper range of the IPO price for the issue, which was Rs 475-500 per share.
As part of the arrangement, TMF Business Services also gave Tata Motors Finance Ltd 81,19,920 shares. In the IPO, which is essentially an offer for sale of up to 6,08,50,278 equity shares with a face value of Rs 2 each, the promoter company, Tata Motors, is also selling 4,62,75,000 equity shares.
Given that the company is selling its shares within the specified price range, Tata Technologies is expected to raise approximately Rs 3,042.5 crore through its initial stake sale. Tata Technologies is expected to have a market capitalization of roughly Rs 20,300 crore at the upper price band (Rs 500). Additionally taking part in the OFS are Tata Capital Growth Fund-I (48,58,425 shares) and Alpha TC Holdings (97,16,853 shares).
Tata Motors’ weighted average cost of acquisition per share among the selling shareholders was Rs 7.4. At the upper end of the price range, the promoter stands to gain approximately 68 times on the IPO. At an average price of Rs 25.10 per share, Alpha TC Holdings and Tata Capital Growth Fund-I purchased shares and will make a profit of 2o times by selling their stake.
Tata Tech is a $547 million revenue mid-size ER&D services company that focuses on verticals like automotive and aero. It provides turnkey solutions for combustion and electric powertrain vehicle development and has established long-term partnerships with anchor clients. According to a note from Anand Rathi Research, it provides after-sales solutions with 19 delivery centers and lower manufacturing costs.
The automotive industry has a growing need for technology-enabled skills due to the increased adoption of digital. It is anticipated that this will lead to opportunities for outsourcing to close the skill gap. Companies aim to fully outsource body engineering segments to outside service providers as they concentrate on autonomous, connected, electrification, and shared initiatives, according to Anand Rathi.
Moreover, body engineering—which accounts for over 40% of addressed spending—offers ESPs the biggest opportunity. The fastest-growing subsegment in the addressed market is predicted to be hybrid and electric mobility, with businesses aiming to collaborate with ESPs that have full-body EV capabilities,” it continued.
For the six months that ended on September 30, 2023, Tata Technologies IPO reported total revenue of Rs 2,587.42 crore and a net profit of Rs 351.90 crore. For the fiscal year that concluded on March 31, 2023, the company recorded revenue of Rs 4,501.93 crore and a net profit of Rs 624.04 crore.
Tata Tech has set aside 20,28,342 shares for qualified staff members, and 60,85,027 shares, or 10% of the offer, have been set aside for Tata Motors shareholders. Qualified institutional bidders will receive half of the net offer, with retail and non-institutional investors receiving 35% and 15% of the offer, respectively.
