Introduction: A New Era in Tech and Automotive
Tata Technologies, a significant subsidiary of Tata Motors, is ushering in a new chapter in the Indian financial market with its much-anticipated Initial Public Offering (IPO). Scheduled to open on November 22, 2023, and closing on November 24, 2023, this landmark IPO aims to raise a substantial Rs 3,042.51 crore at the upper price band, marking a significant step in the company’s journey.
What is an IPO? Understanding the Process
An IPO is a process where a company offers its shares to the public for the first time. It involves several critical steps, starting with the company reaching out to underwriters, who play a pivotal role in researching, marketing, and issuing the shares. For a company to launch an IPO in India, it must fulfil certain eligibility criteria including a consistent financial track record, minimum net worth, sufficient net tangible assets, average operating profits, regulatory compliance, minimum paid-up capital, and dematerialization of shares. These requirements ensure that only financially stable and compliant companies access the public markets for fundraising.
Tata Technologies IPO: A Closer Look
Tata Motors plans to offload 4.62 crore equity shares in this IPO, with Alpha TC Holdings Pte Ltd and Tata Capital Growth Fund I also selling shares. The IPO also sets aside shares for Tata Motors’ employees and shareholders, with the net issue becoming evident post these reservations. A critical aspect of this IPO is the anchor book, scheduled to open a day before the subscription period.
In terms of investment mechanics, the IPO allows bids for a minimum of 30 equity shares, and in multiples of 300 thereafter. This structure means the minimum investment for retail investors starts at Rs 14,250, based on the lower price band, and increases to Rs 15,000 at the upper price band.
Company Profile: Tata Technologies
Tata Technologies stands out as a global engineering services firm, specializing in product development and digital solutions, primarily catering to the automotive industry. It offers turnkey solutions to global original equipment manufacturers (OEMs) and their tier 1 suppliers. The company is also notable for its ‘phygital’ education solutions in manufacturing skills, encompassing upskilling and reskilling in the latest engineering and manufacturing technologies.
Financial Performance
The company has shown robust financial performance with a 42.8 percent year-on-year growth in consolidated net profit at Rs 624 crore for the year ended March 2023. Its revenue from operations during the same period witnessed a 25 percent increase, reaching Rs 4,414.2 crore. For the six-month period ending September FY24, the company continued its growth trajectory with a 36 percent increase in profit and a 34 percent rise in revenue compared to the year-ago period.
Management and Risks
The IPO is managed by seasoned book-running lead managers including Jm Financial, Citigroup Global Markets India, and Bofa Securities India, with Link Intime India as the registrar. However, potential investors should be aware of risks such as revenue concentration in top customers like Tata Motors Limited and Jaguar Land Rover, and dependence on the automotive sector. The company’s expectation of significant future revenue from new energy vehicle companies, many of which might be startups, adds to the uncertainty.
Post-IPO Trading and Opportunities
The conclusion of the IPO will see Tata Technologies’ shares traded on stock exchanges from December 5, marking a new phase of growth in technology and engineering services.
A Strategic Opportunity in the Making
The Tata Technologies IPO represents not just a significant financial event but also a strategic opportunity in the evolving landscape of technology and engineering. With its strong financial performance, robust management, and promising business model, the IPO is poised to be a noteworthy addition to the Indian stock market. Investors, guided by prudent advice and a focus on long-term potential, have a unique opportunity to participate in the growth story of a company at the forefront of engineering and technological innovation.
Investment Advisory by Savart
Savart’s investment advisory recommends a cautious approach to the Tata Technologies IPO. Given the TATA Group’s pedigree and the business potential of Tata Technologies, the advisory firm is optimistic about the IPO’s prospects. Savart advises focusing on the long-term potential of the business rather than short-term listing gains. For long-term investors, there is no rush to invest, as ample opportunities will be available post-listing. SavartX subscribers seeking detailed recommendations can contact the firm directly.
