Tata Technologies IPO: The much-anticipated initial public offering (IPO) of the Tata Group is slated to begin accepting subscriptions today (November 22, 2023). The first IPO from the group firm in nearly 20 years, Tata Technologies, has gripped the pulse on D-Street. Tata Consultancy Services (TCS) was the Tata Group's most recent initial public offering (IPO), which debuted on the stock exchanges in 2004.
Tata Technologies IPO: The much-anticipated initial public offering (IPO) of the Tata Group is slated to begin accepting subscriptions today (November 22, 2023). The first IPO from the group firm in nearly 20 years, Tata Technologies, has gripped the pulse on D-Street. Tata Consultancy Services (TCS) was the Tata Group's most recent first public offering (IPO) to be listed on the stock exchanges in 2004.
Among the five mainboard IPOs to be issued this week, the global engineering and information technology (IT) services firm has earned the highest grey market premium (GMP). On November 21, Tata Technologies' IPO raised Rs. 791 crore from 67 investors through the anchor book.
Tata Technologies, a Tata Motors subsidiary, is a pure-play manufacturing Engineering Research & Development (ER&D) firm largely focused on the automobile industry. Tata Investment Corporation, which owns 0.33 percent of Tata Motors as of September 30, is a promoter group entity.
Brokerages and market experts have been optimistic about the public offering, with largely optimistic subscription and listing projections, but some have also noted a few business dangers. Let's look at what analysts are saying about the IPO and why it has become the buzz on Wall Street:
Why are analysts optimistic about Tata Technologies' IPO subscription?
Tata Technologies intends to raise 3,042.51 crore through the IPO, which is wholly comprised of an offer for sale (OFS) of 6.09 crore equity shares by the promoter and investors. Tata Technologies' OFS includes up to 60,850,278 shares sold by promoter Tata Motors Ltd, up to 9,716,853 shares sold by investor Alpha TC Holdings, and up to 4,858,425 Equity Shares sold by Tata Capital Growth Fund I.
''As a pure OFS, the Tata Technologies IPO's goal is not to raise funds to invest in the company's future growth. With the automotive sector accounting for more than two-thirds of revenues and the top five clients accounting for more than half of sales, the company faces business concentration risk,'' Sunil Shah, Director at Kambatta Securities, told LiveMint.
''However, a sizable portion of revenue comes from Tata Motors and Jaguar Land Rover, who are essentially captive clients for Tata Technologies. On the plus side, the company has deep domain experience in automotive, which it uses to serve allied sectors such as aviation,'' Shah added.
Tata Technologies provides worldwide original equipment manufacturers (OEMs) and their tier-1 suppliers with product development and digital solutions, including turnkey solutions. The company has set the price range for the IPO at $475 to $500 per equity share with a face value of $2. The IPO's three-day bidding period will conclude on November 24.
Analysts also believe that the company's business model and excellent financials will drive significant investor interest in the issue. Brokers emphasised that the issue is reasonably priced in comparison to industry peers.
''We enjoy the company's strong established brand and diversified product range across many product categories, ranging from classic OEMs to new age energy vehicles...We believe that the outsourcing business model would be in high demand in the future for engineering services and digital transformation services to global manufacturing clients, assisting clients in delivering superior goods,'' said Prashanth Tapse, Research Analyst, Sr VP Research, Mehta Equities Ltd.
Looking at the financials, Tata Tech has generated significant revenue and margin growth over the last three years and expects the growth to continue...The issue is asking for a market cap of 20,283 crore with a consolidated P/E of 29x, which appears to be attractively priced when compared to industry peers trading at 60x,'' observed Tapse.
When it comes to investors, various brokerages and market professionals have stated that Tata Technologies' IPO is "investor-friendly." Despite a 100% OFS, most retail investors indicated that the Tata brand name was enough for them to put their trust in the much-anticipated issuance.
