Company Details:

Tata Technologies Limited (TTL) is a global product engineering and digital services company founded in 1989.

A subsidiary of Tata Motors, that specializes in engineering services.

They provide innovative product development and digital engineering solutions, with a particular focus on manufacturing industries. Their expertise and technological advancements have earned them a strong reputation in the field.

Initially a business unit of Tata Motors, it became an independent entity headquartered in Singapore in 1994 and expanded operations in India in 1996.

It helps global OEMs and partners in

-Automotive,
-Industrial machinery,
-Aerospace, and
-Related industries to engineer and manufacture better products and improve business efficiencies.

The company has over 7,900 employees and major offices in 17 countries, serving more than 5,000 clients worldwide.

Additionally, Tata Technologies is ranked as the 15th-largest IT company in the Fortune India Infotech Industry ranking.

Business Overview

Tata Technologies specializes in product engineering and manufacturing engineering within the mechanical domain, with a particular focus on areas such as body engineering.

Additionally, the company is expanding its capabilities in software and embedded engineering, aligning itself with the expertise of peers like KPIT Tech, Tata Elxsi, and L&T Tech Services.

By enhancing its offerings in these segments, Tata Technologies aims to stay competitive and cater to the growing demand for software-driven solutions in the engineering services industry.

This strategic focus allows the company to tap into diverse markets and leverage its expertise across multiple domains, positioning itself as a comprehensive engineering solutions provider.

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IPO Issue Details:

-The IPO is an offer for sale (OFS) with no fresh issuance of shares by the company.

-The offer includes up to 9.57 crore equity shares, representing 23.60% of its paid-up share capital.

-The exact size of the IPO has not been disclosed, but experts estimate it to be around Rs 3,800 crore based on the recent buyback

valuation.

-Tata Technologies’ recent buyback valued the company at Rs 16,080 crore.

Objectives of the OFS:

-The company will not receive any proceeds from the OFS; it will go to the selling shareholders.

-After deducting offer-related expenses and taxes, each selling shareholder will receive their respective proportion of the proceeds.

Selling Shareholders:

-Tata Motors, the parent company of Tata Technologies, will offload 8.11 crore shares, representing a 20% stake.

-Alpha TC Holdings Pte plans to sell up to 97.16 lakh shares (2.40%).

-Tata Capital Growth Fund Inc. would offload up to 48.58 lakh equity shares (1.20%).

Offer Structure:

-50% of the IPO shares are reserved for qualified institutional buyers (QIBs).
-35% of the shares are reserved for retail investors.
-15% of the shares are reserved for non-institutional investors.

Company’s Financials: ( As per DRHP )

Revenue Growth:

For the nine months ended December 2022, the company reported revenue from operations of Rs 3,011.79 crore, compared to Rs 2,607.30 crore for the nine months ended December 2021. This represents a growth of 15.5% in revenue.

Net Profit:

The net profit for the 9MFY23 period stood at Rs 407.47 crore, while it was Rs 331.36 crore for the 9MFY22 period. This indicates an increase in net profit.

Adjusted EBITDA Margins:

The company’s Adjusted EBITDA margins have shown consistent growth over the years. In FY20, the margin was 16.50%, and it increased to 19.20% in the 9MFY23 period.

Why Tata Motors share is surging?

 
Tata Motors shares have experienced a significant increase of more than 35% since Tata Technologies filed a Draft Red Herring Prospectus (DRHP) for its initial public offering (IPO).

The surge in share price can be attributed to market expectations that the IPO will strengthen Tata Motors’ balance sheet and bring substantial benefits to the company.

According to market experts mentioned in the Bloomberg article, the uptrend in Tata Motors shares is likely to continue following the launch of the Tata Technologies IPO.

Tata Technologies IPO contains shareholding of Tata Motors and the auto major is offering its shares for sale in this public issue, which is a 100 percent offer for sale (OFS). This means the net proceeds of Tata Technologies IPO will strengthen the balance sheet of Tata Motors instead of Tata Technologies.

According to the report, Tata Motors will improve its financial position and reduce debt by selling its equity stake in Tata Technologies. Tata Motors has invested a total of Rs 224.1 crore in Tata Technologies.

Under the IPO, Tata Motors intends to sell 81,133,706 shares of its subsidiary.

Tata Motors had acquired Tata Technologies shares at a price of Rs 7.40 apiece (as mentioned in the DRHP), whereas Tata Technologies’ share price is quoting around Rs 850 per share in the unlisted stock market.

So, the market is expecting huge monetary benefits for Tata Motors from this upcoming IPO of Tata Technologies.

Both the primary and secondary markets are optimistic about the Tata Technologies IPO due to the strong brand image associated with the Tata group. This positive sentiment is expected to translate into a successful public offering. To learn more about stock market basics and stock analysis one can consider enrolling in our Stock Market Learning Courses, here.

Key Parameters of Tata Motors