After a gap of nearly 20 years, Tata Group is coming up with another initial public offering (IPO). The group recently received the nod for the launch of Tata Technologies IPO. This will be the first IPO from Tata Group since Tata Consultancy Services (TCS), which got listed on NSE, and BSE in 2004
Tata Technologies IPO got the go-ahead from capital markets regulator SEBI last month. The Tata Group company had filed public offer papers with SEBI in March this year, according to which its IPO was purely an offer for sale (OFS). Its shareholders will reportedly offload up to 9.57 crore units representing 23.60% of its paid-up share capital. Upon listing, Tata Technologies will join the other 28 listed Tata group companies
Tata Motors holds a 74.69% stake in Tata Technologies. Under the OFS, Tata Technologies' parent company Tata Motors will offload 8.11 crore shares or a 20% stake in the company through the IPO. JM Financial Limited, Citigroup Global Markets India Private Limited, and BofA Securities India Limited are the book-running lead managers to the issue
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A pure-play engineering services company with a revenue scale of $500 million, Tata Technologies is engaged in manufacturing-led verticals such as automotive, aerospace, and transportation & construction Heavy Machinery (TCHM). It was acquired by Tata Group in 2001. KPIT Technologies, Tata Elxsi, L&T Technology Services, and Cyient are some of the peers of Tata Technologies
Even though Tata Technologies IPO price band is yet to be announced by the company, market experts believe that it may be priced around Rs 268. Comparing Tata Technologies with Cyient, Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio, said, "Cyient is trading at 23.5x TTM EPS of Rs 46.52. We have valued Tata Technologies at a 10% discount to the multiple assigned to Cyient at 21.2x TTM EPS to arrive at an intrinsic value of Rs 268 per share, which results in market capitalization of Tata Technologies of Rs 10,852 crore."
There has also been a buzz that Tata Technologies' IPO price band may also be either in Rs 450-500 or Rs 700-800 range. While the size of the IPO hasn’t been disclosed yet, a media report cited Krishna Raghavan, Founder, UnlistedKart, saying that Tata Technologies' recent buyback valued the Tata Group company at Rs 16,080 crore, indicating that the IPO size could be at least Rs 3,800 – Rs 4,000 crore
Though Tata group company is yet to announce Tata Technologies IPO date of opening and price band, Tata Technologies shares are available in the unlisted stock market. "The unlisted shares of Tata Technologies are currently scaling new heights in the unlisted market, commanding a remarkable value of Rs 1,050 per share. This stellar performance has translated into an impressive 10x return over the span of three years," said Abhay Doshi, Co-Founder of UnlistedArena.com
"With market expectations for an impending IPO, there is a buzz surrounding the probable price band, which depends upon the company's assessment. Drawing insights from its closely listed peer, KPIT Tech, which has been exhibiting robust performance and trades at approximately ~68x P/E, Tata Technologies' unlisted shares are also at similar valuations in the unlisted market. Considering the investor-friendly reputation of the Tata Group, it is possible that the IPO's price band may be set at a level lower than the current rates in the unlisted market keeping enough on the table for investors," Abhay Doshi told Business Today
As per the grey market observers, shares of Tata Technologies are commanding a firm grey market premium today. Tata Technologies IPO GMP today is Rs 100, which was Rs 84 on last weekend. This means that the grey market has gone bullish on Tata Technologies IPO as GMP surged from Rs 84 to Rs 100 in a week
In FY22, Tata Technologies reported a net profit of Rs 436.99 crore, and a total revenue of Rs 3,578.38. Its net profit for the April-December period of FY23 was Rs 407.47 crore and revenue during the period stood at Rs 3,052.30 crore. On a 9MFY23 basis, the company has reported overall relatively low revenue growth, low margin expansion, and higher attrition, B&K Securities said in a note
Revenue growth for Tata Technologies has been decent in the last three years, as the company grew at a CAGR of 8.6% (FY20-22). KPIT Tech, LTTS and Tata Elxsi grew at a compounded annual growth rate of 4%, 5.8%, and 21.2%, respectively, in the same period, said B&K Securities, adding that the company reported an EBIT margin of 15.9% in FY22 and 16.9% in M9FY23, which has expanded by 3% from 13% in FY20
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