Tata Technologies IPO Review

Tata Technologies IPO shall be raising Rs 3,042.51 crore via stake sale, which entirely consists of an offer for sale (OFS) of 6,08,50,278 equity shares with a face value of Rs 2 each. The promoter Tata Motors along with investors Alpha TC Holdings Pte. and Tata Capital Growth Fund I are offloading 11.41%, 2.40% and 1.20% stakes, respectively. Tata Technologies is a global engineering services company which offers product development and digital solutions, including turnkey solutions, to global OEMs and their tier 1 suppliers.

IPO opensNovember 22, 2023
IPO ClosesNovember 24, 2023
IPO Size (Rs.)₹3,042.51 Cr
IPO Size (shares)60,850,278 shares
BreakupEntirely OFS
Face Value:₹ 2/-
IPO Price in Rs :₹475 to ₹500
Minimum Lot30 Shares
Listing AtNSE , BSE
Anchor & QIB Quota50%
NII Quota15%
Retail Quota35%
 Lead ManagerJM Financial, Citigroup Global Markets, BofA Securities
RegistrarLink Intime

About Tata Technologies Limited:

  • The company was incorporated as Core Software Systems Private Limited on August 22, 1994.
  • and, subsequently, changed its name to Tata Technologies Limited.
  • In 2005, it acquired INCAT International plc, a global product solutions and services provider serving the automotive and aerospace industries.
  • In 2017, the company acquired Escenda Engineering AB in Sweden,
  • Company’s primary business line is “Services”, which includes providing outsourced engineering services and digital transformation services to global manufacturing clients helping them conceive, design, develop and deliver better products.
  • They have established strong partnerships and alliances, such as with Dassault, Logility, Siemens Industry Software Inc., Codincity and Fantasyand by availing Microsoft AZURE products/services that augment their efforts and enable them to expand their client reach across verticals and geographies.
  • The company has a global workforce of over 12,451 employees serving global clients from 19 global delivery centers in Asia Pacific, Europe, and North America.
  • The Promoter is Tata Motors Limited.

Financials: Tata Technologies Limited

Particulars / Rs. In crore2023(06) 2022(06) 2023(12) 2022(12) 2021(12) 
Revenue from Operations 2,526.70 1,887.914,414.183,529.58 2,380.91 
Revenue Growth (%) 33.84% – 25.06% 48.24% – 
Adj EBITDA  464.75 372.52 820.93 645.66 385.71 
Adj EBITDA Margin (%) 18.39% 19.73% 18.60% 18.29% 16.20% 
Profit before Tax 466.25 341.30 796.15586.86 315.27 
Profit for the period 351.9259.06 624.04436.99 239.17 
Net Profit Margin (%) 13.93% 13.72% 14.14% 12.38% 10.05% 
Share Capital 81.13 40.57 81.13 41.81 41.81 
Reserves 2,771.99 2,441.32 2,908.34 2,238.36 2,100.35 
Net worth as stated 2,853.13 2,481.88 2,989.47 2,280.16 2,142.15 
EPS – Basic & Diluted (₹)  8.676.3915.38 10.77 5.89 
RONW (%)12.33%10.44% 20.87 19.16% 11.17% 
Net Asset Value (₹) 70.27 61.18 73.65 56.19 52.79 
Post issue Share Capital81.13    
IPO price500.0    
EPS Fy2315.4    
PE Fy2332.5    
EPS Fy24 (annualized)17.3    
PE Fy24  (annualized)28.8    
Market cap in Lacs20,282.5    
Market cap / Sales4.59    

Tata Technologies IPO: Salient Points

  • The offer size was cut from 9.57 crore shares to 6.09 crore shares after Tata Motors sold a 9.9% stake in Tata Technologies to investors. As part of this about a month back, Tata Motors sold 9.99% of its stake in Tata Technologies to TPG Rise Climate SF Pte and Ratan Tata Endowment Foundation at Rs 401.8 a share which is lower than current IPO price. However this is quite a separate case and cannot be viewed wrt. IPO price.
  • Share Holding of promoter, Tata Motors Limited , post the IPO shall stand at 55.39%
  • The global automotive ER&D spend currently stands at USD180bn. This is the largest contributor among manufacturing verticals, amounting to ~10% of the overall ER&D spend.
  • This spending is estimated to register a ~7% CAGR to USD 238 bn by 2026.
  • Tata Technologies service portfolio for the automotive industry addresses the product development, and enterprise-optimization needs of traditional OEMs and new energy vehicle companies well as with their associated supply chain
  • Tata Technologies creates value for customers by assisting them in the development of products that are safer, cleaner and improve the quality of life for the end customers.
  • Tata Technologies which has deep domain expertise in automotive industry, has gained expertise to serve clients in adjacent industries like aeerospace, transportation and heavy construction machinery.
  • Automotive accounts for (75% of the revenue. Rest is contributed by Aerospace, transportation and construction heavy machinery.
  • % of revenue from Top 5 clients is around 60%.
  • % of Revenue from Operations attributable to new energy vehicle companies has hovered from 20-30%.
  • Majority of their existing master service agreements with the Top 5 Clients are fixed term typically ranging from 3 to 5 years (with an option to renew or extend such term).
  • Revenues in Foreign Currencies has been around 75% of the revenues demonstrating a good geographical spread. Revenue by end market geography is depicted below:
  • Peers: Listed peers as per RHP
CompanyCMP (Rs.)Revenue (In Cr.)PAT (In Cr.)NPMP/EMcap ( cr.)Mcap/sales
Tata Technologies5004,41462414.1%32.520,2834.6
KPIT Technologies1,5373,36538711.5%86.242,12612.5
L&T Technology Services4,5968,0141,17414.6%38.248,5776.1
Tata Elxsi Limited8,4233,14575524.0%66.852,45716.7
  • Tata Technologies has grown at a faster pace than Tata Elxsi, L&T Technologies, and KPIT
  • A substantial portion of their revenues is generated from repeat business, which they define as revenues from a client who also contributed to the revenues during the prior fiscal year.
  • New-energy companies are increasing ER&D spend as they focus on producing next-generation EVs and accelerating time to market while trying to gain market share over traditional OEMs. Owing to their nascent maturity, new-energy players face challenges around prototyping, manufacturing, and production roadmaps, and therefore look to leverage the ESP (Engineering service provider) ecosystem for turnkey full-vehicle programs.
  • New-energy OEMs also face the challenge of limited third-party platform development capabilities globally requiring support from experienced ESPs (Engineering service provider) like Tata Technologies.
  • They have also recently been empaneled by Airbus which is expected to become a good avenue of growth.
  • The company’s revenue and PAT have grown at a CAGR of 36% and 62%, respectively, from FY21- FY23.
  • Tata Technologies revenue breakdown as of FY23 is ~80% from services, 11% from products, and 9% from education vertical.
  • The company through its globally distributed execution model, is in a position to leverage the skills and capabilities of its employees worldwide, ensuring balance between onshore client proximity and offshore efficiency and thus provide added value to the clients.
  • Tata Technologies is a pure-play manufacturing focused ER&D company, with major focus on the automotive industry. It is engaged with seven out of the top 10 automotive ER&D players and five out of the 10 prominent new energy ER&D players in 2022.
  • Tata Technologies IPO is coming at a PE ratio of 32.5 (FY23) and 28.8x (FY24 annualized on H1FY24 results).
  • I intend to apply in Tata Technologies IPO. Company has strong lineage, excellent global spread and has deep domain expertise in the automotive industry and can leverage this expertise to serve clients in adjacent industries.
  • GMP as reported on social media is around Rs. 350.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also in past, I cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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