Tata Technologies IPO: A Gamechanger for Tata Motors

After almost two decades, a Tata group company is all set to test the Indian public markets. Tata Motors subsidiary Tata Technologies has filed its draft red herring prospectus (DRHP) with market regulator Securities and Exchange Board of India (SEBI) for an initial public offering (IPO). Sources estimated the IPO size at around Rs 4,000 crore.

 

 

Tata Technologies IPO: A Gamechanger for Tata Motors

This move comes at a crucial time for Tata Motors, as the company is looking to make a strong push into the electric vehicle (EV) segment. Tata Motors has committed to spending $1.8 billion in the EV segment during 2022-27, and the capital raised from the Tata Technologies IPO will go a long way in funding these growth plans. The IPO will also allow Tata Motors to lighten its debt burden, which has been a major concern for the company in recent years.

 

Tata Motors has struggled financially in the last few years due to losses at its Jaguar Land Rover (JLR) unit and the poor financial performance of its domestic business. The company reported a net loss on a consolidated basis in the last four consecutive years since 2018-19. The trend has continued in the current fiscal. Tata Motors reported a consolidated net loss of Rs 3051.3 crore during the first nine months of FY23. A partial monetization of its equity stake in Tata Technologies will improve Tata Motors’ finances, and is expected to be a game-changer for the company.

Tata Technologies is a global engineering services company, that provides product development and digital services to original equipment manufacturers. The company operates in key verticals such as auto including EVs, aerospace, transport, and construction. The company’s revenue from operations for the nine-month period ended December 31, 2022, and December 31, 2021, was Rs 3011.79 crore and Rs 2607.3 crore, respectively. The number of employees at the company has also grown significantly, from 8,620 as of March 31, 2020, to 11,081 as of December 31, 2022.

 

 

Tata Technologies’ proposed IPO will involve the secondary sale of up to 95.7 million shares, constituting 23.6 percent of the company. Promoter Tata Motors is offloading 81.1 million shares (20 percent stake), Alpha Tata Capital Holdings will sell 9.7 million shares (2.4 percent stake), and Tata Capital Growth Fund another 4.9 million shares (1.2 percent stake).

The IPO size is estimated to be around Rs 4,000 crore, and the proceeds from the IPO will be used to fund Tata Technologies’ growth plans and lighten the debt burden of Tata Motors. The IPO will also be of significance to Tata Motors, as it looks to make a strong push into the EV segment and cement its position as a key player in the Indian auto industry.

The timing of the Tata Technologies IPO is also crucial, as the engineering and product development space has been growing at a fast pace. The global ER&D (engineering, research, and development) spending for 2021 was approximately $1.64 trillion and is expected to grow to approximately $2.28-2.33 trillion by 2025. The ER&D spend outsourced to third-party service providers reached $85-$90 billion in 2021 and is anticipated to grow at a 10-12% CAGR between 2021 and 2025, according to a Zinnov report mentioned in the firm’s red herring prospectus.

Tata Technologies’ IPO comes at a time when the Indian stock market is witnessing a surge in investor interest. The market has been on a record-breaking run, and many companies are lining up to tap into this positive sentiment by going public. A series of successful IPOs over the past year has made the Indian public markets more attractive to investors, and many are now looking for the next big opportunity.

For Tata Technologies, the IPO will provide much-needed capital to fund its growth plans and reduce its debt burden. The company has been investing heavily in new technologies such as electric vehicles and digital services, and the IPO will allow it to accelerate these efforts. Additionally, the IPO will help Tata Motors, which has been struggling financially due to losses at its Jaguar Land Rover unit and poor performance in its domestic business.

The IPO will also be of interest to investors, who will be looking to invest in a company with strong growth potential and a solid track record. Tata Technologies has a strong customer base and a diversified portfolio of services, which makes it an attractive investment opportunity. Additionally, the engineering and product development space is growing at a fast pace, which bodes well for the company’s future prospects.

 

 

The Tata company’s management team, led by Warren Harris, has a strong track record of delivering results, and investors will be looking to see this trend continue after the IPO. The Tata company has a strong focus on innovation and has been investing heavily in new technologies such as electric vehicles and digital services. This puts it in a good position to capitalize on the growing demand for these services in the global market.

In conclusion, Tata Technologies’ IPO is a significant event for the Tata group and the Indian stock market. The Tata company has a strong track record of delivering results and a diversified portfolio of services, which makes it an attractive investment opportunity. Additionally, the IPO will provide much-needed capital to fund the company’s growth plans and reduce its debt burden. The engineering and product development space is growing at a fast pace, which bodes well for the company’s future prospects. Investors will be looking to invest in a company with strong growth potential and a solid track record, and Tata Technologies appears to fit the bill.

 Tata Technologies operates in a highly competitive space, with global players such as Accenture, Wipro, and Infosys also vying for a share of the market.

 

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