The Initial Public Offering (IPO) of Tata Technologies Ltd. will open for subscription for the public investors on November 22 and close on November 24, 2023, its parent company Tata Motors Ltd. said in an exchange filing.

Share Market Live

NSE

The IPO will be a pure Offer for Sale (OFS), which means that the company will not receive any proceeds from this issue.

Existing shareholders like Alpha TC Holdings Pte. Ltd., and Tata Capital Growth Fund I, will be selling up to 2.4% and 1.2% stake in the company respectively. Tata Motors, the parent company, will be selling 4.62 crore shares or 11.41% of its total holding in the company. The number of shares sold by Tata Motors are almost half of the 8.1 crore shares it initially planned to sell as per its Draft Red Herring Prospectus (DRHP).

10% of the IPO will be reservd for shareholders of Tata Motors, including individuals and Hindu Undivided Families (HUF).

While Tata Motors had acquired its stake at ₹7.4 per share, Alpha TC Holdings and Tata Capital Growth Fund had acquired their respective stakes at ₹25.1 per share. As per the company's annual report of 2022, Tata Motors held a 74.42% stake in Tata Technologies.

Price band of the IPO is yet to be determined.

Tata Technologies will be the first Tata Group IPO in nearly two decades after Tata Consultancy Services (TCS).

Last month, the company had announced the sale of a 9.9% stake in the Dalal Street-bound company to TPG Rise Climate for ₹1,613.7 crore. This ascribed an equity valuation of ₹16,300 crore for Tata Technologies.

About The Company

Tata Technologies is a global engineering services company that offers product development and digital solutions, including turnkey solutions to global OEMs and their tier-I suppliers globally.

It has over 9,300 employees and JLR and Tata Motors as its captive clients. For the financial year 2022, the company reported revenue growth of 46 percent, the strongest in its history.

The company also offers its services to adjacent industries like aerospace, transportation and construction heavy machinery industries.

Tata Technologies reported its highest ever revenue growth of 46 percent year-on-year for the previous financial year.

For the first nine months of the current financial year, the company's revenue and net profit has grown in double-digits compared to the same period last year. Operating margin has also seen expansion of nearly 300 basis points to 19.2 percent.

Risk Factors

Here are some of the key risk factors highlighted by Tata Technologies in its Prospects:

Client Concentration

Most of the company's revenue comes from its top five clients, or anchor clients in particular. A significant portion of the top five also comes from a client called VinFast, who has been a client since 2018. Most of the master service agreements with the top five clients typically range between 3-5 years.

Anchor clients - or Tata Motors and Jaguar Land Rover contributed nearly 40 percent to the services revenue of Tata Technologies for the nine-months period of the current financial year. The number during the same period last year stood at 42.76 percent.

A loss of any of the top five clients or a deterioration in their financial position could result in a substantial loss of revenue for the company, according to its DRHP.

Foray Into Education Business

Tata Technologies has expanded its offerings in the education business through the iGetIT platform by upskilling and reskilling the latest engineering and manufacturing technologies to public and private sector academic institutions through curriculum development and competency center offerings.

The company cites expansion into enterprise customers as the rationale behind this foray. Majority of their current projects are with various state governments and public universities.

"Although we try to receive all or a substantial portion of our fees upfront, we may not be successful and may still be exposed to a counterparty default risk with government institutions," the company wrote in its DRHP.

Rupee Exposure

Nearly three-quarters of Tata Technologies' revenue comes from other currencies like the US Dollar, British Pound, Yuan, Euro, Singapore Dollar and the Swedish Krona. For the first nine months of last year, the figure stood at 65.1 percent.

First Published:Nov 14, 2023 5:27 PM IST