Tata Technologies IPO: 10 Things to Before Subscribing
Are you eyeing the impending IPO of Tata Technologies? The buzz surrounding its initial public offering, set to open on November 22, has been palpable. With an aim to raise a substantial Rs 3,042.51 crore through a public issue at the upper price band, this long-anticipated move by the Tata Motors subsidiary has piqued the interest of investors far and wide.
Before diving headfirst into the subscription process, it's prudent to delve deeper into the finer details. This blog aims to equip you with the essential insights necessary to make an informed decision regarding your potential investment in Tata Technologies. Here are ten crucial aspects to consider before taking the plunge into this significant IPO.
10 key things to know before subscribing to the offer
IPO Dates: The IPO subscription window for Tata Technologies opens its doors to investors from November 22, 2023, and remains accessible until November 24, 2023.
Price Band: Investors are offered shares in the price range of Rs 475-500 per share, showcasing the company's valuation at Rs 20,283 crore at the higher price band.
Offer Details: Tata Tech's objective is to raise Rs 3,042.51 crore through an offer-for-sale (OFS) mechanism. This offering primarily involves the sale of equity shares by promoters and investors. Tata Motors, the primary promoter, plans to offload 4.62 crore equity shares valued at Rs 2,314 crore. Other significant sellers include investors such as Alpha TC Holdings Pte Ltd (selling 97.17 lakh shares worth Rs 486 crore) and Tata Capital Growth Fund I (offloading 49 lakh shares worth Rs 243 crore). Additionally, a portion of shares is reserved for employees and shareholders of Tata Motors.
Objectives of Issue: Notably, the proceeds generated from the OFS won't contribute to Tata Technologies' capital. Instead, all proceeds will directly benefit the selling shareholders.
Lot Size: Interested investors can bid for a minimum of 30 equity shares and subsequently in multiples of 300 shares. This implies a minimum investment of Rs 14,250 (at Rs 475 per share) for retail investors. At the upper price band, the investment rises to Rs 15,000.
Company Profile: Positioned as a global engineering services provider within the Tata Motors umbrella, Tata Technologies specializes in offering comprehensive solutions for product development, digital innovations, and engineering services focused on the automotive industry. Notably, the company's educational arm plays a pivotal role in providing advanced manufacturing skills and training through its iGetIT platform.
Financials: Demonstrating robust performance, Tata Technologies reported a noteworthy 42.8% year-on-year growth in consolidated net profit, reaching Rs 624 crore for the fiscal year ending in March 2023. Additionally, their revenue from operations surged by 25% to Rs 4,414.2 crore during the same period. The subsequent six-month period ending September FY24 showcased a 36% increase in profits to Rs 351.9 crore and a 34% rise in revenue to Rs 2,526.7 crore compared to the previous year.
Lead Managers: Steering this IPO are esteemed book-running lead managers, including Jm Financial, Citigroup Global Markets India, and Bofa Securities India. Meanwhile, Link Intime India is entrusted with the role of the registrar.
Client Concentration Risk: Tata Technologies relies significantly on its top clients, namely Tata Motors Limited (TML) and Jaguar Land Rover (JLR), which collectively contribute about 40% of the company's Total Operating Income (TOI). This reliance poses a substantial risk; any adverse impact or potential loss of these major clients could significantly impact the company's revenue stream.
Dependency on Automotive Segment: The company's revenue streams are heavily reliant on clients within the automotive sector. This concentration presents vulnerability to the cyclicality and challenges specific to this industry, potentially impacting Tata Technologies' financial performance.
Exposure to New Energy Vehicle Companies: Anticipating a considerable portion of future revenue from new energy vehicle companies, many of which are startups, introduces uncertainties. Factors such as their funding plans, product roadmaps, growth management capabilities, creditworthiness, and potential ownership changes could have adverse effects on Tata Technologies' business projections.
Historical and Potential Negative Cash Flows: Tata Technologies has experienced negative cash flows in the past and may continue facing similar situations in the future. This ongoing negative cash flow might strain the company's liquidity, impacting its capacity to fund operations and manage overall business functions.
Listing Date: The anticipated commencement of trading for Tata Technologies’ shares on the stock exchanges is scheduled for December 5, post the IPO timeline.
Also read: Best Value Stocks in India 2023
The Bottom Line
The Tata Technologies IPO beckons with potential, but caution is essential. While the company's strengths shine through robust financials and innovative ventures, risks loom—client concentration, sector dependency, and cash flow concerns. Investors must weigh these intricacies against growth prospects. Diligence and informed decisions will be key amidst this IPO excitement. Understanding nuances, assessing risk tolerance, and aligning investment goals are crucial steps. The IPO offers promise, but informed choice remains pivotal for a rewarding investment journey.
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