Introduction
Tata Technologies Ltd., a global engineering services company, is set to make its initial public offering (IPO) on November 22, 2023. The IPO will be a pure Offer for Sale (OFS), meaning that the company will not receive any proceeds from the 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.
Company Overview
Tata Technologies is a global engineering services leader that offers product development and digital solutions to global OEMs and their tier-I suppliers across the automotive, aerospace, transportation and construction industries. The company has over 9,300 employees and JLR and Tata Motors as its captive clients.
Tata Technologies has a strong track record of growth and profitability. For the financial year 2022, the company reported revenue growth of 46 percent, the strongest in its history. The company also reported its highest ever revenue growth of 46 percent year-on-year for the previous financial year.
IPO Details
The price band of the IPO is yet to be determined. However, the company has raised ₹1,613.7 crore from TPG Rise Climate at a valuation of ₹16,300 crore.
Key Risk Factors
Some of the key risk factors highlighted by Tata Technologies in its DRHP include:
Client concentration: Most of the company’s revenue comes from its top five clients. 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.
Foray into education business: The company has expanded its offerings in the education business through the iGetIT platform. However, the company may be exposed to a counterparty default risk with government institutions.
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. Any adverse movement in these currencies could have a negative impact on the company’s financial performance.
Investment Rationale
Tata Technologies is a well-established global engineering services company with a strong track record of growth and profitability. The company is well-positioned to benefit from the growing demand for engineering services from global OEMs. However, investors should be aware of the key risk factors highlighted above before investing in the company’s IPO.
Conclusion
The Tata Technologies IPO is a significant event for the Indian capital markets. It is the first Tata Group IPO in nearly two decades after Tata Consultancy Services (TCS). The IPO is likely to attract strong investor interest due to the company’s strong track record and its position in the growing engineering services market. However, investors should be aware of the key risk factors highlighted above before investing in the company’s IPO.
Additional Information
Here is some additional information about the Tata Technologies IPO:
The IPO will be open for subscription from November 22 to November 24, 2023.
The price band of the IPO is yet to be determined.
The IPO will be managed by Axis Capital, BofA Securities, Citigroup, ICICI Securities, J.P. Morgan Securities, and Kotak Mahindra Capital Company.
10% of the IPO will be reserved for shareholders of Tata Motors, including individuals and Hindu Undivided Families (HUF).
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Investors should consult with a qualified financial advisor before making any investment decisions.