The Tata Group has come up with an initial public offering (IPO) almost twenty years after its flagship company Tata Consultancy Services (TCS) debuted on the bourses in 2004. It is planning to list Tata Technologies, a unit of carmaker Tata Motors, according to draft papers submitted to the market regulator.
Tata Technologies provides engineering and product development digital services and its IPO does not involve a fresh issue of shares. Instead, its promoter Tata Motors which has a 74.69% stake in Tata Technologies will sell up to 81.13 million shares. Meanwhile, Alpha TC Holdings will sell 9.7 million shares and Tata Capital Growth Fund I will sell 4.9 million shares in the offer for sale.
According to the DRHP, Tata Motors has 303,006,000 equity shares of the company at an average cost of ₹ 7.40 per share, Alpha TC Holdings holds 29,445,010 equity shares at ₹ 25.10 per share and Tata Capital Growth Fund I holds 14,722,500 equity shares at ₹ 25.10.
The IPO price is yet to be fixed. However, a report by ICICI Direct suggests that the IPO price will be at least 4-5 times the rate at which Tata Motors acquired a stake in the company. This would translate to an issue price of anywhere between ₹ 30 to ₹ 40 per share.
The report further states that at an IPO valuation of ~ ₹ 20,000 crores, Tata Motors’ stake in the company is pegged at ₹ 15,000. Given the auto major’s intent of selling a partial stake or 81.13 million shares, it will most likely make ~ ₹ 4,000 crores. This IPO will help Tata Motors unlock value for its stake in Tata Technologies.
Further, the IPO will also help Tata Motors to reduce debt on its balance sheet and it gels under the broader vision of going net automotive debt free over the next few years.
“With China reopening and the worst of the chip supply side issues behind us, Tata Motors is well poised to report better financials and create wealth for investors going forward,” ICICI Direct added.
Financials
Tata Technologies reported a revenue of ₹ 2852.06 crores for FY20, ₹ 2,380.91 crores for FY21, ₹ 3,529.58 crores for FY22 and ₹ 3,011.79 for 9MFY23. Its net profit margins improved from 8.82% in FY20 to 12.38% in FY22. Its margins have further increased to 13.53% in 9MFY23.
Written by Simran Bafna
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