Ahead of the launch of its initial public offering (IPO), Tata Technologies Ltd is trading 70% up at ₹351 premium over the issue price in the unregulated grey market. In the wake of this, market experts expect strong demand for the public issue.
The public issue, which is completely an offer for sale (OFS) in nature, will hit the Indian primary market on November 22, 2023, and will close on Friday i.e. November 24, 2023. The price band for the Tata Motors subsidiary has been fixed at ₹475 to ₹500 per share.
What analysts say
Brokerage Swastika has given a "subscribe" rating to the Tata Technologies issue, saying the IPO is coming at a very attractive valuation of 32.5x and is a great opportunity for investors. "One should surely apply for this IPO for listing gain as well as long-term benefits," says the brokerage in its outlook. Tata Tech, a long-awaited IPO from the Tata Group, has deep expertise in the automotive industry and differentiated capabilities to deal with emerging trends, it adds.
In terms of concerns, Swastika says just like any company, Tata Tech also has "dependence on a few top clients and third-party vendors", and that there's a "risk related to foreign exposure".
Analysts at Arihant Capital have also recommended to "subscribe" the issue for long as well as short-term gains, considering diverse areas in which the company operates including IT consultancy, SAP implementation, and CAD/CAM engineering and design. Strong financials and big tie-ups are also expected to work in the company's favour.
Nirmal Bang says the company aspires to "create value for its customers by assisting them in the development of products that are safer, cleaner and improve the quality of life for the end customers."
On the concern side, it says, the company continues to derive a material portion of its revenues from its top 5 clients which include Tata Motors and certain of its subsidiaries and Jaguar Land Rover (and certain other subsidiaries of Jaguar Land Rover Automotive PLC). "If any or all of its Top 5 Clients were to suffer a deterioration of their business, cease doing business with it or substantially reduce their dealings with it, the company’s revenues could decline."
About Tata Technologies IPO
Tata Technologies has set the price band of its IPO at ₹475-500 per share. The lot size has been fixed at 30 equity shares and its multiples thereof. At the upper price band, the Tata Motors subsidiary will fetch around ₹3,042.5 crore, and its valuation will stand at ₹20,283 crore. Tata Technologies IPO will be launched on November 22, 2023, and will close on November 24, 2023. It is the first IPO of a Tata Group company in 18 years.
For retail investors, the minimum investment of ₹15,000 for 30 shares can be done, and the maximum investment they can make is ₹1.95 lakh (390 shares).
The IPO is an 'Offer For Sale' (OFS) of up to 60,850,278 equity shares for cash, comprising of offer for up to 46,275,000 shares; up to 9,716,853 shares by Alpha TC Holdings Pte Ltd.; and up to 4,858,425 shares by Tata Capital Growth Fund I, each representing up to 11.41%, 2.40%, and 1.20%, respectively, of the paid-up share capital of Tata Technologies. The Tata Tech IPO has reserved up to 6,085,027 shares, i.e., 10% of the offer, for subscription by eligible shareholders of Tata Motors.
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