Tata Technologies, the engineering services company under the Tata Group, has successfully raised ₹791 crore from 67 investors through an anchor book, just a day before its highly anticipated Initial Public Offering (IPO) opens for bidding. This marks a significant development as it hits the upper limit of the ₹475-500 price range set by the company for the IPO.
In a filing to exchanges, Tata Technologies stated, “the company in consultation with the book running lead managers has finalised allocation of 1,58,21,071 equity shares to anchor investors, at a price of ₹500 per share.” The IPO, scheduled to open on November 22, will remain open for bidding until November 24.
This IPO is particularly noteworthy as it represents the first public offering from a Tata Group company in almost two decades. The company aims to raise ₹3,042.51 crore through this IPO, which is entirely an offer for sale (OFS) in nature. Tata Technologies has reserved 20.28 lakh equity shares for its employees and 60.85 lakh shares for Tata Motors shareholders. The net issue of the IPO, excluding the portions allocated to employees and shareholders, constitutes the overall offering.
Qualified institutional buyers (QIBs) have been allocated 50% of the total offer size, with 15% earmarked for high net worth individuals (HNIs). The remaining 35% is set aside for retail investors, providing a diverse participation opportunity in the IPO.
Market analysts are closely watching the IPO, noting that Tata Technologies shares are trading at a substantial 70% premium in the grey market, which serves as an informal platform for trading IPO shares until their official listing. Despite volatile trends in the market, the grey market premium (GMP) for Tata Technologies IPO remains steady at ₹351, reflecting sustained investor interest.
The IPO allotment date for Tata Technologies is expected on November 27, 2023, while the listing date is anticipated to be on November 29, 2023.
Arihant Capital has given an ‘apply’ recommendation for the public offer. They highlight Tata Technologies’ diverse services, including IT consultancy, SAP implementation, and CAD/CAM engineering and design consultancy. The revenue breakdown shows a robust mix, with approximately 80% from services, 11% from products, and 9% from education.
Strong partnerships with industry leaders like Dassault and Siemens, coupled with the use of Microsoft AZURE products, position Tata Technologies for global expansion. Recent empanelment by Airbus signals significant growth potential for the company. The revenue and profit after tax (PAT) of Tata Technologies have demonstrated a compound annual growth rate (CAGR) of 36% and 62%, respectively, from FY21 to FY23. In the first half of FY24, there was a 34% and 36% year-on-year growth in revenue and PAT.
Arihant Capital suggests that Tata Technologies has outpaced competitors such as Tata Elxsi, L&T Technologies, and KPIT Technologies in revenue CAGR over the last three years. At an upper band valuation of ₹500, the issue is valued at a price-to-earnings (PE) ratio of 32.5x based on FY23 earnings per share (EPS). The recommendation encourages investors to subscribe to the IPO for potential short-term listing gains as well as long-term investment prospects.