A Profound Look into Tata Technologies Limited IPO

A Brief Introduction

Tata Technologies Limited, a part of the reputable Tata group with an extensive range of diversified products, is getting listed on the stock exchange after nearly 20 years. As a subsidiary of Tata Motors, this company provides outsourced engineering services and digital transformation services to global manufacturing clients.

Key Takeaways:

1. The company is headquartered in Pune and was founded in 1989.
2. Its services cater to various industries such as aerospace, automotive, industrial machinery, and consumer goods.
3. Despite the name, Tata Technologies is not a hardcore IT company; instead, it's an engineering R&D company.

What Does Tata Technologies Do?

Tata Technologies provides end-to-end solutions from concept development, design, engineering to delivery for clients aiming to produce products across various sectors. The company assists its clients in enhancing their offerings' efficiency, and its services span industries like automotive, aerospace, industrial machinery, and consumer goods.

Key services include:

• Outsourced Engineering Services
• Digital transformation services
• Support in concept development, design, development, and delivery.

Financials and Performance

Tata Technologies has demonstrated operational efficiency with increasing revenues over the years. The sales growth CAGR from 2021 to 2023 stands at 36.23%; whereas, the net profit has grown at 61.53%. With improvements in overall profit margins from 10.05% in 2021 to 14.14% in 2023, it shows potential for steady growth.

Financial Highlights:

• Revenues, EBITDA, and profitability have consistently increased over the years.
• Sales growth CAGR stands at 36.23% (2021-23).
• EBITDA growth CAGR stands at 45.2%
• Net Profit has grown at a CAGR of 61.53%.

Risk factors

Despite the promising performance, there are a few risks associated with Tata Technologies.

Major Risks:

• High dependency on top five clients which contribute 57.36% to the total revenue
• Over 69.9% of the total revenue is contributed by the Automotive sector.
• Outstanding unhedged foreign currency positions (Financial assets of 5,154 million rupees vs liabilities of 600 million rupees)
• Competition from group companies: the extent of overlap is minimal but exists.

IPO details

The IPO, opening on November 22nd, 2023, and closing on November 24th, 2023, is a 100% offer for sale (OFS). Proceeds from the IPO will go to the selling shareholders Tata Motors Limited, Alpha TC Holding PTE Limited, and Tata Capital Growth Fund I.

IPO Specifics:

• 10% of the offer has been reserved for eligible shareholders of Tata Motors Limited.
• Shares will be allotted on a proportionate basis.
• No discount is offered to the shareholders of Tata Motors Limited.

In a nutshell, the success of Tata Technologies Limited depends on its ability to maintain its competitive edge, manage its significant client dependency, and seize arising opportunities in its operating sectors.