The Indian IPO market hasn’t been very exciting this year. However, all it needs is a fundamentally strong company to boost its prospects. The upcoming IPO of Tata Technologies, a Tata group company, might just be the impetus that the Indian IPO scene requires. The company filed the draft red herring prospectus with the SEBI very recently and is planning to complete the IPO process by the end of this calendar year. Read on to find out more about the public issue.
Established in 1989, Tata Technologies is a subsidiary of Tata Motors Limited. The company’s primary business revolves around providing engineering services to domestic and international entities. The company’s service portfolio includes product development, digital solutions and turnkey solutions to original equipment manufacturers (OEMs).
Being a subsidiary of Tata Motors Limited, Tata Technologies has strong automotive industry expertise which it leverages to provide solutions to companies in other industries like transportation, aerospace and heavy machinery.
Airbus, the world’s largest manufacturer of airliners, is one of the clients of Tata Technologies. To cater to the product engineering and other requirements of Airbus, the company has even established a dedicated innovation centre in Toulouse, France. This centre will be used to fulfil the requirements of other entities operating in the aerospace and defence sectors as well.
The draft red herring prospectus contains the financial statements of Tata Technologies up until the quarter ended on December 31, 2022. Here are some of the company’s key financial metrics as per the prospectus.
(figures are in ₹ crores)
|As of December 31, 2022||FY22||FY21||FY20|
|Equity share capital||40.5||41.8||41.8||41.8|
|Profit After Tax||407.4||436.9||239.1||251.5|
|Diluted Earnings Per Share||10.04||10.77||5.89||6.2|
|NAV per Equity Share||677.08||545.4||512.42||440.26|
|Return On Networth||14.80%||19.16%||11.17%||13.58%|
Note: All figures except for the Diluted EPS, NAV per equity share and Return on Net Worth are expressed in ₹ crores.
Tata Technologies possesses numerous strengths which put it at a huge advantage compared to its peers. Here are a few of its key strengths as listed on its draft red herring prospectus.
Despite the many advantages of Tata Technologies, there are a few risks that threaten the company’s business. Here’s what they are.
Since Tata Technologies Limited has just filed its draft red herring prospectus with the SEBI, there isn’t much information regarding its public issue. However, based on the DRHP, it is clear that the entire IPO is an offer for sale from the company’s promoters. This effectively means that the funds so collected via this public issue would go directly to the selling promoters and not to the company.
Through this IPO, Tata Motors Limited, the parent company of Tata Technologies, is planning to divest around 8,11,33,706 equity shares, which represents 20% of its stake in the company. Additionally, two other promoters Alpha TC Holdings Pte. Ltd. and Tata Capital Growth Fund I are also planning to offload 97,16,853 and 48,58,425 equity shares respectively.
According to the DRHP, about 50% of the total issue has been reserved exclusively for Qualified Institutional Buyers (QIBs). Out of the remaining 50%, 35% of it has been reserved for retail investors and 15% has been reserved for Non-Institutional Investors (NIIs).
The objects of the offer as mentioned in the draft red herring prospectus are as follows.
Since Tata Technologies has only filed a draft red herring prospectus to date, there isn’t any information regarding the other aspects of the public issue like the issue opening and closing dates and IPO pricing. However, once the company files the final red herring prospectus, there might be more clarity regarding the public issue.
If you’re planning on investing in the Tata Technologies IPO, make sure to first open a demat account. Without it, you cannot invest in any upcoming IPOs or any other market-linked securities. To open a demat and trading account, all you need to do is simply visit the website of Motilal Oswal and complete an online application.