Tata Technologies IPO Review
|Issue Open||Nov, 22 2023||Listing At||BSE, NSE|
|Issues Close||Nov, 24 2023||Issue Size||₹3,042.51 Cr|
|Issue Type||Book Built Issue IPO||Allotment Details||Nov, 30 2023|
|Lot Size||30 Shares||Refunds||Dec, 1 2023|
|Face Value||₹2 per share||Credit of Shares to Demat||Dec, 4 2023|
|Price Band||₹475 to ₹500 per share||Cut off time for UPI Mandate Confirmation||Nov, 24 2023 5:00 Pm|
- About The Company
- The objective of the fresh issue
- Key Strengths and Opportunities
- Financial Snapshot
About The Tata Technologies Limited
Tata Technologies Limited stands as a prominent global engineering services company, specializing in delivering comprehensive product development and digital solutions, including turnkey offerings, to esteemed original equipment manufacturers (OEMs) and their tier-1 suppliers worldwide. Leveraging extensive domain expertise in the automotive sector, the company has successfully extended its capabilities to cater to clients in related industries, such as aerospace, transportation, and heavy construction machinery.
The company’s primary business line is services (“Services”), which includes providing outsourced engineering services and digital transformation services to global manufacturing clients helping them conceive, design, develop, and deliver better products. Tata Technologies has a diversified global client base and as of September 30, 2023, they have 19 global delivery centers spread across North America, Europe, and Asia Pacific. They have established strong partnerships and alliances, such as with Dassault, Logility, Siemens Industry Software Inc., Codincity and Fantasy and by availing Microsoft AZURE products/services that augment their efforts and enable them to expand their client reach across verticals and geographies. They have also recently been empanelled by Airbus which is expected to become a strong avenue of growth.
The objective of the fresh issue
The company will not receive any of the offer proceeds as the entire issue is an offer for sale and hence it will be received by the respective selling shareholders.
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Key Strengths and Opportunities
- The company’s automotive domain expertise and deep understanding of client requirements underpins the approach it takes to help clients leverage digital technologies to optimize the manner in which they conceive, develop, manufacture, sell, and service new products. Additionally, the long-standing partnership with its Anchor Clients provides them with opportunities to cultivate skills and refine the value proposition for the automotive sector. Its sizeable portfolio of automotive services provides cross-selling opportunities into the TCHM and aerospace sectors.
- The company’s end-to-end solutions for EV development, manufacturing, and after-sales services are designed to help OEMs develop competitive EVs while maintaining a balance between cost, quality, and timelines. Global automotive companies are increasing their research and development (“R&D”) investments across the broader theme of ‘ACES’ technologies – autonomous, connected, electrification, and shared. Tata Technologies offers a one-stop platform for automotive OEMs to meet new engineering needs across the value chain.
- Given the high concentration of ER&D spend among select automotive, aerospace, and TCHM companies globally, Tata Technologies methodically targets large spenders in their chosen industries, devoting substantial time and resources in cultivating relationships. Their fundamental approach of client centricity, long-term strategic partnering, and joint engagement governance has consistently enabled them to develop and expand their long-term relationships.
- The company continues to work on strengthening its forecasting processes, resource management processes, and automation of non-core processes in order to enhance delivery excellence and strengthen pricing models that will enable it to improve its margins while creating value for all stakeholders. It is focused on building the talent supply chain to ensure it fulfils client requirements at the right time and at the right cost.
- The company has derived a material portion of its revenues from the top 5 clients in each of the reported periods. If any of these top 5 clients suffer a deterioration of their business or substantially reduce their dealings with Tata Technologies, it may have a material adverse effect on the business operations of the company.
- Its revenues are highly dependent on clients concentrated in the automotive segment. An economic slowdown or factors affecting this segment may have an adverse effect on the company’s business operations.
- Tata Technologies expects a significant amount of future revenue from new energy vehicle companies, many of whom may be start-up companies. Uncertainties about their funding plans, future product roadmaps, ability to manage growth, creditworthiness, and ownership changes may adversely affect the growth strategy and business operations of the company.
- The company had negative cash flows in the past and may continue to have negative cash flows in the future, which could adversely affect its liquidity and operations.
Financial Snapshot of Tata Technologies
|Particulars (Rs. in Crores)||6M ended Sept 30, 2022||6M ended Sept 30, 2023||FY21||FY22||FY23|
|Revenue from Operations||1,888||2,527||2,381||3,530||4,414|
|Y on Y Growth (%)||34%||48%||25%|
|Revenue attributable to the Services Segment (% of Revenue from operations)||87%||79%||80%||75%||80%|
|Y on Y Growth (%)||33%||61%||31%|
|Y on Y Growth (%)||36%||83%||43%|
|Adjusted EBITDA Margin||20%||18%||16%||18%||19%|
|YoY Constant Currency Growth in Revenue from Operations (%)||NA||29%||-20%||45%||24%|
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Tata Technologies has displayed robust revenue, EBITDA, and PAT growth over the reported periods. An evaluation of Tata Technologies reveals an earnings valuation of 32x based on its EPS as of March 31, 2023, and the upper price band. This suggests a relatively cheap valuation compared to its listed peers KPIT, L&T Technology Services, and Tata Elxsi. Considering the favorable long-term growth prospects coupled with the company's attractive valuation, the investors should not miss this investment opportunity.