Tata Technologies Ltd is making a significant mark in the primary market with its upcoming initial public offering (IPO), scheduled to open for subscription on November 22 and conclude on November 24. This IPO holds particular importance as it marks the return of the Tata Group to the IPO market after a hiatus of nearly two decades.
Lot Size and Grey Market Premium
The IPO operates on an Offer for Sale (OFS) model, allowing investors to bid for a minimum of 30 shares and in multiples of 30 shares thereafter. The Grey Market Premium (GMP) for Tata Technologies shares currently stands at Rs 350, demonstrating a slight dip from last week’s GMP of Rs 370. Despite the decrease, GMP remains favorable, representing approximately 70 percent of the IPO price band. However, market experts caution against relying solely on GMP, emphasizing its speculative nature and lack of connection to the company’s fundamentals.
Price Band and Stakeholders
The IPO comprises an offer for sale of up to 60,850,278 shares, with major stakeholders including Tata Motors Ltd, Alpha TC Holdings, and Tata Capital Growth Fund I. Analysts anticipate a robust investor response, driven by the IPO pricing, strategic collaborations, and the company’s focus on key industry verticals.
Market Sentiment
Market observers expect a robust response from investors, considering the positive outlook driven by IPO pricing, strategic collaborations, and the company’s focus on key industry verticals. However, caution prevails, with experts advising investors to conduct a thorough analysis of the company’s balance sheet for a comprehensive understanding of its fundamentals.
Pre-Apply Mode and Public Interest
The Tata Technologies IPO, considered one of the most-awaited public offers of the season, is open for subscription under the pre-apply mode, allowing investors to apply in advance before the official bidding opens on November 22.
Expert Opinions and Valuation
Experts highlight Tata Technologies’ attractive valuation against its peers, such as Tata Elxsi, KPIT Technologies, L&T Technology Services, etc. The company’s strengths include a strong clientele, with long-standing relationships and an impressive customer repeat rate. However, weaknesses lie in its dependence on Tata Motors and exposure to the cyclicality of the automotive industry.
Financial Overview
Tata Technologies, a global engineering services provider, has shown positive financial indicators, with a three-year average ROE of 17 percent and ROCE of 25 percent. The company has recorded significant revenue and net profit growth, along with positive cash flows. Valuation metrics, including P/E and P/B, indicate a favorable position compared to its peers.
Market Position and Outlook
Tata Technologies, primarily serving automotive OEMs, operates in two revenue verticals: Services (80 percent of FY23 revenue) and Technology Solutions (20 percent). The company’s future growth is driven by the rising demand for next-gen technology, particularly in the automotive segment, although uncertainties related to start-up clients pose challenges.
Grey Market Premium and IPO Market Return
The Tata Technologies IPO has garnered the highest grey market premium among the five mainboard IPOs launched recently. Analysts attribute this premium to healthy financials, reasonable valuations, potential future growth, and the strength of the Tata brand. Despite concerns about the grey market’s speculative nature, the IPO is expected to attract substantial interest.
As Tata Technologies makes its debut in the primary market, investors are closely watching its IPO for potential listing gains and long-term growth prospects. The company’s financial strength, strategic positioning, and the Tata Group’s backing contribute to a positive market sentiment. However, cautious optimism prevails, emphasizing the importance of thorough due diligence before making investment decisions in the dynamic IPO landscape