Brexit-related fears sank Warburg Pincus-Tata Tech deal in 2018: Source

Tata Technologies plans to raise a total of Rs 3,043 crore via the initial stake sale, which will be an offer-for-sale (OFS) of 6.1 crore equity shares of face value of Rs 2 each

The fallout with Warburg Pincus in 2018 hasn’t altered the strategy for Tata Technologies, which, after months of waiting, will finally launch its initial public offering (IPO) on November 22.

Back in 2018, Tata Motors and two other group entities agreed to sell a 43 percent stake in Tata Technologies to an affiliate of private equity (PE) firm Warburg Pincus. A source familiar with the deal, speaking on condition of anonymity, revealed that the deal fell through due to the PE major’s concerns regarding Brexit. This hesitation stemmed from the fact that JLR, a key customer for Tata Technologies, could potentially be impacted by Brexit-related uncertainties.

On being questioned about the deal, Tata Technologies Chief Executive Officer (CEO) and Managing Director (MD), Warren Harris, on the sidelines of the IPO conference, told Moneycontrol, “Our journey has been about raising capital for both our shareholders and the company at different stages. The exploration with Warburg Pincus was a significant part of this journey. However, it was a mutual decision for both parties to step away from the partnership. Despite this, the separation was amicable, leaving us with a deep respect for the Warburg team.”

Harris added that the company's capital structure will likely continue to evolve.

Tata Technologies plans to raise a total of Rs 3,043 crore via the initial stake sale, which will be an offer-for-sale (OFS) of 6.1 crore equity shares of face value of Rs 2 each. The company is not raising funds through a fresh issue of shares. Thus, it will not receive any proceeds from the IPO.

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In the OFS, Tata Motors, the promoter entity of Tata Technologies, is looking to sell up to 4.6 crore equity shares, while other selling shareholders, Alpha TC Holdings and Tata Capital Growth Fund-I, are likely to sell up to 97.2 lakh equity shares and 48.6 lakh equity shares, respectively, through the IPO.

Tata Technologies' Shareholding Pattern

The key objectives of the IPO are to achieve the benefits of listing the equity shares on the stock exchanges and give a partial or full exit to the selling shareholders.

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Trimmed IPO size

The shareholders of Tata Technologies are offloading a lesser number of shares than previously planned. In the draft red herring prospectus filed with the Securities and Exchange Board of India (SEBI) in March this year, the Pune-based engineering research and development (ER&D) services firm said Tata Motors, Alpha TC Holdings, and Tata Capital Growth Fund I would sell 20 percent, 2.40 percent, and 1.20 percent stakes, respectively.