Tata Tech sets IPO price band at over 47% discount to unlisted market price

Tata Tech is not the only company to have set a price band that is far lower than the prevalent stock price in the unlisted market

Investors of Tata Technologies Ltd are in shock after the company priced its initial public offering (IPO) price band below its unlisted price, dealers said.

The firm set its price band at Rs 475-500 a share, about 47.4 percent discount from its unlisted market.

The stock currently trades at Rs 950 per share in unlisted markets. It has risen from around Rs 100 per share in June 2020, marking a nearly 1000% gain to reach a record high of Rs 1010 per share in July 2023. Analysts suggested the significant surge in the unlisted stock was due to expectations of an upcoming listing on exchanges.

Experts warn that investors who enter the unlisted market without doing proper research and only following IPO excitement might face challenges. This market is more unpredictable and risky, demanding patience for successful wealth creation.

Read: Come Nov 22, Tata Technologies to be first Tata Group firm to go public in nearly 20 years

To be sure, Tata Tech is not the only company to have set a price band that is far lower than the prevalent stock price in the unlisted market. Earlier, AGS Transact, UTI Asset Management Co Ltd and PB Fintech’s IPO price bands had been below grey market levels. AGS Transact listed in January 2022 and its price band was set at Rs 185-195 a share; its unlisted shares were trading at Rs 550 apiece before its IPO.

UTI AMC listed on exchanges in September 2020 and its price band was at Rs 552-554 a share; however, its unlisted market price just before the IPO was quoting around Rs1,100 a share. PB Fintech, parent of platform Paisabazaar, had set an IPO price band of Rs 940-980 a share even though shares were quoting around Rs 1,900 apiece just before the IPO.

Tata Technologies, a subsidiary of Tata Motors, will become the first Tata Group company in nearly 20 years to go public on November 22. This IPO marks the group's first offering since TCS went public in 2004. The Tata Tech offer-for-sale ends on November 24. Basis of allotment will be on 30 November and credit of equity shares to demat will be on 1 December. The stock will be listed on exchanges on 4 December.

Read: Tata Tech IPO: Check likely price band, issue date, company financials, more

On the upper price band, the firm will raise around Rs 3042.51 crore and its valuation comes at around Rs 20,283 crore. The OFS consists of up to 60.85 million shares by its existing shareholders. The OFS also comprises employee reservation portion of up to 2.03 million and Tata Motors Ltd shareholders reservation portion of up to 6.09 million shares. Meanwhile, its grey market premium is trading at Rs 298 a share.

Tata Tech has PE of 32.53x for FY23 which is cheaper than its peers L&T Technology Ltd (37.47x), KPIT Technologies Ltd (80.31x) and Tata Elxsi Ltd (61.55x).

Tata Technologies Ltd reported nearly 36 percent year on year jump in its net profit for the six month ended September 2023. Net profit for the half year stood at Rs 351.90 crore against Rs 259.06 crore a year ago. Revenue jumped 33.8 percent YoY to Rs 2526.70 crore. EBITDA margin stood at 18.39 percent from 19.73 percent last year.

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