Tata Tech IPO sees Rs 1.56 lakh crore bids, issue booked 69.4 times on final day

Tata Technologies IPO closes today

The Tata Technologies IPO, as expected, turned out to be a strong success for the Tata Group, as the Rs 3,042.51-crore offer saw 69.43 times subscription with bids coming in for 312.65 crore equity shares (which is valued at Rs 1.56 lakh crore at the upper price band) against an issue size of 4.5 crore on November 24, the final day of bidding.

The first public issue from Tata Group since the Tata Consultancy Services IPO in 2004, was fully subscribed in the first hours of opening and ended the debut day with 6.54 times buying and Day 2 with 14.85 times subscription.

On Day 3, of the last day of bidding, qualified institutional buyers and high net-worth individuals (non-institutional investors), who have 50 percent and 15 percent reservation in the net issue, bought 203.41 times and 62.11 times their allotted portions.

Even retail investors, Tata Technologies' employees and Tata Motors' shareholders also looked aggressive in the offer, subscribing 16.50 times, 3.7 times and 29.2 times the portion set aside for them, which is 35 percent of the net issue, 20.28 lakh shares and 60.85 lakh shares reserved in the issue.

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The public offer, excluding employees and shareholders' quota, is the net issue. The offer, which was opened on November 22, has a price band at Rs 475-500 per share.

It is entirely an offer-for-sale (OFS) of 6.08 crore shares by the promoter Tata Motors, and investors Alpha TC Holdings and Tata Capital Growth Fund 1, while there is no fresh issue component. Hence, the entire issue proceeds, excluding IPO expenses, will go to selling shareholders.

Despite being an entire OFS, the issue remained in the limelight given many other reasons like attractive valuations, strong parentage, healthy financials and expectations of great demand in the engineering services space.

Also read: Countdown begins for Tata Technologies IPO: Should you subscribe to Rs 3,042-crore issue?

Several marquee investors took exposure in the global engineering services company including Goldman Sachs, BNP Paribas Funds, HSBC Global, Government Pension Fund Global, Florida Retirement System, Oaktree Emerging Markets Equity Fund, Copthall Mauritius Investment, Franklin Templeton Mutual Fund, SBI Mutual Fund, ICICI Prudential Mutual Fund, SBI Life Insurance Company, Kotak Mutual Fund, Mirae Asset Mutual Fund, and Sundaram Mutual Fund via anchor book. The company raised Rs 791 crore this book.

"We like the company's strong established brand and diverse product portfolio across different product categories from traditional OEM’s to new age energy vehicles," Prashanth Tapse, Senior VP (Research), Mehta Equities said.

He thinks outsourcing business model would be in great demand going forward in engineering services and digital transformation services to global manufacturing clients helping clients to deliver better products. "Valuations are reasonably priced."

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At the IPO price of Rs 500 per share, Tata Technologies is valued at a TTM (trailing twelve months) P/E of 28.3x.

"With the gradual recovery in the global economy, rising manufacturing capex and shift in manufacturing from US/Europe/China to India due to cost inflation and China+1 strategy, we are expecting strong in the Tata Tech’s financial performance in the coming years," Ventura Securities said.

Incorporated in 1994, the Pune-based company that offers product development and digital solutions, including turnkey solutions, to global original equipment manufacturers (OEM) and their tier 1 suppliers, has recorded profit growth at a CAGR of 61 percent and revenue at 36 percent during FY21-FY23, with strong EBITDA and net margin.

Also read: Tata Technologies IPO: A deep dive into its business, risk factors and whether you should invest

Backed by Tata Motors, it is a pure-play manufacturing focused ER&D (engineering, research and development) company, primarily focused on the automotive industry. It is currently engaged with seven out of the top 10 automotive ER&D spenders and five out of the 10 prominent new energy ER&D spenders in 2022.

Tata Technologies IPO shares traded at a 80 percent premium over the upper price band, increasing from 70 percent premium couple of days back, in the grey market, analysts on anonymity said. The grey market is an unofficial platform for trading in the IPO shares till the listing.

Generally, investors make use of the grey market premium to guess the expected listing price of any IPO.

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