Tata Technologies Limited, a wholly owned subsidiary of Tata Motors Limited, is set to be the first Tata Group company to go public in nearly two decades with an offer-for-sale on November 22.
This will be the first IPO from the Tata Group since TCS went public in 2004. The Tata Tech OFS will close on November 24.
The issue of up to 60,850,278 equity shares will close for bidding on November 24. The OFS will comprise up to 46,275,000 equity shares by the company, up to 9,716,853 by Alpha TC Holdings Pte Ltd, and up to 4,858,425 by Tata Capital Growth Fund I, representing up to 11.41 percent, 2.40 percent, and 1.20 percent, respectively, of the paid-up equity share capital of Tata Technologies Limited, the company informed in an exchange filing on November 13.
The company had filed its draft IPO papers with the Securities and Exchange Board of India (Sebi) on March 9.
Stake sale
The issue size was pruned after Tata Motors sold 9.9 percent of its stake in the company to new investors at an enterprise valuation of Rs 16,300 crore (about $2 billion) in October 2023, according to reports. TPG Rise Climate SF Pte, a climate-focused private equity fund, which had previously invested $1 billion in Tata Motors’ electric mobility unit, picked up 9 percent, while the Ratan Tata Endowment Foundation took the rest. Tata Motors held a 74.69 percent stake in Tata Technologies before the stake sale.
The stake sale was necessitated from the automaker's “deleveraging agenda”, the company had said in a filing on October 13. In the September quarter, the net automotive debt for the car maker reduced to Rs 38,700 crore as against Rs 41,700 crore in the previous quarter, and it was on course to make its domestic business net debt-free by FY24.
In October, the company's unlisted share price looked up after Moneycontrol reported that Tata Technologies was intending to go public the same month. “Tata Technologies unlisted shares, which were previously trading at a modest Rs 90-100 in 2020, surged to approximately Rs 900. The anticipation surrounding the IPO is marked by an expected pricing range of Rs 400-450, considering the recent 9.9 percent stake sale by Tata Motors," Manan Doshi, co-founder of Unlisted Arena, had said.
Brokerage views
Following the stake sale in the IPO-bound Tata Technologies, Tata Motor's target price was upped by foreign brokerage firm CLSA to Rs 803 from Rs 777, based on the recent valuation round.
The firm said the automaker's British brand Jaguar Land Rover is expected to report better margins for H1FY24 while suggesting the Indian carmaker will have a strong SUV pipeline in 2024. CLSA also expects share gains in the Indian SUV segment to continue over the next two years, estimating Tata Motors' SUV share to be 65.4 per cent for FY25 and FY26. CLSA also sees market share increase for the company in the passenger vehicle segment to 16.1 per cent by FY26.
The financials
The automaker had, on November 2, reported a consolidated net profit of Rs 3,764 crore for the September quarter, riding on robust performance by its British arm Jaguar Land Rover. This is the fourth successive quarter of positive results for the homegrown auto major. The homegrown automaker posted a consolidated net loss of Rs 945 crore in the corresponding quarter last year.
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