Tata Motors on October 13 said it has agreed to sell 9.9 percent stake in IPO-bound Tata Technologies for Rs 1,613.7 crore to TPG Rise Climate SF Pte. Ltd, a climate focused private equity fund, and Ratan Tata Endowment Foundation, for an equity valuation of Rs 16,300 crore.
TPG, which also invested in Tata Motors’ electric vehicle business, will pick up 9 percent in Tata Technologies while Ratan Tata Endowment Fund (RTEF) will buy the rest 0.9 percent.
The company said an amount of Rs 1,467 crore will be received by the Tata Motors as consideration for sale of its stake to TPG while RTEF will pay Rs 146.7 crore. Transaction to be completed by October 27, 2023, it added.
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Tata Technologies is a global engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers. The company uses domain expertise in the automotive industry to serve clients in industries such as aerospace, transportation, and heavy machinery.
Tata Technologies, whose initial public offer is expected soon, will be the first such offer from Tata Group in nearly two decades. The IPO includes the sale of up to 9.57 crore equity shares, which accounts for 23.6 percent of the company's paid-up share capital, by Tata Motors, Alpha TC Holdings, and Tata Capital Growth Fund I.
Its revenue for FY23 grew 25 percent to Rs 4,418 crore, while profit after tax was up 63 percent at Rs 708 crore. Over FY21-23, revenue had a compound annual growth rate (CAGR) of 30 percent, leading to a 46 percent EBITDA CAGR, and translating to a 61.5 percent profit after-tax CAGR.
Tata Technologies’ revenue CAGR over the last three years has far exceeded that of Tata Elxsi, L&T Technologies and KPIT Technologies. Its EBITDA margin, at 23.7 percent, remains more or less equal to industry standard.
Tata Technologies’ return on equity (RoE) stood at 19.8 percent in March 2022 and 23.7 percent in March 2023. The return on capital employed (RoCE) was 19.5 percent in March 2023 compared to 16.7 percent in March 2022.
Earlier in the day, the stock rose about 5 percent to Rs 667.15.
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