Tata Projects working on sustaining profitability with eye on IPO plans: MD

Vinayak Pai, Tata Projects CEO and MD

Tata Projects has started discussions within the group for a potential initial public offer in the future after the company’s turnaround in 2023-24, but the company aims to maintain profitability and build scale before finalising a plan, the company's managing director and chief executive officer Vinayak Pai told Moneycontrol.

While Tata Group companies’ initial public offerings (IPO) are sought after by investors and the last such offer from Tata Technologies created the biggest buzz in 2023. Notably, this was the first IPO from the conglomerate in over 19 years.

"We have been discussing it (the IPO). However, our financial performance needs to be steady and strong for the next few years before we can fully consider an IPO," Pai told Moneycontrol in an interview.

Covid-related disruption hit the construction and engineering industry hard with projects slowing down and migration of labourers.

"We were also facing delays in executing some public sector projects, where there are more milestone payments, and we were facing liquidity issues," Pai said.

After reporting a profit of Rs 10,365.15 lakhs in 2020-21, Tata Projects slipped to red for two consecutive years in FY22 and FY23. The company returned to profitability in 2023-24 and reported a net profit of Rs 14,548.04 lakhs.

Pai said he is optimistic that these challenges are in the past now. The company has reported a profit in the last five quarters and has also improved its operating margins.

"Now we have a strong portfolio of private sector orders where we can negotiate the terms of the contract in a equitable risk reward mechanism," Pai said, adding that, "Balancing both the public sector and private sector has helped us to gain that stability and not rely too much on the milestone payments."

According to reports, the Tata Group is believed to be lining up IPOs for the next 2-3 years for of companies like Tata Capital, Tata Autocomp Systems, Tata Passenger Electric Mobility, BigBasket, Tata Digital, Tata Electronics, Tata Housing, and Tata Batteries.

The move to opt for public listing by of Tata Group companies by the promoter firm Tata Sons is expected to unlock value, fuel future growth, and provide exit options for select investors.

While Pai did not give a timeline for a likely IPO of Tata Projects, he signalled that the groundwork of it has started.

The conglomerate had announced plans in the final quarter of 2022 to invest $90 billion in emerging industries by 2027, including mobile components, semiconductors, electric vehicles, batteries, renewable energy, and e-commerce. Since then the Tata group has announced that it is set to exceed that level, going beyond $120 billion in the coming years.

Earlier this year, reports suggested that to comply with notification by the Reserve Bank of India (RBI), Tata Sons may be listed on the exchanges by September 2025. Reports later indicated that this may be improbable in the foreseeable future as the group may be considering various other options to adhere to the norms.