Tata Group initiates talks for public listing of Tata Autocomp Systems

Tata Group to list Tata Autocomp Systems

The Tata Group has begun talks to list Tata Autocomp Systems (TACO), the group’s auto components manufacturing business, with the formal process expected to begin later this year, people aware of the discussions told Moneycontrol requesting anonymity.

According to the persons cited above, the discussions are at an early stage and talks are currently focused on Tata Group entities that will divest their stakes in the company and also the overall quantum of stake which will be divested in the IPO.

TACO is owned fully by Tata Group entities with direct holding by Tata Sons, which owns around 21 percent while the remaining is held by Tata Industries Ltd. TACO was founded in 1995 and operates as the vehicle for the group's ventures in the auto components business.

'Market conditions ripe'

Notably, in 2011, the Tata Group had planned to raise Rs 750 crore for the company from the capital market and had also received the Securities and Exchange Board of India’s approval for the same. The group later withdrew the IPO, potentially due to unfavourable market conditions, although it did not specify any reason at that time.

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“The market conditions are far better now and as a company TACO has come a long way,” said the first person cited above. “It is a certainty that the IPO will be a success this time around but other details such as to which Tata group entity will divest stake and how much quantum is something that needs careful evaluation,” said the first person.

Also Read: TATA AutoComp Systems signs initial pact with Skoda group

“It is also possible that the group may want to bring in an investor before the IPO as it did in the case of IPO bound Tata Technologies in which Tata Motors a part of its stake to global private equity fund TPG group,” the person added.

A Tata Group spokesperson declined requests for comment.

The autocomp business

TACO is one of the leading players in the auto component industry and is present in product segments such as interior plastics and composites, radiators, exhaust systems, batteries, stampings, suspensions, seating, mirror assemblies, EV powertrains, EV battery energy storage systems, and engine cooling systems.

According to the company’s corporate filings, its revenues have increased by approximately 57 percent on-year to Rs 14,372 crore during fiscal 2023 owing to strong volume growth on a standalone basis as well as across subsidiaries and joint venture partnerships. Credit rating agency Crisil estimates that the company’s turnover is expected to continue to grow at mid-to-high double digits on the back of capacity ramp-up of components specifically catering to the EV segment, such as EV battery packs and powertrains, among others.

To leverage on expected growth, TACO is expected to step up capital expenditure investments over the medium term towards capacity enhancement and new product launches, which Crisil estimates will be funded largely through internal accruals with limited dependence on debt owing to sustained healthy cash generation.