Tata Technologies Ltd, a provider of engineering services and product development IT services, has announced its initial public offering (IPO) with bids opening from November 22 to November 24. The company has set the share price range between ₹475 and ₹500. The IPO will be conducted via an offer for sale (OFS) route, with options for various investor categories including institutional buyers, non-institutional investors, retail investors, Tata Motors (NYSE:TTM) Limited (TML) shareholders, and Tata Tech employees.
The grey market premium (GMP) for Tata Technologies shares is currently at ₹352, which is a decrease of ₹17 from the weekend but still indicates a robust interest level at approximately 70% of the IPO rate. The GMP is considered a speculative indicator of how the market perceives the upcoming public offering, although stock market experts advise against using it as the sole criterion for investment decisions. Instead, they suggest that potential investors should review Tata Technologies' financials for a more informed assessment.
The company plans to raise ₹3,042.51 crore (INR100 crore = approx. USD12 million) through the IPO. Equity shares have been reserved for Tata Tech employees, amounting to 0.50% of the post-offer capital, and TML shareholders have been allocated 10% of the post-offer capital. Bids must be placed in lots of 30 shares each.
According to Emkay Global's analysis, Tata Technologies operates within manufacturing-led verticals such as automotive and aerospace and is expanding its capabilities into software and embedded engineering areas. Despite slower growth rates from FY16-23 compared to competitors', recent performance indicates an uptick.
Samco Securities recommends investing in the Tata Technologies IPO based on its reasonable valuation at ₹500 per share and promising growth prospects in engineering services. With a P/E multiple of 32.5 times FY23 earnings, it is positioned below competitors like KPIT Tech and Tata Elxsi. The global engineering research & development (ER&D) sector offers significant potential for outsourcing, and Tata Technologies projects a compound annual growth rate (CAGR) of 7% in automotive ER&D spending through 2026.
The company has been reducing its dependency on major clients like Tata Motors and Jaguar Land Rover by diversifying into new markets and clients such as VinFast (NASDAQ:VFS) and Airbus. For the period from April to September, Tata Technologies reported a net profit increase of 36% year-over-year and a revenue surge of 34%. IDBI Capital forecasts continued earnings growth driven by strategic initiatives targeting key ER&D spenders and investments in advanced technologies.
Investors should note that following the T+3 settlement cycle, allotment dates are expected around November 27 or November 28 with an anticipated listing date on November 29. High subscription rates could impact share allocation probabilities, yet investor interest remains high despite these factors influencing portfolio choices.
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