Tata Technologies Ltd, a subsidiary of Tata Motors, initiated its IPO on November 22, closing on November 24. The IPO witnessed a record number of applications, marking the first IPO from the Tata Group in nearly two decades.
On Friday, the third and concluding day of the bidding process, the Tata Technologies Rs 3,042-crore IPO witnessed an overwhelming response, it has been oversubscribed 69.43 times, receiving bids for 3,12,64,69,230 equity shares against the offered 4.50 crore shares mainly driven by robust participation from non-institutional investors (NIIs), according to NSE data at 5:45 pm.
For the retail investors category, the subscription stands at 16.50 times, while while qualified institutional buyers (QIBs) oversubscribed 203 times, and NIIs 62 times. The employee portion has received a subscription of 3.70 times, and the shareholder portion is booked 29.19 times.
The IPO's popularity is attributed to its appealing valuations compared to listed counterparts like KPIT, L&T Tech, and Tata Elxsi, with Tata Tech's FY23 PE ratio at 3233x, offering attractiveness against 105x for KPIT, 40x for L&T Technology Services, and 70x for Tata Elxsi.
Tata Tech has demonstrated superior financial growth, achieving a 36% revenue CAGR from FY21 to FY23, surpassing the 29% growth of its three peers. its operating margin CAGR of 46% outperforms both KPIT (43%) and LTTS (30%).
Tata Technologies IPO's grey market premium (GMP) has risen sharply to ₹405 per share, marking an 81% surge from the issue price of ₹500 per share. Analysts anticipate a potential listing at ₹905 per share, factoring in the current GMP and issue price.
Day 2 Details
On day 2, the IPO was subscribed 14.86 times, with bids for 66,92,39,790 equity shares against the offered 4.50 crore shares, according to BSE data. In the retail category, the IPO was subscribed 11.20 times, and in the QIB category, it was subscribed 8.55 times. The NII portion saw a significant oversubscription at 31.04 times.
Analysts and Researchers on Tata Technologies
Santosh Meena, Head of Research at Swastika Investmart, observes, "Despite a slightly lower revenue growth rate, excluding the Covid years significantly boosts Tata Tech's Compound Annual Growth Rate (CAGR) compared to its peers." In the first half of the fiscal year ending in September, Tata Tech achieved a 35% YoY increase in total income, reaching Rs 2,587 crore, along with a 36% rise in net profit, totaling Rs 352 crore.
Analysts emphasize Tata Tech's strategic emphasis on the electric vehicle (EV) sector in product engineering, combined with a robust global industry position, positioning the company for sustained market outperformance.
Despite the inherent industrial risk linked to client concentration in the automotive sector, Tata Tech's expansion into defense and education solutions addresses these concerns, presenting the potential for strong top-line growth with a prudent impact on the bottom line.
More about Tata Technologies
Tata Technologies' range of services encompasses IT consultancy, SAP implementation, CAD/CAM engineering, and design consultancy. As of FY23, the revenue breakdown indicates 80% from services, 11% from products, and 9% from education.
Within its segments, the primary revenue source for Tata Tech is the automotive sector, which is anticipated to experience robust growth despite disruptions.
Analysts foresee substantial opportunities in aerospace, driven by the expansion plans of aircraft manufacturers and activities related to maintenance, repair, and overhaul (MRO).
(Inputs from other Agencies)
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