Tata Technologies’ IPO opens for subscription on November 22, amidst a lot of competition. The initial public offer (IPO) of Tata Technologies is opening its subscription alongside four other issues. Investment bankers are confident of the ‘high-quality business’ from the House of Tatas. Analysts are backing the ₹3,042 crore issue due to its prospects, business model and pricing. The grey market is also optimistic, predicting 70% listing gains.
The engineering research and development (R&D) company offers product development and digital solutions to manufacturing companies. Its areas of expertise include product engineering and manufacturing engineering in the mechanical domain such as body engineering, while also adding capabilities in the software and embedded engineering segments.
The global outsourced ER&D market was estimated to be around $105-110 billion in 2022. The digital engineering market is expected to grow at a compounded annual growth rate (CAGR) of 16% between 2022 to 2026. The company has set its sights on the auto, electric vehicle, and aviation sectors, where there is significant potential for growth.
Tata Technologies has a diverse portfolio, with around 80% of its revenues coming from services, 11% from product business, and 9% from an education vertical. Despite slower growth compared to its peers, its revenue and profit after tax grew at a compounded annual growth rate (CAGR) of 36% and 62% respectively in the last three fiscal years.
The company also revealed in its risk factors that it’s heavily dependent on its top five clients, including its anchor clients – Tata Motors and its subsidiary, Jaguar Land Rover.
The price band for the IPO has been set at ₹475-500, valuing the company at around 32 times its FY23 EPS. Brokerage reports suggest that the company has left something on the table for its IPO investors. Most reports indicate that strong earnings growth potential is expected, and the company is well-positioned for long-term prospects.
In conclusion, Tata Technologies’ IPO has generated a lot of attention and interest due to its strong business model, prospects, and pricing. With significant potential for growth in the global outsourced ER&D market, as well as in the auto, electric vehicle, and aviation sectors, the company is expected to attract investors who are looking for long-term prospects and potential listing gains.