Mega Tata IPO Coming Soon? Tata Motors To Sell 9.9% Stake In Tata Technologies Ahead Of Public Listing

Tata Technologies IPO: It looks like the much-awaited Tata Technologies IPO is nearing its launch soon! On October 13th, Tata Motors decided to sell a 9.9% stake in the IPO-bound company to TPG and Ratan Tata Endowment Foundation. The transaction is for a consideration of up to Rs 1,613.7 crore. The move comes ahead of Tata Tech's plan to go public on stock exchanges. Also, Tata Motors shares touched a new 1-year high.

As per the regulatory filing, Tata Motors entered into a share purchase agreement with two buyers namely -- TPG Rise Climate SF Pte. Ltd, a climate-focused private equity fund, and Ratan Tata Endowment Foundation, a section 8 company.

Under the agreement, of the total 9.9% stake sale, Tata Motors will sell a 9% stake to TPG for Rs 1,467.0 crore, and the rest of 0.9% will be sold to Ratan Tata Foundation for Rs 146.7 crore.

TPG Rise Climate is among the major investors in Tata Motors' electric vehicles business. At the start of 2023, the American investment firm infused Rs 3,750 crore into Tata Group's automobile flagship company's EV business. This would be the second tranche of investment by TPG in Tata Motors, as the first tranche was Rs 3,750 crore in March last year.

On Friday, amidst market bears, Tata Motors' share price touched a new 52-week high of Rs 669.10 apiece, before soaring by 4.8% to end at Rs 667.15 apiece on BSE. The company's market value is at Rs 2,21,648.38 crore.

The transaction is expected to be completed by October 27, 2023, or such other date as may be mutually extended by the parties.

Earlier this month, Tata Tech filed an addendum to its draft red herring prospectus (DRHP) with market regulator Sebi. Under the revised draft, Tata Tech has reserved 10% of the total IPO size for Tata Motors shareholders and employees.

Although the amount of Tata Tech's IPO size is not yet revealed along with its subscription dates and price bands, the Tata-backed IT player's initial public offer comprises up to 95,708,984 equity shares.

Under the IPO, Tata Motors is offloading 81,133,706 shares in Tata Tech through the IPO, while other selling shareholders are Alpha TC Holdings and Tata Capital Growth Fund I will offload o 9,716,853 equity shares and 4,858,425 equity shares respectively.

Of the total size, 50% of the portion will be reserved for qualified institutional buyers (QIBs), while 15% of the size will be allocated to non-institutional investors (NIIs), and the rest of 35% will be kept for retail individual investors (RIIs).

Tata Tech will not receive any proceeds from the IPO as selling shareholders will be entitled to it. The date of the IPO, anchor investor bidding, and price bands will be known in due course.

Tata Tech had first filed the draft prospectus with Sebi on March 9, 2023.

In the nine months ending December 2022, Tata Tech's revenue stood at Rs 3,011.79 crore, while the top-line stood at Rs 3,529.5 crore in FY22 and Rs 2,380.91 crore in FY21. Further, profit stood at Rs 407.46 crore as of December 2022, Rs 436.99 crore in full-year FY22 and Rs 239.17 crore in FY21.

Tata Tech is a leading global engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers ("OEMs") and their tier 1 suppliers. The company has deep domain expertise in the automotive industry and leverages this expertise to serve clients in adjacent industries, such as aerospace and transportation and construction heavy machinery ("TCHM").

Within technology solutions (20% of revenue in FY23), the company has a product business (72% of T's revenue), including reselling software used by manufacturing companies on PLM and MES. Its education business (28% of T's revenue) focuses on reskilling corporates and government institutes, the brokerage highlighted.

Also, it mentioned that over FY21-23, revenue clocked at a 30% CAGR, leading to a 46% EBITDA CAGR, translating to a 61.5% PAT CAGR. Net cash in FY23 was Rs10,290m and RoE was 24%.