Tata Tech IPO Oversubscribed By 70x; How Much Profit Tata Motors Will Make From This Public Offer?

Mega IPO of Tata Technologies has been concluded and it has received a huge love from investors across categories. The Rs 3,042.51 crore IPO oversubscribed by 69.43 times with bids of 312.65 crore equity shares against its offered size. Tata Motors on Saturday announced that it fixed Rs 500 per share as the issue price of the IPO. At the upper price band, the bids received are worth over Rs 1.56 lakh crore. Since Tata Motors is the largest selling shareholder in the IPO, how much profit will this auto giant make?

Tata Technologies IPO Subscriptions:

As per the exchange data, on the last day, Tata Tech IPO received bids of 3,12,64,69,230 equity shares against the offered size of 4,50,29,207 equity shares. This will lead to an oversubscription of 69.43 times in the IPO.

On the upper price band, the IPO received bids which were mind-bogglingly worth Rs 1,56,323.46 crore.

By the end of November 24th, Qualified Institutional Buyers (QIB) were the largest bidders with the portion subscribing by a massive 203.41 times, followed by non-institutional investors (NII) whose portion booked 62.11x subscriptions. Retail individual investors (RII) also subscribed to the portion 16.50 times, while reserved shares for employees received 3.70 times subscriptions. The portion reserved for shareholders of Tata Motors also subscribed 29.19 times.

Tata Motors Gains In Tata Tech IPO:

The IPO was entirely offer for sale (OFS) of up to 60,850,278 equity shares which included anchor investors portion as well. In this IPO, Tata Motors was offloading up to 46,275,000 equity shares.

Since the IPO's price band stood at Rs 475 to Rs 500 per share, Tata Motors' profits on the shares it was selling came around to Rs 2198.06 crore to Rs 2313.75 crore.

But since the issue price is fixed at Rs 500, Tata Motors profits is nearly Rs 2,314 crore.

In its regulatory filing on Saturday, Tata Motors said, "We wish to inform you that Tata Technologies Limited in consultation with book running lead managers to the IPO, has finalised the offer price (including the anchor investor offer price) at Rs 500 per Equity Share of face value of Rs 2 each."

Further, Tata Motors highlighted that the size of the IPO aggregates to Rs 3,042.51 crore, comprising of an offer for sale of 46,275,000 Equity Shares by the Company amounting to Rs 2,313.75 crore.

Other selling shareholders are Alpha TC Holdings Pte.Ltd who sold 9,716,853 equity shares amounting to Rs 485.84 crore, and up to 4,858,425 equity shares worth Rs 242.92 crore which was sold by Tata Capital Growth Fund I.

However, Tata Motors' profit along with other selling shareholders could be higher because, as per the red herring prospectus, Tata Technologies said that the "selling shareholders will be entitled to the entire proceeds of the Offer after deducting their portion of the Offer expenses and relevant taxes thereon."

In its RHP, Tata Tech said, "Our Company will not receive any proceeds from the Offer. The objects of the Offer are to (i) achieve the benefits of listing the Equity Shares on the Stock Exchanges, and (ii) carry out the Offer for Sale of up to 60,850,278 Equity Shares by the Selling Shareholders."

So, Tata Motors is in for a huge gain from Tata Tech's IPO.

Apart from this, Tata Motors is also going to earn up to Rs 1,613.7 crore from selling about 9.9% stake in Tata Tech to TPG Rise Climate SF Pte. Ltd, a climate-focused private equity fund, and Ratan Tata Endowment Foundation, a section 8 company.

After hitting back-to-back new 52-week highs during the week, Tata Motors shares ended marginally lower to Rs 673.65 apiece on BSE after market hours of Friday. Its market cap is around Rs 2,23,826.84 crore. Currently, its 1-year high is at Rs 687.55 apiece.

Tata Tech IPO Listing:

Post the IPO, the proposed shares of Tata Tech will be listed on BSE and NSE.

After the public offer, Tata Technologies is likely to carry allotment of shares on November 30th, followed by initiation of refunds on December 1st, and credit of shares in demat accounts on December 4th. As per Chittorgarh, Tata Tech is expected to list on December 5, 2023.

Earlier, Master Capital Services in its IPO note had said, " Tata Technologies is a leading global engineering services company with deep expertise in the automation industry. The company posted consistent growth in revenue and margins in the last few years. Tata is known as investor investor-friendly group and enjoys special preference amongst investors. The company has differentiated capabilities in new age automation trend EVs."

Tata Technologies IPO GMP Today:

Coming to the GMP, as per Investor Grain, Tata Technologies IPO's last GMP is Rs 411, last updated Nov 25th 2023 01:30 PM. With a price band of 500.00, Tata Technologies IPO's estimated listing price is ₹911 (cap price + today's GMP). The expected percentage gain/loss per share is 82.20%.

Tata Motors Share Price Target

Meanwhile, on Tata Motors, the latest report of brokerage Sharekhan said, "High-margin models as 76% of its order book is constituted by Range Rover, Range Rover Sport and Defender. JLR expects its performance in H2FY24 will be better than that of its performance in H1FY24. The company is witnessing robust demand and is expected to deliver better operational efficiencies, aided by aggressive launches, market positioning, product differentiation, cost savings, and investments in research and development (R&D)."

Sharekhan's note further said, "The management is looking for double-digit EBITDA margins in both CV and PV business. It is also looking for a positive EBITDA in the electric PV business in the near to medium term. Further Tata Group company is planning to set up a Li-ion cell plant. An EV battery cell plant within the group would help the company in achieving speedy product validation and reduce the dependence on the third-party suppliers. We maintain a Buy rating on the stock."

Sharekhan has recommended a target price of Rs 787 apiece on Tata Motors.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.