Banger: Tata Technologies IPO Fully Subscribed In Less Than 1 Hour Of Opening; Latest GMP, Brokerages Outlook

Tata Technologies IPO: The much-awaited Tata IPO made a bumper opening on Wednesday with issue fully-subscribing in just less than an hour of the launch in the primary market. All categories right from institutional to retail, have oversubscribed the IPO. Its grey market premium (GMP) witnessed a strong rally as well. The majority of brokerages are optimistic about the company and have recommended subscribing. Bidding in the IPO will be available till November 24.

As per the NSE data, at around 10.53 am, the IPO received bids of 6,36,35,070 equity shares -- oversubscription of 1.41 times against the offered size of 4,50,29,207 equity shares.

Qualified institutional buyers (QIBs) were the major buyers of Tata Tech IPO as the category's portion oversubscribed by 1.98 times. While non-institutional investors (NIIs) portion oversubscribed by 1.54 times, and retail individual investors (RIIs) portion fully subscribed by 1.11 times. The portion reserved for Tata Motors shareholders also fully subscribed by 1.62 times.

From the total IPO size, 50% of the shares will be reserved for qualified institutional buyers (QIBs), while 15% to be kept for non-institutional investors, and 35% to be allocated to retail individual investors (RIIs). Additionally, 10% of the offer for subscription by eligible shareholders of Tata Motors.

Tata Technologies IPO GMP:

As per Investor Grain, Tata Technologies IPO's last GMP is ₹355, last updated Nov 22nd 2023 09:58 AM. With a price band of 500.00, Tata Technologies IPO's estimated listing price is ₹855 (cap price + today's GMP). The expected percentage gain/loss per share is 71.00%.

The IPO comprised purely offer for sale (OFS) of up to 60,850,278 equity shares including 1,58,21,071 shares of anchor investors. The IPO will be available from November 22nd to 24th.

The price band for the IPO is fixed at Rs 475 to Rs 500 per share having a face value of Rs 2 each. The bid lot size is 30 Equity Shares and in multiples thereof.

On November 21, the company raised about Rs 791 crore from a total of 67 anchor investors. The company allotted about 1.58 crore shares at the upper price band of Rs 500 apiece to these investors.

Companies like JM Financial, Citigroup Global Markets India and BoFA Securities are acting as the book-running lead managers of the IPO. While Link Intime India is the registrar of the issue.

Should You Subscribe to Tata Tech IPO?

Key points to consider before subscribing to the Tata Technologies IPO:

Geojit:

At the upper price band of Rs.500, TTL is available at P/E of 28.8x (FY24E annualised EPS), which appears to be reasonably priced compared to peers. Its strong brand legacy, extensive automotive expertise, diversified global presence and strategic partnership with industry leaders provide a distinct advantage that aligns well with its growth ambitions. Hence, we assign a "Subscribe" rating on a medium to long-term basis.

STOXBOX:

The company has a track record of sustained Revenue/EBITDA/PAT growth which grew at a CAGR of 85.4%/112.8%/160.9% during the FY21-23 period, respectively. On the upper price band, the issue is valued at a P/E of 32.51x based on FY23 earnings which we feel is fairly valued. We, therefore, recommend a "Subscribe" rating for the issue.

SBI Securities:

At the upper price band of Rs 500, Tata Technologies is trading at 32.5x FY23 P/E multiple. Its peers are trading at a relatively expensive valuation with FY23 P/E multiple of 108.9x for KPIT, 68.5x for Tata Elxsi and 40.1x for LTTS. We believe Tata Technologies is well placed to encash the growth opportunities in the ER&D space and looking at the relatively cheaper valuations, we recommend investors to SUBSCRIBE to the issue.

Ventura Securities:

Over FY21-23, TTECH's revenue/ EBITDA/ net profit grew at a CAGR of 36.2%/ 45.9%/ 61.5% to INR 4,414 cr/ INR 807 cr/ INR 624 cr, respectively, while EBITDA and net margins improved by 240bps (to 18.6%) and 409bps (to 14.1%), respectively. Return ratios - RoE and RoIC improved by 971bps (to 20.9%) and 308bps (to 36.3%) in FY23.

TTECH's proposed OFS size is INR 3,043 cr. TML is selling 46,275,000 shares, which will reduce its stake from 64.8% (pre-issue) to 53.4% (post-issue). Other selling shareholders are Alpha TC Holdings Pte Ltd (selling 9,716,853 shares) and Tata Capital Growth Fund I (selling 4,858,425 shares), which will reduce their holdings from 7.3% to 4.9% and 3.6% to 2.4% respectively.

With the gradual recovery in the global economy, rising manufacturing capex and shift in manufacturing from the US/Europe/China to India due to cost inflation and China+1 strategy, we are expecting strong in TTECH's financial performance in the coming years. At the IPO price of INR 500 (upper price band), TTECH is valued at a TTM P/E of 28.3X. Considering the growth opportunities and strong fundamentals of TTECH, we recommend a SUBSCRIBE rating for this IPO.