Tata Technologies IPO Latest Subscription Status, GMP: Will This Tata Firm List At Premiums Or Discounts?

Tata Technologies IPO: 2 days have concluded of the mega initial public offer (IPO) of Tata Technologies and so far it has received a robust response from investors. By the end of the second day, the IPO had oversubscribed by 14.85 times. The last day of the bidding is scheduled for Friday, November 24. In the grey market, the IPO is hinting at nearly 81% premium listing.

Tata Technologies IPO Latest Subscriptions:

On Day 2 (November 23), as per the NSE data, cumulatively, the IPO received bids of 66,87,31,680 equity shares, oversubscribing 14.85x the offered size of 4,50,29,207 equity shares.

Among investors, Non Institutional Investors (NII) were top bidders with the portion reserved for them oversubscribing by 31.03x, while Retail Individual Investors (RIIs) portion subscribed by 11.19x. The Qualified Institutional Buyers (QIBs) recorded a subscription of 8.55x. Not just that strong demand was also seen from shareholders of Tata Motors as the portion oversubscribed by 20.02x, and the cut-off for employees also saw 2.35x subscriptions.

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.

Tata Technologies IPO GMP Today:

On Friday, as per Investor Grain, Tata Technologies IPO's last GMP was Rs 403, last updated Nov 24th 2023 07:58 AM. With a price band of 500.00, Tata Technologies IPO's estimated listing price is Rs 903 (cap price + today's GMP). The expected percentage gain/loss per share is 80.60%.

Tata Technologies Growth And Listing Outlook

In its IPO note, Motilal Oswal said, "We like TTL and recommend Subscribe given its niche presence, strong parentage and strategic partnership with marquee clients. This along with TTL's focus on diversifying its offerings and clients, puts it in a sweet spot to tap huge outsourcing opportunities in ER&D space. The IPO is attractively priced at 29x 1HFY24 P/E (on an annualized basis) which is at a discount to its peers. Tata Group is coming with an IPO after a gap of 19 years, catching investors' fancy and hence could see listing gains as well."

Motilal highlighted four key factors of Tata Technologies. These are:

1. Pure-play ER&D & Digital Solutions Specialist:

Tata Tech is a leading global engineering services player offering product development (80% of 1HFY24 revenue) and digital solutions (20%) including turnkey solutions to global OEMs and their Tier-1 suppliers. It is ranked 1st among all India-based ER&D service providers & top 2 globally, in electrification. It is primarily focused on the automotive industry (70% 1HFY24 revenue).

2. Diversifying client base and services:

The company is diversifying its clients' base to reduce dependence on anchor clients - Tata Motors & JLR whose contribution has fallen to 36% by 1HFY24 end. It now has 35+ auto OEMs & Tier 1 suppliers and 12+ new energy vehicle companies as clients, with prominent names like McLaren, Honda, Ford, and VinFast.

TTL is also scaling adjacent verticals of Aerospace and Transportation and construction Heavy Machinery to leverage Automotive expertise. It recently got empanelled by Airbus which would help tap the fast-growing Aerospace vertical - expected to grow at 16-17% CAGR by 2026.

3. Large Market Opportunity:

Global ER&D spending is expected to grow at 10% CAGR to $2.7tn by 2026E with 3rd party outsourcing expected to grow faster at 14-17% for Indian players. The largest ER&D vertical - Automotive is expected to grow at 7% CAGR by 2026 to $27-29bn led by disruption in the automotive industry due to autonomous, connected, electrification, and shared mobility.

4. Financials:

TTL recorded Revenue/PAT CAGR of 36%/60% over FY21-23 with EBITDA margins improving to 18.6% (vs 16.2% in FY21), driven by strong unit economies, better utilization, & improved offshore mix. Cash conversion remains strongly supported by a lower working capital of 36 days. Return ratios are healthy with RoCE of 24%.

Post the IPO, Tata Tech will list on both BSE and NSE. The listing is expected on December 5, 2023.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.