502.50% Dividend Ahead: Tata's IT Stock To Pay 1st Ever Dividend Of Rs 10.05/Sh; Buy For Rs 1,410 Target Price

The newly listed Tata Group company, Tata Technologies will be in focus in June month as the midcap IT major will pay its first-ever dividend to its shareholders. The dividend payout is to the tune of 502.50% for FY24. Tata Tech is the first listing of Ratan Tata-backed conglomerate since TCS IPO in 2004. Tata Tech was listed in November last year, and has the potential to touch new highs.

At the time of writing, Tata Tech traded at Rs 1060.65 apiece, up by 1% on BSE with a market cap of Rs 43,053.60 crore. The stock's 52-week high and low is at Rs 1,400 and Rs 1,004.15 apiece. Tata Tech was one of the best IPOs of 2023.

After a mega IPO, Tata Tech made a bumper listing in late November last year. Notably, Tata Tech is the first company to be listed on stock exchanges in 19 years since TCS's IPO in 2024. The stock is currently a multi-bagger, trading higher by 117.18% returns from its IPO issue price of Rs 500 per share.

From its IPO issue price, Tata Tech is up by 113% currently.

Tata Technologies Dividend:

This IT giant has fixed Thursday, June 13, 2024, as the "Record Date" to determine the
entitlement of Members to receive a final and special dividend for the financial year ended March 31, 2024.

The company has announced its first-ever dividend payout of 502.50% worth Rs 10.05 per share for FY24, taking its dividend yield to 0.95%. Of the total dividend payout, the tech player is rewarding a final dividend of Rs 8.40 per share, along with a special dividend of Rs 1.65 per share having a face value of Rs 2 each.

If the final and special dividend as recommended by the Board of Directors is approved at the AGM, payment of such dividend, subject to deduction of tax at source, as applicable, will be made on or after the third day from the conclusion of the 30th AGM, it said. The company's AGM will be held on June 21, 2024.

Tata Technologies Earnings:

In Q4FY24, the company posted a net income of Rs 1,572 million with a Net margin of 12.1%. Also, operating EBITDA at ₹2,400 million; EBITDA margin at 18.4% vs. 18.3% QoQ (adj.) and 17.3% YoY. Further, total operating revenue is up 0.9% QoQ to ₹13,010 million. Additionally, in USD terms, total operating revenues were up 1.2% QoQ to $156.6 million. Services segment revenues came in at $120.2 million. 90 bps sequential improvement in [LTM] attrition to 14.5%.

Warren Harris, Chief Executive Officer and Managing Director, said earlier in May, "In the last 3 years, our revenue from operations has grown at 29% CAGR while Operating EBITDA grew at a 35% CAGR. We closed a total of 12 large deals in FY24 which included one $50 Mn plus deal, and five deals in the $15 to $25 Mn range."

Harris added, "Our large deal pipeline remains healthy and continues to grow. We are currently engaged in several large deal discussions with existing and new customers and anticipate an uptick in deal conversions in the current quarter. We continue to lead our industry in Gen AI and Software Defined Devices (SDx) services - as evidenced by the endorsement that we have received from BMW."

Tata Technologies is integrating systems engineering for software-defined vehicles (SDVs), leveraging its turnkey vehicle development capabilities to engineer the future of mobility with agility. The company is also utilizing generative AI-powered styling solutions for design studios to fuel innovative design ideas for OEMs.

BUY Tata Tech Shares:

JM Financial has set the highest target for Tata Tech. The brokerage recommended BUY for a 12-month target price of Rs 1,410. The brokerage expects Tata Tech's EPS to rise to Rs 19.8 by FY25E and Rs 23.2 by FY26E.

In its research report, ICICI Securities, "We see TATATECH set amid propitious conditions, being ably shouldered by
the fast-growing automotive ER&D segment with conspicuous exposure to automotive (86% of revenue) and a foot in the door in aviation (single-digit share of revenue). ER&D services, TATATECH's mainstay, are outpacing industry growth on the back of structural drivers (increasing digital engineering penetration of enterprises, India's favourable position as an outsourcing destination, lower outsourcing penetration, need for speed to market, etc.) compared to other IT Services players."

ICICI Securities report also said, "We envisage its strides in this direction to be driven by: 1) ownership/equity and commercial relation with its largest client Tata Motors - for which, it gets a leg up vs. peers given favourable growth dynamics and ownership overlap too; and 2) new energy start-up clientele. By virtue of its relationship with Tata Motors, the company also receives support for digital capability creation, as clients undergo digital transition."

"We initiate with BUY and a TP of INR 1,330 on a one-year forward PE of 56x (in-line with lifetime median/average PE) on FY26E EPS of INR 23.8. Key risks: Under-penetration in Europe; and other verticals being unable to adequately compensate for VinFast's ramp-down," the brokerage said.

Tata Technologies is empowering manufacturers with Gen AI-powered virtual sales assistants to support sales and after-sales journeys. Utilizing Gen AI for decoding failure modes can help reduce analysis time by 70%, facilitating proactive decision-making and rapid design enhancements. These advancements represent the company's commitment to innovation and excellence in engineering the vehicles of tomorrow.