Tata Technologies IPO: A Warning for Unlisted Market Enthusiasts

OFS consists of up to 60.85 million shares held by its existing shareholders

Investors in Tata Technologies Ltd may face a surprise as the IPO price is reported to be lower than its unlisted market listing, leading to a 47.4% discount. With the IPO price band set at Rs 475-500 per share, the shock stems from the unlisted market trading at Rs 950 per share, showcasing a steep increase from around Rs 100 per share in June 2020.

This surge, amounting to almost 1000%, has been largely attributed to the anticipation of the upcoming listing on the exchange. However, experts caution against entering the unlisted market without thorough research, emphasizing its unpredictable and highly risky nature. Successful wealth creation in this market demands patience and careful consideration.

Tata Technologies, a Tata Motors subsidiary, is set to go public on November 22, making it the first Tata Group company to do so in nearly two decades. This IPO marks the group’s return to public offerings since TCS went public in 2004. The offer for sale (OFS) will conclude on November 24, with the basis of allotment on November 30 and equity shares credited to demat accounts on December 1. The listing is scheduled for December 4.

At the highest price range, Tata Technologies aims to raise approximately Rs 3,042.51 crore, valuing the company at about Rs 20,283 crore. The OFS includes up to 60.85 million shares held by existing shareholders, along with employee subscription of up to 2.03 million shares and Tata Motors Ltd shareholders’ subscription of up to 6.09 million shares. Notably, the gray market premium is trading at Rs 230 per share.

Tata Tech’s Price-to-Earnings ratio (PE) for FY23 stands at 32.53x, making it comparatively cheaper than L&T Technology Ltd (37.47x), KPIT Technologies Ltd (80.31x), and Tata Elxsi Ltd (61.55x).

Despite concerns over the IPO pricing relative to the unlisted market, Tata Technologies Ltd reported a nearly 36% YoY increase in net profit for the six months ending September 2023. The net profit for the half-year reached Rs 351.90 crore compared to Rs 259.06 crore a year ago. The revenue also witnessed a 33.8% YoY increase to Rs 2,526.70 million, with an EBITDA margin at 18.39%, down from 19.73% last year.

Investors are advised to exercise caution and consult certified professionals before making investment decisions, as the above views are those of individual analysts and not the website or its management.