Your Wait Is Over Because Tata Technologies Entering The IPO ( Initial Public Offering ) Market – Know About It, In this post we are talking about the the Tata Technologies IPO which is going to allotment within two days that is on 30th November 2023. Here in this article we are talk about the complete case study of tata technologies IPO , Subscription details, and the method of status ETC.
I’m really sure that many people were waiting for this Special IPO. Well this is a company of course a part of the tata group and it has been 20 years since any tata group company got listed on the stock exchange it was somewhere around 2004 when the tata group was listed in the market now we are in the 2023 here where tata technologies limited coming up with an IPO something special about its company is headquartered at Pune, Maharashtra. And this company was founded in the year of 1989. This company was subsidiary of Tata Motors Limited and like i obviously mentioned that it is the part of the tata group and that you all know that tata group have so many diversified product it could be from salt to steel this group is present in almost everywhere.
What Does The Company Actually Do ?
People have that typically if you buy shares in the unlisted space they will give you profits, an IT company which it is not it is actually an Engineering R&D company and if you were to read in the prospectus the prospectus mentions that this company is engaged in providing outsourced Engineering Services and digital transformation services to Global manufacturing clients helping them conceive design develop and deliver better products to various Industries such as Aero space, automotive industrial machinery and consumer goods. Let me just give you an example if I want to have my own car RR car oh uh but the problem is that I’m not really sure about exactly how the design should be, I’m not sure about what sort of development will it required, I’m not sure sure about what all engineering related you know technology or engineering related requirements will be there, I’m not sure about how this will be exactly delivered, I’m not sure about how can I make it more and more efficient so for that I will need one single point of contact who can help me with an end to end solution who can come up with a turnkey project so I just tell them I want a car right from design to the engineering to the delivery everything will be done by one single company and that single company that single point of contact for me can be Tata Technologies Limited. Now if you read this one more time now you’ll understand what did I do for my RR car I outsourced them correct outsourced what entire Engineering Services whatever will be required for the car they’ll do it for me anything which is about the digital transformation because I’m sure everyone knows that in EV cars a lot of digital things go inside it right so everything will be done by them and uh they are giving it for Global manufacturing clients okay but they’re also going to give it to me right Global TK for RR it’s important right but what are they going to help for they’re going to help them in conceiving the idea in designing it, in delivering it, in developing it, delivering it, in a better way and for automobiles was the example that I gave but not only do they do this for automobiles but also for Aerospace for industrial machinery and for consumer goods so I hope you have understood everything what does the company do it’s like I just tell them I want a car whole conceptualization.
Industry Analysis :
Now let’s understand a bit more about the industry in which this company operates so the engineering R&D spends outsourced to engineering service providers to at almost 105 to 110 billion US dollars and if I were to understand the CAGR at which this entire industry grew it was at approximately 14 to 16% CAGR, but and of course this is like more than twice the growth rate of the western European service providers so good for our country uh now if I were to talk about the coming four years or basically 22 to 26 estimated figures the CHR is estimated to grow at 14 to 17% CAGR of course as per RHP now uh when I tried to dig down more into the RHP I found out that there are certain industry growth drivers which can lead this growth and the RHP mentions three factors which is A,C,E factors A stands for autonomous, C stands for connected and E stands for electrification. Now if I’m talking about advanced Safety and Automotive or autonomous driving that is nothing but the first point which is about autonomous I’m sure you might have experienced these days that some cars already have these autonomous features where let us say this car is going closer to the car in front of it it will auto break that is nothing but an autonomous feature. There are some car cars which will be enabled with autonomous parking or a park assist and in fact some Tesla cars now now go fully autonomous basically a driverless car so all these are examples of autonomous more and more autonomous features coming into the car it’s going to be beneficial for a company like the one which we are analyzing right now Tata Technologies Limited, the second one is connected connected stands with for connectivity I’m sure everyone will be like a lot of cars these days have connectivity for roadside assistance they have connectivity for something like infotainment for safety it could be for diagnostics efficiency, for navigation and one more latest point which is upcoming is about autonomous or connected payments.
Financial Segments :
Now let’s understand the financials we’ll try and understand the segmental breakup we’ll try and understand the geographical breakup and then we’ll move on with the financials and for that have a look at this now first if we try and understand the segmental breakup the first one you can see Services segment the second one you can see is a technology solution segment and if I were to just you know round up the figures you can see Services segment is almost contributing to 80% of the revenue whereas Technology Solutions is contributing to roughly 20% of the revenue this is about 30th September 2023 latest data. Now you can see that out of that 78.6 to% which I rounded rounded it off to 80% out of that 69.9% is contributed by Automotive only okay so you can now understand &d for automotive is so important for this company and balance barely 9.52% is contributed by others and I hope with the help of this breakup also you’re able to understand why I’m shouting from the beginning of the video because this is not like a pure IT company, Technology Solutions is contributing barely 23.8% of the Revenue. Now if I were to go to the geographical segment you can see India is contributing to 35.14% per of the revenue Europe roughly 26% North America 19% rest of the world 18% so all in all I can say that it’s a very well Diversified Revenue uh flow for the company not only from US or not only from Europe and so on right. Now if I were to go to the financials of the company have a look at this and you can see that the revenue from operations is continuously increasing the EBITDA has been continuously increasing, the profitability has been continuously increasing in and if I were to understand the CAGR sales growth from 21 to 23 is at 36.23% CAGR, EBITDA growth is at a 45.2% CAGR and net profit has a growth of 61.53% CAGR. Well that shows the operational efficiency because sales is growing at 36.23% but net profit has grown at 61.53%.
Strength Factors Of Tata Technologies :
Now let’s understand the strengths and the key risks for the company have a look at all these strengths all are self-explanatory we have already discussed about this especially in the first point I did discuss about the total revenue contribution from automotive industry that is a big one for this and of course that’s a strength for this company they have strong digital capabilities they have some amazing set of clients I did discuss about the Swedish company in the begin while I was discussing what does the company do I did take examples of Tata Motors limited, Jaguar Land Rover and other uh important clients as well right and of course they also have a global delivery model enabling intimate client engagements.
What Are The Key Risk Of The Tata Technologies :
Now let’s go to the key risks of the company and for that have a look at this chart now out of the total revenue of the company 57.36% is contributed only by top five clients of the company and top five clients will of course include clients like Jaguar. Land rover and Tata Motors limited. if you see your sector dependence how much is the sector dependence on Automotive 69.9% of the total revenue is contributed by Automotive sector only. as I mentioned you know are they specializing in this area yes but then what could be the risk if the overall economy faces some some slowdown automotive is a type of a sector which is like a cyclical sector what does cyclical sector means if the economy is down automotive sector will also be down but has there been a precedence for this and answer is yes from 2010 to 2018 entire automotive sector was in a slowdown where this entire sector was growing barely at 6% but one company which is KPIT Technologies which is one of the peers and it has been again mentioned in the RHP that it is one of the peers this company while the entire automotive was in a slowdown this company was growing at 22% CAGR in revenues now if this be so I can say that even though the entire sector is in slow down the companies may not be wanting to spend less on engineering R&D and that was the reason why KPIT Tech was doing well and I think the same logic can be copy pasted for Tata Technologies as well, the third risk is about exchange rate fluctuations and for that have a look at this.
Now if you see out of the total revenue which the company generates 64.75 of the total revenue is related to foreign currency revenue but now if you were to understand this you can see that the outstanding unhedged foreign currency positions financial assets are 5,154 million rupees and financial liabilities are just 600 million rupees. Now why is this important okay agreed that a big chunk of the revenue comes from foreign currency agreed that a big chunk is unhedged but if you remember the major figures were for financial assets. Now in the past we have seen that rupee typically depreciates and if that be so if they have a major if the major amount is in financial assets that typically will not be counted as a risk is what my interpretation is and talking about the last risk it is about competition from group companies something like TCS or Tata Alexi but again it is mentioned in the RHP that the overlap the extent of the overlap is absolutely absolutely limited.
Peer Comparison To Similar Organizations :
Now let’s have a look at the peer comparison which is given in the RHP they have mentioned three listed peers the first one that they have mentioned is KPIt Technologies they have also mentioned L&T Technology services and they have also mentioned Tata Elxsi Ltd. We are going to have a look at the chart but I feel that L&T Technology Services has a bigger gamut of services and products that they offer. If I’m talking typically about engineering R&D and that too in the automotive segment then I feel KPIT Technologies limited and Tata Elxsi are better peers for them and and now let’s move on to the snapshot given in the RHP for that I have will look at this now like I mentioned agreed L&T technology Services Limited revenue is highest amongst the peers but as I mentioned they have a wider range of service and products to be delivered but if I were to compare only Tata Technologies limited KPIT Tech and Tata Elxsi, Tata Technologies limited has the highest revenue from operations. Now the one more thing that if you have a look at the PE, KPIT PE is at 8.31 Tata Elxsi is at 61.55 and at 500 rupees price band Tata Technologies PE is coming at 32.53. for a long time they understand the valuation and they will understand whether 32.53 is overpriced or underpriced absolutely you can let me know what is your interpretation in the comment section as well. If I’m talking about the PV valuation average of all these is coming out to 16.43% n PB for Tata Technologies is coming on 6.79%.
IPO Details :
Now let’s move on with the IPO details but some interesting facts and figures coming up here as well first basic information here you can see IPO date you can see opens on 22nd November closes on 24th November uh important point this is a 100% of so not even one rupee will go to the company entire amount will go to the selling shareholders but who are they? selling shareholders are Tata Motors limited Alpha TC holding, PTE Limited and Tata Capital Growth Fund One. Now U out of all the the entire IPO issue some issue has been reserved for Tata Motors limited shareholders and how much has been reserved 10% of the offer has been reserved for eligible shareholders of Tata Motors limited. Now what do they mean by eligible shareholders they mean that those who hold Class A shares of TML of Tata Motors limited should be holding these shares as on 13th November 2023 so if you don’t hold the shares as I release the video you are not an eligible shareholder of Tata Motors limited big point is that they will be allotted shares based on a proportionate basis but no discount is going to be offered for the shareholders of Tata Motors limited.
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