The IPO for Tata Technologies is anticipated to start soon. Here is an estimate of the price, according to specialists

 The IPO for Tata Technologies is anticipated to start soon. Here is an estimate of the price, according to specialists

Tata Technologies, a division of Tata Motors, submitted an update to its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) this week. This IPO is one of the most awaited on Wall Street. According to the addendum submitted to SEBI, Tata Technologies would sell 9.57 crore shares in its anticipated IPO, each with a face value of two rupees.

As part of the Tata Tech IPO, Tata Motors, Alpha TC, and Tata Capital Growth Fund I will each sell up to 8.11 crore shares, 9.71 crore shares, and 48.58 lakh shares, respectively.

The company has hired financial institutions like JM Financials, Citi, and BoFA Securities to help with the IPO process.

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The IPO markets have been very active in 2023. Since the Tata Tech IPO has been in the spotlight for a while, investors are interested in learning more about the price range, subscription days, and overall success. Here is what professionals have to say.

Addendum to the Tata Technologies IPO

The amendment is wonderful for Tata Motors (TAMO) stockholders and firm personnel who gain preference, says Mohit Gulati, CIO & Managing Partner of ITI Growth Opportunities Fund. The entire Tata Group's guiding principle is to reduce debt, thus this IPO is an important step in that direction.

On the other hand, according to Vinit Bolinjkar, Head of Research at Ventura Securities, negative global sentiments may have an influence on JLR sales volumes in Q3FY23, which may have an impact on the share price of Tata Motors. Tata Technologies is indirectly easing selling pressure on Tata Motors by setting aside 10% for the company's shareholders, and it is also increasing the possibility that its initial public offering will be fully subscribed.

Bolinjkar believes the company will conduct its initial public offering (IPO) within the upcoming month given its current level of preparation.

In the post-offer paid-up equity share capital, 0.5% is allotted to employees, and 10% is reserved by Tata Tech for current Tata Motors Ltd stockholders.

Values and price range for the Tata Tech IPO

Mohit Gulati thinks the Tata Tech IPO price range of 280 to 320 looks acceptable. 

"I think an 18 to 20 billion rupee market cap will be reasonable. It could certainly reach 30-35k on euphoria. Anything above that is definitely a reach, Gulati said.

On the other hand, Bolinjkar asserted that Tata Technologies is a preeminent international provider of engineering services. They provide tier-1 ancillary suppliers and international vehicle original equipment manufacturers (OEMs) with product development and digital solutions. Tata Tech's revenue, EBITDA, and PAT have increased over the past five years at a CAGR of 9.5%, 10.5%, and 12.2%, respectively, to 4,414 crore, 807 crore, and 624 crore, while its EBITDA and PAT margins have increased by 81 basis points to 18.3% and 161 basis points to 14.1%, respectively.

In the worldwide Engineering Research & Development (ER&D) sector, where the median P/E valuation typically runs from 20 to 25X, Tata Technologies' margins and growth prospects are comparable to those of that sector. This appraisal places the price range for Tata Technologies shares between 308 and 385 rupees per share.

Can the IPO of Tata Technologies live up to investors' hopes?

Gulati claims that 2023 has been fantastic for the IPO market and that everything would go well for Tata Tech. It will be encouraging to see a solid anchor book with long-term investors from pension and sovereign funds rather than diplomatic traders. On an illiquid counter, this will result in a scarcity premium, which can raise prices to any degree!

According to Vinit Bolinjkar, ER&D companies have better business potential than conventional IT services organizations. Consistent expenditures in new product development and process optimization have increased their growth potential both inside and outside of India. 

"Tata Tech is positioned for strong growth as a forward-thinking participant in the global scale ER&D sector. Given the present buzz in the primary market this year, we are certain that Tata Tech will satisfy investors' expectations, stated Bolinjkar.

Is the IPO of Tata Technologies worthwhile?I'll respond to this with a straightforward quotation from Warren Buffett that suggests an answer: "An IPO is like a contested transaction - the seller choose when to invade public, and it's unlikely to take place at a time that's favourable to you," said Mohit Gulati.

Bolinjkar thinks that the valuation and IPO price range established by the company will be the lone factors influencing the choice to invest. 

If the IPO is provided within a realistic P/E valuation range of 20-25X, we believe it would be a compelling BUY opportunity, added Vinit.