The second-biggest client of Tata Technologies is in serious jeopardy; the share price dropped by 90%

 The second-biggest client of Tata Technologies is in serious jeopardy; the share price dropped by 90%

Vinfast is one of Tata Technologies' top five clients, accounting for 57% of customer revenue and 71% of service revenue.

The last six months have seen a more than 80% decline in Vinfast Auto shares.

Vinfast, a Vietnamese electric vehicle manufacturer and one of Tata Technologies' top five clients, has gained notice lately because of notable swings in its stock price. The two companies that contribute most to the revenue of Tata Motors Tata Technologies—whose IPO was just completed—are VinFast and Jaguar Land Rover (JLR). Five anchor clients accounted for roughly 57% of overall revenue and 71% of service revenue in H1FY24.

Vinfast contributed significantly to this revenue; Vinfast has been a Tata Tech client since 2018. Recently, analysts have voiced worries regarding VinFast, a company listed on the Nasdaq, citing factors such as diminishing client base, inflated valuations, and related party-driven electric vehicle (EV) sales. traction.

As to the US Securities and Exchange Commission filings for the July-September quarter, a significant amount of VinFast's electric vehicle sales for the nine months that concluded in September 2023 were made to affiliated entities or parent company linked parties. There are now significant concerns about the company's capacity to have a significant impact in the market as a result of this trend.

Additionally, the statistics demonstrated that over half of Vinfast's EV sales this year were to family members, underscoring the low level of interest in the company's models. According to Barron's, out of the 11,300 cars sold in the first half of this year, 7,100 went to Green & Smart Mobility (GSM), a Vietnamese taxi service under the ownership of Vingroup, the parent company of the automaker.

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Concerns about sales growth overseas

VinFast has lofty goals for the global stage. However, some well-known American auto critics gave the company's EVs harsh initial evaluations, labeling them "not quite ready" and "disappointing". After a massive recall was prompted by a software fault that raised the danger of crashes, the US National Highway Traffic Safety Administration (NHTSA) discovered the cause of the initial shipment of cars in the US being severely delayed.

The EV manufacturer isn't daunted by these setbacks and is still working to expand globally. VinFast intends to supply 40,000 to 50,000 vehicles in 2023, almost seven times higher than the 7,400 EVs delivered in Vietnam last year, despite obstacles brought on by the weak global economy. The company's goal to deliver 50,000 cars this year, nevertheless, is viewed as "unrealistic" by some analysts.

worry about net loss

VinFast's revenue more than doubled in the September quarter as a result of rising car sales and deliveries. Vehicle sales were $319.5 million, almost three times higher than in the same period previous year, while deliveries were over 10,000, up from only 153. Despite this, higher costs caused the company's net loss to widen by about 34%, from $466 million in the same quarter of last year to $623 million this quarter.

Pham Nhat Vuong, the company's founder, reportedly informed investors during the annual general meeting in May that the automaker hopes to break even by the end of 2024.

valuations and erratic share price fluctuations

Established in 2017 by Vingroup, a prominent private conglomerate in Vietnam, this is the inaugural Vietnamese automobile brand to venture into international markets and also the first to extend into the manufacturing of electric vehicles (EVs), including automobiles and scooters. The company's spectacular debut earlier this year and subsequent fast surge in stock price made history for the company.

An alternate path to the stock market was taken by the automaker when it went public through a merger with a shell business. Since listing, the stock price has experienced unexpected swings, akin to the volatility experienced by startups. VinFast's stock last ended at $6.56, a significant discount to its all-time high of $93 per share.

Even while VinFast only sold 24,000 vehicles last year, its valuation in September of this year pushed it over competitors like Volkswagen, Ford, and General Motors (GM) to become one of the most valuable automakers in the world. abandoned, with sales reported in the lakhs.

Even though VinFast has only recently started to ramp up production, at its peak, the six-year-old company was momentarily valued at $200 billion, twice the combined value of Ford and General Motors.

The last six months have seen a more than 80% decline in Vinfast Auto shares. It is subject to erratic swings because there aren't enough shares available for trading. The company's market value is currently estimated to be around $15.46 billion, as shares are trading below their $22 listing price.

Analyst Arun George of Smartkarma, an independent research network, said that VinFast is being praised because of its EV sales that are driven by parties, its falling customer base, its operating losses, its cash burn, its rising equity, and its inflated valuations.

Tata Technologies goes public

Since Vinfast is one of Tata Technologies' five main clients, any decline in these clients' financial standing could mean a significant loss of income for the Tata group firm. Investors responded favorably to the Tata Technologies IPO in spite of this apprehension.

The first initial public offering (IPO) of the Tata Group in 20 years received 69.43 subscriptions, with bids totaling Rs 1.56 lakh crore for an issue size of Rs 2,200 crore, minus the anchor component.

Several brokerages have rated the issue as "Subscribe," pointing out that Tata Technologies generates cash and has $150 million in cash on hand at the end of FY23. The post-issue market capitalization has been projected by analysts to be in the range of Rs 19,200 crore to Rs 20,250 crore.