Tata Technologies, a subsidiary of Tata Motors, has filed draft papers with the Securities and Exchange Board of India (Sebi) to raise funds through an initial public offering (IPO), making it the second Tata Group company intending to tap the capital markets in 2023.
In December, Tata Play (formerly Tata Sky) had filed initial papers for an IPO, the first by a Tata Group company in nearly two decades since Tata Consultancy Services’ initial stake sale hit the market in 2004. Tata Play, in which Tata Sons holds a 62.2% stake, filed under the new regulations which provides confidentiality to its documents till the final papers are submitted for scrutiny.
Tata Technologies will offload up to 95.7 million shares or 23.6% of the company’s paid-up share capital by way of an offer for sale (OFS). Tata Motors
According to the DRHP, Alpha TC Holdings and Tata Capital Growth Fund I are the other investors selling shares through the IPO, which would be only through the OFS mode. While Tata Technologies will not issue any fresh shares, Alpha TC will pare 9.7 million shares (2.40% stake) and Tata Capital will offload 4.9 million shares (1.20%).
At present, Tata Motors holds a 74.42% stake in Tata Technologies, Singapore-based investment firm Alpha TC (managed by Tata Capital Advisors) owns 8.96% and Tata Capital Growth Fund holds 4.48%.
The company said it is not contemplating a pre-IPO placement of shares and added that about 35% of the IPO size would be reserved for retail investors.
Tata Technologies is an engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers. The firm employs more than 11,081 personnel across 18 delivery centres in the US, Europe, India, China, Japan, and Singapore.
For the nine-month period ended December 2022, the firm’s net profit rose 22.97% to Rs 407.47 crore from Rs 331.36 crore recorded during the same period of previous financial year, while revenue from operations rose 15.5% to Rs 3,011.79 crore (from Rs 2,607.30 crore). The company’s adjusted Ebitda margin has risen to 19.20% for nine months of FY23 from 16.5% in FY20.
The possible IPO, along with the receipt of consideration of electric vehicle deal with TPG, will support Tata Motors’ free cash flow generation from the India business and help attain near-debt zero in the India business (Rs 12,000 crore net debt as of December 2022), according to a Motilal Oswal report issued in February.