Tata Technologies IPO: Are the Valuations Too High?

Tata Technologies IPO: Key Details, GMP, and Expert Opinions

The much-awaited Tata Technologies IPO is set to hit the Indian primary market tomorrow, 22nd November 2023. The subscription window will stay open until 24th November 2023. This IPO has generated considerable interest for several reasons. One is the strength of the Tata Group brand. Another is the company’s growth prospects. Its role in the global manufacturing and engineering services industry is also a factor.

In this post, we’ll cover the latest details. We will also discuss the grey market premium (GMP). Additionally, we’ll share expert opinions. These insights aim to help investors decide whether to apply for the IPO.

Tata Technologies IPO Overview

Tata Technologies, a leading provider of engineering and industrial design services, is looking to raise ₹3,042.51 crore from its public offering. Importantly, this is a completely offer for sale (OFS) in nature. The funds raised will not go toward expanding the company’s operations. Instead, they will primarily be used by the existing shareholders to exit or reduce their holdings. The company has set the IPO price band between ₹475 and ₹500 per share. This price band is considered reasonable. The reasonableness is due to its strong market position and growth trajectory.

Key Dates for Tata Technologies IPO

• IPO Opening Date: 22nd November 2023
• IPO Closing Date: 24th November 2023
• Allotment Date: 27th November 2023
• Listing Date: 29th November 2023

Tata Technologies IPO GMP: ₹351 Premium

As of today, Tata Technologies IPO GMP (grey market premium) is ₹351, which remains unchanged from yesterday. Strong investor sentiment for the IPO is indicated by the consistent GMP in spite of the stock market’s volatility.. A GMP of ₹351 shows a premium of around 70% compared to the upper price band of ₹500 per share. This is considered a positive sign, suggesting that market observers expect strong demand for the shares once they are listed.

GMP is a speculative figure. It is important to note that it can be influenced by various factors. This includes grey market players who have vested interests in the offering. Experts caution that investors should not make decisions based solely on GMP. This is because it’s not a regulated market and can sometimes be artificially inflated. Instead, it’s better to focus on the fundamentals of the company, its financial health, and long-term growth prospects.

Tata Technologies IPO Subscription Details

For retail investors, the Tata Technologies IPO offers shares in lots of 30 shares each. An investor will need to apply for at least one lot. This would cost around ₹15,000 (at ₹500 per share). Given the high market interest and the company’s reputation, retail investors are likely to face a competitive subscription process.

IPO Valuation and Growth Potential

At the upper price band of ₹500 per share, Tata Technologies is valued at a price-to-earnings ratio (P/E) of 32.5x, based on the company’s FY23 earnings. This valuation is higher than some of its peers in the engineering and IT services sector. These peers include Tata Elxsi, L&T Technologies, and KPIT Technologies. Yet, experts argue that this premium is justified. They highlight the company’s impressive growth prospects. It also leads in the engineering and industrial design space.

Expert Opinions on Tata Technologies IPO

1. Ventura Securities has given a ‘Subscribe’ recommendation for the Tata Technologies IPO. The firm highlights the company’s exposure to the growing manufacturing and digital transformation sectors. This is especially significant in light of the global shift towards the China+1 strategy. The increasing manufacturing capex also plays a role. They believe the company’s strong fundamentals and expected growth will drive its performance in the coming years. Ventura analysts note that Tata Technologies IPO is priced at a TTM P/E of 28.3x (at ₹500), which is relatively reasonable given the company’s future growth potential. They recommend subscribing for long-term gains, based on the company’s growth trajectory.
2. Arihant Capital has also recommended a ‘Subscribe’ tag for the IPO. The firm points to the company’s strong service portfolio, which includes IT consultancy, CAD/CAM engineering, and SAP implementation services. Tata Technologies has established strong partnerships with industry giants like Dassault, Siemens, and Microsoft Azure. These partnerships give it a global footprint and offer a competitive edge in digital engineering services. Arihant highlights the company’s stellar financial performance. It achieved a CAGR of 36% in revenue. Additionally, there was a 62% increase in PAT (Profit After Tax) from FY21 to FY23. In the first half of FY24, revenue and PAT saw a year-on-year growth of 34% and 36%, respectively. This robust financial growth coupled with Tata Technologies’ strong client base and strategic partnerships positions it for continued success.

Should You Apply for the Tata Technologies Initial Public Offering?

There is considerable excitement around the Tata Technologies IPO. Investors should carefully assess their risk tolerance. They must also consider their long-term investment objectives.

If you are looking for a short-term listing gain, the strong GMP suggests good returns once the shares are listed. Positive expert sentiment also indicates this possibility. Still, for long-term investors, the company is attractive. Its solid fundamentals, consistent growth, and leadership in digital transformation services make it appealing.

As always, before making any investment decision, conduct thorough research. Consult with financial advisors to confirm that the Tata Technologies IPO aligns with your portfolio and investment goals.

In conclusion, the Tata Technologies IPO presents an intriguing opportunity. It has a solid valuation. There is strong market sentiment and promising growth prospects. Whether to apply for the IPO depends on your individual investment strategy. Consider your appetite for risk. For many, this IPO is worth considering as a part of a diversified investment portfolio.