This is big news for Tata Group investors. After almost two decades, the Tata Group is about to go public (IPO). Tata Technologies, a subsidiary of Tata Motors, has filed for initial public offering with the Securities and Exchange Board of India (SEBI).
After 19 years, the Tata Group would go public again with its IPO. The group last issued the IPO for Tata Consultancy Services, which went public in 2004. According to sources in the market, Tata Tech’s IPO will include 95,708,984 shares for cash, or approximately 23.60 percent of its paid up share capital.
The IPO of Tata Technologies has been the most anticipated since Tata Motors announced it was separating its engineering division. Investors have been wondering how Tata Technologies’ initial public offering (IPO) will affect Tata Motors since the company filed the required documents. Let’s decode all of this BW explained.
What is the IPO about?
The initial public offering (IPO) consists of an offering to sell up to 81,133,706 shares of Tata Motors, up to 9,716,853 shares of Alpha TC Holdings and up to 4,858,425 shares of Tata Capital Growth Fund I, each of which is the Opportunity could represent up to 20 percent, 2.40 percent and 1.20 percent of Tata Technologies’ paid-up share capital, respectively.
How will Tata Motors benefit?
Around 75 percent of the subsidiary is owned by Tata Motors and as part of this bid the company hopes to sell 8.1 million of its shares. Looking at the recent buyback to examine the value of Tata Technologies, it becomes clear how Tata Motors will benefit. The stock was last valued at Rs. 198 per share at the time
The valuation of the Tata Motors subsidiary is estimated at approximately Rs 8,000 crop considering the total number of shares on offer. Tata Motors is selling just 8.1 million of its 30.3 million shares in the deal, which is valued at Rs 6,100 crore. Tata Motors is therefore expected to receive 1,600 crore from this IPO. The car manufacturer is supposed to use this money to pay off its debts.
Tata Tech’s recent earnings
Tata Technologies revenue was Rs 3,578 crore for FY22 and Rs 3,052 crore for the first nine months of FY23. Tata Tech is valued at the low end of P/E at Rs 8,000 crore, which is lower than peers like Cyient, KPIT Tech, Zensar Tech and L&T Tech which are publicly traded. It is valued at Rs 16,300 crore at the high end.
The IPO of Tata Technologies and Tata Motors shares are well received by stock market professionals. The IPO, which is expected to go public in the next two to three months, is expected to give Tata Motors a significant boost.
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