Tata Tech plans IPO by fiscal-end, the first by Tata group in 18 years

The company is in talks with several banks, including Citibank, to manage the share sale; The last share sale by a Tata firm was in 2004, when TCS floated an IPO

After almost 18 years, a Tata group firm is planning to sell shares to retail investors with Tata Technologies, the profit making arm of Tata Motors, planning to list its shares in the current fiscal and use the proceeds to expand its business to new clients.

Once launched, the initial public offer will be the first from the Tata group since the group holding firm, Tata Consultancy Services listed its shares in 2004. Bankers said the company is in talks with several banks, including Citibank, to manage the share sale. Tata Motors owns 74 per cent in Tata Technologies and remaining stake is owned by other Tata group firms. Talks on the size of the issue and dilution are currently on. “The Tata group is likely to dilute around 25 per cent with the share sale though a final decision will be taken once the markets improve,” said a banker close to the development.

As of now, around 40 per cent of Tata Technologies’s income comes from its top two captive customers--Tata Motors and JLR, which analysts say poses a significant revenue concentration risk for the company. Bankers said the company earns its income from three industrial segments--automotive, aerospace and industrial machinery, but derives the biggest chunk of its revenue from the automobile segment.

Data submitted by the company shows that it earned revenues of Rs 2,648 crore in the first nine months of fiscal 2022 and a net profit of Rs 330 crore.

Tata group officials declined to comment on the IPO plans.

The firm's share sale comes at a time when several top companies are planning to list their unlisted companies to unlock value for the holding firms. Reliance Industries, India’s biggest company in market capitalisation, is planning to list its wireless telephony and retail arms. An announcement by RIL is expected at the forthcoming annual general meeting of the shareholders.

Fifty companies have filed their draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) in the first half of 2022. This is the highest number of filings for IPOs since 2007, data from PRIME Database shows. Bankers said the surge comes on the back of strong momentum seen in the IPO market in 2021 and many companies may have either put on hold or abandoned their issue plan because of volatile market conditions, the broader market crash, and drying up of liquidity after RBI raised rates.