Tata Motors up 1% on announcing IPO date for Tata Tech; DVR hits new high

Shares of Tata Motors gained 1 per cent to hit an intraday high of Rs 660.80 on the BSE in Wednesday's trade after the company announced that Tata Technologies' initial public offering (IPO) will open for subscription on November 22. Tata Technologies IPO will be the first IPO from the Tata Group since the successful launch of Tata Consultancy Services (TCS) in 2004.

Shares of Tata Motors DVR (Differential Voting Rights), meanwhile, hit a new high of Rs 453.50, gaining 2 per cent on the BSE. The stock surpassed its previous high of Rs 449.65 touched on November 3, 2023.

Tata Technologies, a subsidiary of Tata Motors, had filed a draft red herring prospectus (DRHP) on March 9, 2023, with the Securities and Exchange Board of India (Sebi) for its IPO.

Tata Technologies, which provides engineering and product development digital services, said its IPO would comprise an offer for sale of 60.85 million shares, representing 15 per cent of its paid-up capital.

The IPO will open for subscription on Wednesday, November 22, 2023 and shall close on Friday, November 24, 2023.

Tata Motors will offload an 11.4 per cent stake, private equity firm Alpha TC Holdings will sell a 2.4 per cent stake, and Tata Capital Growth Fund I will dispose of a 1.2 per cent shareholding.

Interestingly, the company reduced its IPO size from 96 million shares in the past (DHRP) to 61 million shares now (RHP), primarily reflective of recent stake sale of 10 per cent of Tata Technologies by Tata Motors to TPG Climate Fund and others.

This, in a way, will also limit the total quantum of stake sale by Tata Motors to the original quantum of ~20 per cent as against what was feared to the over and above the IPO stake sale at the time of stake sale to the PE fund.

ICICI Securities expects it to have positive rub-off effect on the company as 10 per cent of issue size is reserved for retail shareholders of Tata Motors as well. With Tata Motors holding 50 per cent plus stake in Tata Technologies post its partial stake sale in IPO, this is indeed value accretion event for Tata Motors, it said.

Meanwhile, in another development, S&P Global Ratings has upgraded the Long-term issuer credit and issue ratings of Tata Motors and its wholly-owned subsidiaries (TML Holdings Pte. Ltd and Jaguar Land Rover Automotive Plc).

While Tata Motors' and TML Holdings' ratings have been revised to 'BB+/Postive' from 'BB/Stable', JLR Automotive's rating has been revised to 'BB/Positive' from 'BB-/Stable'.

The upgrade comes a week after global rating agency Moody's upgraded Tata Motors' corporate family rating (CFR) from 'B1' to 'Ba3', reflecting continued improvement in the company’s credit profile. It also upgraded Jaguar Land Rover Automotive Plc's (JLR) CFR to 'Ba3' from 'B1'. The rating agency maintained a positive outlook on all ratings.

On the company's debt reduction plans, Moody's estimated that Tata Motors would reduce its gross debt by almost 40 per cent by March 2024 from March 2022 levels, having already reduced debt by 25 per cent as of March 2023. "Sustained debt reduction and earnings expansion will pave the way for Tata Motors' leverage, measured by Moody's adjusted consolidated gross debt/Ebitda, to steadily improve to less than 3 times from around 4 times at March 2023 and 6.4 times at March 2022," said Kaustubh Chaubal, senior vice president and lead analyst for Tata Motors at Moody's.