Tata Motors up 1% in weak market as Tata Technologies files DRHP with Sebi

This possible IPO along with the receipt of consideration of EV deal with TPG will support FCF generation from the India business to attain near debt zero in the India business, MOFSL said.

Shares of Tata Motors were up 1 per cent at Rs 437.85 on the BSE in Friday’s intra-day trade in an otherwise weak market after Tata Technologies filed papers with the market regulator for its initial public offering (IPO).

Tata Technologies is a subsidiary of Tata Motors. The company provides services in engineering and design, product lifecycle management, manufacturing, product development, and IT service management to automotive and aerospace original equipment manufacturers and their suppliers.

“Tata Technologies has informed the company that it has filed a draft red herring prospectus (DRHP) dated March 9, 2023 with the Securities and Exchange Board of India (Sebi) for an initial public offering by way of an offer for sale of up to 95.7 million equity shares for cash, representing approximately 23.60 per cent of its paid-up share capital (IPO),” Tata Motors said in an exchange filing.

The IPO comprises of an offer for sale of up to 81.13 million equity shares (20 per cent of total capital of Tata Technologies) by Tata Motors, up to 9.72 million equity shares (2.4 per cent) by Alpha TC Holdings Pte. Ltd. and up to 4.8 million equity shares (1.2 per cent) by Tata Capital Growth Fund I, the company said.

At 10:05 AM; Tata Motors was up 0.79 per cent at Rs 435.60, as compared to 1.3 per cent decline in the S&P BSE Sensex. In past three months, the stock has outperformed the market, by gaining 6 per cent, as against 5 per cent decline in the benchmark index.

Tata Technologies, a 74.4 per cent subsidiary of Tata Motors, is a global leader in the ER&D segment with focus on the automotive industry. In FY22, it had consolidated revenues of Rs 3,530 crore and a PAT of Rs 440 crore. Of this, it derived Rs 1,200 crore (or 34 per cent of revenues) from the Tata Motors group.

This possible IPO along with the receipt of consideration of EV deal with TPG will support FCF generation from the India business to attain near debt zero in the India business (around Rs 12,000 crore net debt as of Dec-22), analyst at Motilal Oswal Financial Services (MOFSL) said. The brokerage firm has ‘Buy’ rating on Tata Motors with a target price of Rs 540 per share.

A strong recovery in JLR, sustained resurgence of the India business, and a possible monetization of its stake in Tata Technologies (possible value of Rs 25-47/share for Tata Motors) are the key catalysts for the stock over next 12 months, the brokerage firm said.

Technical View

Bias: Range-bound

Indicative Range: Rs 410 - Rs 460

Support: Rs 428; Rs 420

Tata Motors has been trading on a volatile note since the last one year, with the stock swinging broadly in the range of Rs 380 - Rs 530. However, in the last few weeks the stock has been attempting to consolidate above the 50-WMA (Weekly Moving Average), currently placed at Rs 428.

The short-term trend hints that as long as the stock is able to hold Rs 420, it will attempt to conquer the trend line resistance on the upside at Rs 460. Fresh strength can be expected only after the stock conquers Rs 460 level.

Meanwhile, in case, the stock fails to hold the Rs 420 level, it has multiple supports in the form of 20-WMA and 100-WMA at Rs 420 and Rs 410, respectively.

(With inputs from Rex Cano)