Will Tata Tech Revive 2023’s Lackluster IPO Market? 

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The Tata Group has returned to the capital markets, for the first time since 2004, filing a “draft red herring prospectus” (DRHP) for Tata Motors’ subsidiary, Tata Technologies.

This is the first time that a Tata group firm is listing on the exchanges since Tata Consultancy Services listed in 2004. Tata Technologies works with clients across automotive, aerospace, industrial heavy machinery and other industries to develop sustainable engineering solutions.

The DRHP was filed on 10 March 2023, and is an “offer for sale” (OFS) of 9.571 crore shares that include 8.1 crore shares being offered by Tata Motors. 50 percent of the offer was reserved for “qualified institutional buyers” (QIB), 35% for retail and the remaining 15% was for non-retail bidders.

According to the filing, Tata Technologies’ net profit in Dec 22 stood at 407.4 crores which was a 22% rise over the previous year. While the size of the issue hasn’t been revealed, a recent share buyback by Tata Technologies pegged the value of the firm at 16000 crores which would put the size of this issue at approximately 4000 crores.

Tata Motors, the parent company, has said that it will used the proceeds generated from this sale to retire some of its debt.

Tata Technologies recently split its shares in 1:5 ratio. They also announced a bonus issue in a 1:1 ratio. These two corporate actions taken together meant that each original shareholder would have 10 times their original number of shares post-bonus and -split.

The last two quarters have seen a subdued response from by investors on the Indian bourses with most IPOs not managing to stay above their listing price. Will Tata Tech be the one to break that streak, that too in a climate that hasn’t been conducive to valuations of technology companies?

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