Few business houses in the world command respect as great as the Tatas do. Hence, the excitement around the upcoming Tata Technologies IPO cannot be understated. It has been 18 years since the last Tata Company was listed. TCS was that company and it made shareholders wealthy by maintaining its position as one of the key players in the Indian and the Global IT space.
In this article we will analyze the business of Tata Technologies ahead of its much awaited listing on the Indian Indices.
Company Overview:
Tata Technologies 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. It is a subsidiary of Tata Motors and operates in 25 countries with a global workforce of more than 11,000 employees. Tata Technologies is expected to grow to about $800 million by 2025, up from $473 million during 2021-22, driven by an increase in acquisitions. Tata Technologies at its core is an ER&D Company.
Area of Expertise:
1. Engineering, Research and Development (ER&D):
The manufacturing sector is currently concentrating on designing connected, customer centric goods and creating a technology ecosystem to better engage service providers. The ER&D line of business of Tata technologies offers global outsourced engineering services that enable manufacturers to conceive, design, develop and realize more competitive products. The talented pool of experienced engineers, technicians, project managers and domain specialists provide efficient and cost-effective product development, from fully outsourced program management to transactional engineering support, tailored to each of its client’s needs. Throughout the whole product lifecycle, the company is an expert at providing its clients with global engineering programmers’, expert domain services, shared services, component, subsystem, and system deliveries, complete vehicle turnkey projects, and software-defined vehicles.
In short the company provides engineering solutions to help its customers conceptualize, design, and develop better products for a sustainable future.
2. Digital enterprise solution:
As we all know today’s global digital economy is defined by continuous change and progress. To keep up and manage technology-driven change and evolving business transformation roadmaps, manufacturers need a partner who understands the latest innovation and how to implement change successfully here where Tata technology comes into play. The company uses its deep domain knowledge of product and manufacturing engineering processes and its partnerships with emerging technology providers to deliver digital transformation for its customers.
Digital enterprise solutions include machine learning, artificial intelligence, predictive maintenance, data analytics, and digital manufacturing. Manufacturers can realize better products, gain a competitive advantage, and quicken their digital revolution by implementing, embedding, and integrating effective digital strategies across product design, development, manufacturing, and after sales with the aid of Tata Technologies as a service provider.
In short the business uses cutting-edge digital solutions to help its clients address business difficulties. Utilizing cutting-edge technology, the organization develops best-fit solutions that perform better.
3. Education:
Manufacturers need engineers who can design goods for the future and provide efficient digital transformation as they work to drive towards Industry 4.0. Businesses need a partner that can provide the necessary training, resources, and support to equip the next generation of talent with the necessary capabilities. In order to close the gap between industry and academia, the company has created upskilling tools, training, and courses that make use of its manufacturing industry domain knowledge. The business has taken the initiative to collaborate with universities, government agencies, and schools to provide the upcoming generation of engineers and technicians with the knowledge and abilities needed by the global manufacturing sector. Additionally, it also offers a digital learning system through its proprietary iGET IT offering to corporations and individuals to address their training requirements.
In short the company engages in academia and industry collaboration to help the engineers of the future gain new skills. This increases their employability and produces better results for enterprises, their clients, and the industry as a whole.
4. Software products:
The manufacturing sector is currently concentrated on developing connected, customer-centric goods with a short time to market and cheap product development costs. To address these issues, businesses must use the proper software throughout the entire value chain of product engineering and manufacturing. This is where Tata technologies come in; they have partnered with top product software providers to offer value-added reselling of software throughout the product lifecycle. This covers software solutions that facilitate digital engineering and manufacturing, aiding clients in developing a software-enabled approach to enhance methods for conceptualizing, designing, developing, and managing profitable products. As a product design and manufacturing value-added service provider, Tata technologies helps in improving customer experience with its best-in-class enhanced-technical support and training, tailored to needs of the customer. From product development – CAD, CAM, product lifecycle management (PLM) and simulation, to manufacturing process management, the company has in-depth knowledge and expertise will help its users achieve greater efficiency, cost savings and faster time to market.
In short the company helps its customers transform their products through their service offerings. Moreover, the company also helps them identify and deploy product development software offered by the partners of their own to manufacture, service, and realize better products.
Industry where the company operates:
1. Automotive:
As businesses concentrate on releasing new goods more quickly, the automotive industry is undergoing an unparalleled upheaval. The rush to adapt, develop, and bring about a shared, connected, autonomous, and electrified future is on. The company can deliver end-to-end solutions that assist manufacturers in launching competitive products, optimizing operations, and improving customer journeys because of its deep manufacturing domain knowledge and understanding of the physical and digital layers of product engineering. The automotive offerings cover the entire product value chain across automotive engineering, manufacturing, and customer experience areas. This includes outsourced turnkey vehicle development solutions, product benchmarking, rightweighting, simulation and validation, embedded systems, AUTOSAR, hardware-in-the-loop validation as well as connected and autonomous vehicle solutions. the digital enterprise offerings of the company enables digital transformation of entire operations, digital twin, digital thread, manufacturing engineering, and Industry 4.0 solutions aimed at helping companies manufacture products faster and optimize the cost of operations.
In short the company acts as a helping hand to the automakers, and helps in engineering and validating products for a greener, safer and more sustainable world.
2. Industrial heavy machinery:
We are all aware that the global demand for infrastructure development has caused a paradigm shift in the industrial heavy machinery (IHM) sector. But emerging technologies and rising production costs, alongside government standards that vary by country, can make this harder to achieve for manufacturers. The end-to-end solutions of the company are across engineering and manufacturing better products. This includes accelerators for turnkey equipment development, product benchmarking, right weighting, physical validation, design and styling services, embedded software development and validation, electrification as well as connected and autonomous equipment. Through its digital enterprise products, including digital thread, digital twin, factory automation, and digital manufacturing, the company focuses on reducing production costs and accelerating time to market in order to take customers towards Industry 4.0.
In short the company helps manufacturers to realize more productive, competitive and profitable industrial heavy machinery products.
3. Aerospace:
As the world recalibrates its relationship with air travel, the aerospace industry is under pressure to develop innovative, cutting edge products and experiences that reduce carbon emissions, increase productivity and improve passenger experiences. Aerospace offerings of the company cover engineering, manufacturing and customer services. The company works with a mature global engineering engagement model to deliver fast and optimized solutions for aerospace engineering analysis and modeling, continuous engineering support, cabin interiors design and development, passenger to freighter conversion, tooling as well as maintenance, repair and overhaul (MRO). The business actively makes use of cutting-edge technology for industrial automation, simulations, tool design, predictive maintenance, and data analytics.
In short the company works with leading aerospace businesses to realize their vision, providing solutions and resources to get them from where they are today to where they need to be tomorrow.
Tata technologies and its connection with Tata Motors
Tata Motors owns a 74.69% share in Tata Technologies, which is thereby a subsidiary of the automaker. Tata Technologies provides engineering and product development digital services to the automotive and aerospace industries, among others. As a subsidiary of Tata Motors, Tata Technologies works closely with the company to provide engineering and design; product lifecycle management, manufacturing, product development, and IT service management to automotive and aerospace original equipment manufacturers and their suppliers. Since Tata Technologies and Tata Motors have a close working relationship, services and knowledge may be seamlessly integrated, assisting both businesses in meeting their objectives.
Prospects of the upcoming IPO of Tata Technologies on Tata Motors:
The IPO consists of a pure offer for sale (OFS) of up to 95.71 million shares, with Tata Motors offering up to 81.13 million shares, Alpha TC Holdings Pte offering up to 9.72 million shares, and Tata Capital Growth Fund I offering up to 4.86 million shares.
Tata Motors currently owns 74.69 percent of the company; Tata Capital Growth Fund I and Alpha TC Holdings Pte each have 7.26 and 3.63 percent holdings. After the issue, Tata Motors, the parent company of Tata Technologies, would sell 8.11 crore shares, or 20% of the business. Tata Capital Growth Fund Inc. would unload up to 48.58 lakh equity shares (1.20%), while Alpha TC Holdings Pte would sell up to 97.16 lakh shares (2.40%).
Tata Motors has struggled over the years due to losses at its Jaguar Land Rover (JLR) unit and the poor financial performance of its domestic business. The company has reported a net loss in the last four consecutive years since 2018–19. According to reports, Tata Motors would be able to strengthen its finances and lower its debt by selling its ownership holding in Tata Technologies. Tata Technologies has received a total investment of Rs. 224.1 crore from Tata Motors.
However, The Company will not receive any proceeds from the OFS from the selling shareholders. Each of them will be entitled to the respective proportion of the proceeds of the IPO after deducting their portion of the offer related expenses and the relevant taxes thereon.
Data of Unlisted Shares:
Market Capitalizaton | ₹37417 crores |
Current Share Price (Unlisted) | ₹895 |
P/E | 85.6 |
Long Term Debt | NIL |
Financials:
| FY20 | FY21 | FY22 |
EPS (Rs.) | 60 | 57 | 104 |
ROCE (%) | 28% | 14% | 17% |
ROE (%) | 16% | 13% | 19% |
Total Income (crores) | ₹2896 | ₹2426 | ₹3578 |
PAT (crores) | ₹252 | ₹239 | ₹437 |
Major Risk for investors in the business of Tata Technologies:
There is one significant risk that remains for anyone who wants to invest in Tata Technologies and that is Client Concentration Risk.
Tata Technologies is the subsidiary of Tata Motors and has major revenues coming in from Tata Motors. Infact the Top 5 Customers of Tata Technologies generate over 70% of their revenue. While business visibility is not an issue at least from the in-house companies, the dependence on them is. Any slowdown in the business of Tata Motors can significantly affect the business of Tata Technologies. Hence, one needs to track the future business development of Tata Technologies continuously.
Conclusion: The IPO will be heavily subscribed and shares in the unlisted market are already being actively traded. However, from a long term point of view, one must look at future client diversification as the major trigger for wealth creation.
How to Buy Unlisted TATA TECHNOLOGIES Shares?
We help investors in acquiring these unlisted shares. If you wish to buy these shares in the unlisted market feel free to contact us on 7703902588. We will make sure to get you the best price for these shares. Buy only when you are satisfied with the price.
Disclaimer: All information is provided for educational and informational purpose only. Data is fetched from publicly available sources such as the DRHP filed by the company. The website or the author takes no guarantee for the accuracy of the data however, we have tried our best to present accurate data to out readers. Please consult a financial advisor or do your own analysis before investing/trading in the stock market.
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