Tata Technologies IPO receives bids worth Rs. 1 lakh crore
The Tata Technologies initial public offering (IPO) has garnered a remarkable 69.43 times subscription today, the final day of bidding. The issue received bids for 312.63 crore shares, worth over Rs. 1 lakh crore, against an issue size of 4.5 crore. This is the first public issue from the Tata Group since Tata Consultancy Services IPO in 2004. The Rs. 3,042.51-crore offer, which opened on November 22, has a price band of Rs. 475-500 per share.
High demand from institutional investors and HNIs
Institutional investors led the strong demand for Tata Technologies IPO, making bids worth Rs. 66,000 crore. Qualified institutional buyers and high net-worth individuals (non-institutional investors) subscribed 203.41 times and 62.11 times their allotted portions, respectively. Retail investors, Tata Technologies employees, and Tata Motors shareholders also demonstrated fairly good interest, subscribing 16.50 times, 3.70 times, and 29.19 times the portion reserved for them, respectively.
The issue is fully an offer-for-sale
The IPO is fully an offer-for-sale (OFS) of 6.08 crore shares by promoter Tata Motors and investors Alpha TC Holdings and Tata Capital Growth Fund 1, with no fresh issue component. The entire issue proceeds, excluding IPO expenses, will go to selling shareholders. Several prominent investors took exposure in the global engineering services company, including Goldman Sachs, Kotak Mutual Fund, Mirae Asset Mutual Fund, and ICICI Prudential Mutual Fund, among others via anchor book, raising Rs. 791 crore.
Company's strengths and growth prospects
Tata Technologies is a pure-play manufacturing-focused engineering research and development (ER&D) company that primarily serves the automotive industry. Established in 1994, the Pune-based company provides product development and digital solutions to global original equipment manufacturers (OEM) and their tier-1 suppliers. The company is currently partnering with seven out of the top 10 automotive ER&D spenders and five out of the 10 leading new energy ER&D spenders in 2022.
Grey market premium and analyst expectations
Tata Technologies shares are highly sought after in the unlisted market, commanding a premium of over 80% compared to the IPO price. Analysts are overwhelmingly positive on the issue and anticipate strong financial performance in the coming years due to the gradual recovery in the global economy, rising manufacturing capex, and shift in manufacturing from US/Europe/China to India. At the IPO price of Rs. 500 per share, Tata Technologies is valued at a trailing twelve-month (TTM) P/E of 28.3x.
