Tata Technologies IPO: Is it Worth Investing?

When we talk about the ' Tata Group ', what comes to your mind first? For many, it's " trust ." This name has been known for providing reliable and excellent service for years. Now, after almost two decades, the Tata Group is getting ready to do something exciting in the world of Initial Public Offerings. The last time the company came up with their IPO was in July 2004, when the group introduced us to Tata Consultancy Services , which is now India's biggest software exporter.

This time, all eyes are on their technology powerhouse, Tata Technologies , a proud subsidiary of Tata Motors. This company specializes in Engineering Research and Development (ER&D) services. It works with industries that make cars, big machines, and stuff for space.

The IPO was initially planned for early October 2023, but it got listed on November 2023. Its goal is to raise a substantial amount of money – precisely ₹5000 crore with a total issue size of ₹3,042.51 crore . What's interesting is that the company has set aside 10% of the shares specifically for those who already own Tata Motors shares.

Let's talk about the global Engineering, Research, and Development industry.

Industry Overview

Think of ER&D services as producing amazing things, like high-tech gadgets, machines, or software that companies can sell to make money.

An amount of ₹134.48 lakh crore was invested in this sector in 2021 . And guess what? By 2025 , it's predicted to soar to an impressive ₹187.76-190.66 lakh crore . That's a significant leap forward.

In 2021, companies hired outside experts for their research and development work, and they spent somewhere about ₹6.97-7.38 lakh crore on it. Between 2021 and 2025, it's projected to grow by 10-12% every year. 

What's fueling this growth, you ask? Well, it's a fascinating mix of factors. First, more and more companies are turning to experts for assistance. Second, there's a surge in regulations pushing for safer and cleaner products. Lastly, there's a need for speed, especially when it comes to innovative high-tech products.

One thing to note here is businesses are moving towards being more environmentally friendly these days. They are paying additional attention to making products that use less energy and transitioning to clean energy. This means they need ER&D services in various sectors to come up with new and innovative ideas. After all, it is about making the world greener!

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Moving to Digital Engineering, which involves investing in cool, new technologies like the Internet of Things (IoT), Blockchain, Augmented Reality/ Virtual Reality (AR/VR), Cloud Engineering, and Artificial Intelligence/ Machine Learning (AI/ML), among others. And this field is super hot and is expected to grow by about 18% each year from 2021 to 2025.

Now, let's learn more about the company.

About Tata Technologies

Tata Technologies is based in Pune, and it offers a bunch of services: think engineering and design, product lifecycle management, manufacturing, product development, and IT service management. 

It is a leading global engineering services company with over two decades of experience, specializing in product development and digital solutions for major original equipment manufacturers and their suppliers. The company operates with a globally distributed team, ensuring a balance between proximity to clients and efficiency to provide maximum value.

In 2011, Tata Technologies raised ₹141 crore by selling 13% of itself to Tata Capital and Alpha TC Holdings.

And here's something exciting: the company is not stopping at cars and machines. It is gearing up to help educate the future workforce. With the rise of Industry 4.0 and all these fancy new technologies, it wants to train engineers and technical experts for the future. 

Currently, Tata Tech is pretty unique in this space, with its global partners and the ability to put everything together, making them feel 👇

Now, let's take a closer look at the company's financials.

Key Financials 

Over the past three years, Tata Technologies Limited's financial performance has shown variability. It began with a total revenue of ₹2,896.96 crore and a Profit After Tax (PAT) of ₹251.57 crore in 2020. 
However, in 2021, both revenue and PAT experienced a slight decline, whereas 2022 witnessed a substantial resurgence, with total revenue surging. to ₹3,578.38 crore and PAT reaching ₹436.99 crore. Check out the graph below for a visual representation 👇

In 2022, the company saw its PAT almost double, which is a very promising sign for the future. This big jump in profits is exciting, especially as Tata Technologies ventures into the education upskilling sector. 

Now, let's turn our attention to the assets. Check out the table below to see that the company has been making substantial investments in its assets.

The financials hint at a bright future and show that Tata Technologies is ready to make a meaningful mark in the ever-changing field of education and upskilling. 

IPO Details

Tata Technologies IPO was one of the most successful IPOs in the last decade as it was oversubscribed 69.43 times .

The Bottom Line

With Tata Group's trusted reputation and Tata Technologies' strong position in Engineering Research and Development services, I feel that this IPO shines a spotlight on a sector that's set for steady growth.

The company's financial performance is impressive. But it's not just about the numbers; it's also about their smart plan to improve education.

However, as with any investment, investors should conduct thorough research and due diligence to identify the most promising opportunities and manage their risk effectively.

*Disclaimer: The stock discussed above aren't recommendations from Finology, and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making an investment decision.