Tata IPO Rush: A Golden Opportunity for Indian Investors?

Considering the applauding success of the Tata Technologies IPO, Tata Group is planning a series of IPOs soon. As revealed by the sources, the popular conglomerate is planning a spree of public offerings in the next 2-3 years.

Tata Sons, the holding company, is making this strategic decision to create value for the group, support future expansion, and offer exit routes for certain investors.

If you are also an enthusiast who is always on the search for a good investment opportunity, then this article could be a gold mine for you. We will take a peek into the prospective candidates for the upcoming IPOs. That's not all! We will also discuss the financials of said prospects and understand whether it would be a good idea to invest or not.

Tata Companies Lined to Bring IPO

After almost two decades of not issuing IPOs, the conglomerate suddenly shifted its strategy and plans to issue a shower of IPOs. Before we dive into the list, let's take a moment to understand this surprising change.
There are two main reasons for this move:

a. Funding Growth: The capital raised through these IPOs will be used to fuel the expansion of new businesses within the Tata Group. This includes sectors like digital services, electric vehicles, and semiconductors, which are considered to be crucial for future growth.

b. Compliance and Investor Exits: Some Tata companies, like Tata Capital, need to comply with regulations set by the Reserve Bank of India (RBI), which mandates listing by September 2025. Additionally, IPOs can provide an exit option for existing investors in these companies.

Seeing the recent ₹3,000 crore IPO by Tata Technologies come out, that too years after its last offering in 2004 (Tata Consultancy Services), the excitement is palpable.

1. Tata Capital:

Established in 1986, Tata Capital offers a wide range of financial services, including lending, investment banking, wealth management, and insurance broking.

If you look at the financial reports for the year ending with March 2023, then you will see that the gross income saw a major rise by 25% as it stood at ₹7,939 crore.

The Company’s Profit After Tax, aka PAT, saw a hike by about 69% to ₹1,383 crore. The Net Interest Margin (NIM) also increased by 28% and stood at ₹3,567 crore. This makes Tata Capital a good base for a possible public offering.

2. Tata Autocomp Systems

Founded in 2000, Tata Autocomp is a leading manufacturer of auto components in India with a presence in over 50 countries. It produces parts for engines, transmissions, interiors, and more.

Tata Autocomp Systems is one such company that has a positive CRISIL rating (AA Rating, which means “Stable”) in terms of ESG. The company's sales jumped roughly 57% year-over-year to ₹14,372 crore in fiscal 2023. This strong growth came from both its own operations and its subsidiaries and joint ventures. Profit margins improved from 10.5% in fiscal 2022 to 11% in fiscal 2023.

3. Tata Passenger Electric Mobility Ltd.

Established in 2017, Tata Passenger Electric Mobility Ltd., aka TPEML, is a subsidiary of Tata Motors that designs and manufactures electric passenger vehicles. It is a key player in India's growing EV market.

Showcasing a fabulous boost, Tata Passenger Electric Mobility Ltd.'s operating income reached ₹275.9 crore in FY23 from ₹15.05 crore in FY22. This major advancement in financial numbers makes TPEML a good choice for public offering.

4. BigBasket

Founded in 2011, BigBasket is India's largest online grocery store, offering a wide variety of groceries and household products delivered to customers' doorsteps. It is the subsidiary of Tata Digital, with a 64% stake in the grocery firm in 2021. 

This move involved buying out all the shares held by Alibaba, BigBasket's biggest investor at the time. The deal valued BigBasket at between $1.5 billion and $2.0 billion (over ₹12,500 crore).

Curious about why Tata Group acquired BigBasket? Click here to #KnowItAll.

5. Tata Digital: Group’s Digital arm

Established in 2015, Tata Digital operates the e-commerce platform Tata Cliq and invests in other digital startups. It is building a digital ecosystem for the Tata Group.

When it comes to financials for FY23, Tata Digital's revenue soared 1,200% to ₹204.35 crore, compared to ₹15.88 crore in FY22. However, the company's losses also widened, reaching ₹1,370.99 crore in FY23, up from ₹1,122.88 crore the previous year.

This increase in losses affected all of Tata Digital's business units, including BigBasket, Tata 1mg, CLiQ, and Croma, which contributed to its e-commerce platform, Tata Neu.

6. Tata Electronics: Electronics Manufacturing

Founded in 2017, Tata Electronics is a new venture focusing on manufacturing electronic components for various industries including automotive, aerospace, and defence.

According to regulatory filings, Tata Electronics, competing with established names like Foxconn and Dixon, manufactured ₹463 crore worth of mobile phone parts.

7. Tata Housing: Real Estate

Incorporated in 1984, Tata Housing is one of India's largest real estate development companies. It develops residential, commercial, and industrial properties across the country.

The sudden hike in PAT in FY23 is due to the company reducing the value of some investments in its subsidiaries and joint ventures during the quarter and year ending 31 March 2023. This decision was based on recent business plans and investment valuations.

8. Tata Batteries (Battery Manufacturing)

Tata Batteries is a joint venture between Tata Autocomp and GS Yuasa International of Japan. It manufactures batteries for passenger vehicles, commercial vehicles, and two-wheelers.

Apart from these may-be upcoming IPOs, Tata Sons might also need to plan a mega initial public offering. The reason for the currently valued ₹11 lakh crore Tata Sons to include another offering could be due to an RBI regulation.

The Reserve Bank of India's (RBI) regulations for Non-Banking Financial Companies (NBFCs) include the following: If classified as an "upper layer" NBFC, Tata Sons might need to comply with listing requirements within 3 years. This could potentially lead to a future IPO where 5% of the total holdings might be offered for sale, but it hasn't been confirmed.

The Bottom Line

These are potential IPOs, and the Tata Group has not officially announced confirmed dates or timelines. We at Finology Insider will keep you updated with more information about the specific companies going public, the issue size, and the IPO schedule. So, stay tuned!

And remember to do your due diligence regarding researching the companies' offerings, fundamentals, and investing goals.

*Disclaimer: The stocks and companies discussed above aren't a recommendation from Finology Insider and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.