Tata Motors to sell 9.9% stake in IPO-bound Tata Technologies for Rs 1,614 crore
Tata Motors to sell 9.9% stake in IPO-bound Tata Technologies for Rs 1,614 crore
Tata Motors, a leading automotive manufacturer, announced on October 13 that it has finalized the sale of a 9.9 percent stake in Tata Technologies, an entity preparing for an initial public offering (IPO). The transaction, valued at Rs 1,613.7 crore, involves the sale of the stake to TPG Rise Climate SF Pte. Ltd, a private equity fund with a focus on climate-related investments, and the Ratan Tata Endowment Foundation. The equity valuation for the deal is estimated to be around Rs 16,300 crore.
As part of this agreement, TPG Rise Climate SF Pte. Ltd, which has previously invested in Tata Motors’ electric vehicle business, will acquire a 9 percent stake in Tata Technologies. The remaining 0.9 percent stake will be acquired by the Ratan Tata Endowment Fund (RTEF).
This strategic move not only signifies Tata Motors’ commitment to unlocking value and raising capital but also reflects its alignment with investors focusing on climate-related initiatives. The involvement of TPG, a prominent global investor in sustainable solutions, underscores the growing emphasis on environmental sustainability within the automotive industry. The sale of the stake in Tata Technologies is expected to strengthen the financial position of Tata Motors while also facilitating the future growth and development of Tata Technologies in the dynamic technology and automotive sectors.
According to the recent announcement by Tata Motors, the company is set to receive a total consideration of Rs 1,467 crore from the sale of its stake to TPG, while the Ratan Tata Endowment Foundation (RTEF) will pay Rs 146.7 crore for its share of the stake in Tata Technologies. The completion of the transaction is expected to take place by October 27, 2023.
Tata Technologies, the subject of this stake sale, is a globally recognized engineering services company that specializes in providing a comprehensive range of product development and digital solutions to various international original equipment manufacturers (OEMs). Leveraging its extensive domain expertise in the automotive industry, Tata Technologies caters to clients across diverse sectors such as aerospace, transportation, and heavy machinery.
With a focus on delivering innovative and comprehensive turnkey solutions, the company has established itself as a key player in the global engineering and technology landscape. This strategic move by Tata Motors is likely to reinforce the company’s financial position while enabling Tata Technologies to pursue further growth opportunities and expand its global footprint within the rapidly evolving and competitive engineering services sector.
Tata Technologies’ upcoming initial public offering (IPO) is anticipated to mark a significant event for the Tata Group, representing the conglomerate’s first such offering in nearly two decades. The IPO is set to encompass the sale of up to 9.57 crore equity shares, constituting approximately 23.6 percent of the company’s paid-up share capital, with Tata Motors, Alpha TC Holdings, and Tata Capital Growth Fund I being the key stakeholders involved in the share offering.
Notably, Tata Technologies has demonstrated robust financial performance, as evidenced by its revenue growth of 25 percent, amounting to Rs 4,418 crore, during the fiscal year 2022-2023. Moreover, the company recorded a noteworthy 63 percent increase in its profit after tax, reaching Rs 708 crore during the same fiscal year. Over the period spanning fiscal year 2020-2021 to fiscal year 2022-2023, Tata Technologies achieved a remarkable compound annual growth rate (CAGR) of 30 percent in terms of revenue, resulting in a substantial 46 percent CAGR for EBITDA (earnings before interest, taxes, depreciation, and amortization), ultimately contributing to a significant 61.5 percent CAGR for profit after tax.
These impressive financial figures underscore Tata Technologies’ strong market performance and its ability to deliver consistent growth, which is likely to generate substantial investor interest and confidence in the forthcoming IPO. As the Tata Group prepares to enter the public market arena after a significant hiatus, the IPO launch of Tata Technologies is poised to be a pivotal moment for the conglomerate and the wider investment landscape.
Tata Technologies’ strong financial performance is highlighted by its impressive revenue Compound Annual Growth Rate (CAGR) over the past three years, surpassing that of key industry players such as Tata Elxsi, L&T Technologies, and KPIT Technologies. Additionally, the company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin, standing at 23.7 percent, reflects a competitive position that aligns with the industry standard.
The company’s solid financial performance is further underscored by its robust Return on Equity (RoE) figures, which stood at 19.8 percent in March 2022 and notably increased to 23.7 percent in March 2023. Furthermore, its Return on Capital Employed (RoCE) exhibited a positive trajectory, reaching 19.5 percent in March 2023, demonstrating substantial growth from 16.7 percent in the previous fiscal year.
These promising financial indicators have evidently contributed to investor confidence in Tata Technologies, as reflected by the notable 5 percent increase in the company’s stock price to Rs 667.15 earlier in the day. Tata Technologies’ consistent revenue growth, healthy profitability margins, and improved returns on equity and capital employed position the company favorably within the market, underscoring its potential as an attractive investment opportunity in the competitive engineering services sector.
