Tata Tech IPO may set stage for more listings from group

Mumbai: The Tata group on Thursday kicked off the initial public offering (IPO) of Tata Technologies, the first from the group’s stable after Tata Consultancy Services Ltd went public in 2004.

A successful IPO of Tata Technologies may encourage the conglomerate to take more group companies public, two investment bankers said on the condition of anonymity.

Both Tata Sons and Tata Capital were classified by the Reserve Bank of India (RBI) in September 2022 as “upper-layer” NBFCs, which requires them to go public three years from the date of classification. Tata Capital managing director Rajiv Sabharwal said the company will comply with the RBI categorization, a Mint report said in September. The company is considering a 2025 IPO, the report said.

In November 2022, multiple news reports said Tata Play had made a confidential filing for an IPO, though the company has now abandoned it after firming up plans to buy back investor Temasek’s stake in the entity. Tata Projects is seen as another future listing candidate and may reverse-list through a listed Tata Group entity, a senior executive previously said.

On Thursday, Tata Technologies MD and CEO Warren Harris hinted at the Tata group’s return to the public markets after two decades. “I feel the weight of responsibility, not just for Tata Technologies, but also for the group. The group has positioned its reputation and has been supportive of our decision to list. We’ve got some very big shoes to fill, given what TCS has been able to do in the last 19 years. And we were fully cognizant of what that means,” Harris said, while declining to comment on other group companies.

“I have no doubt that if we can be successful, it will be the catalyst for other group companies to explore the value that can be achieved by this. But I’m responsible for Tata Technologies. I’m not responsible for the other companies that may be looking at it (IPO),” he said on the sidelines of the firm’s IPO launch on Thursday.

Under Tata Sons chairman N. Chandrasekaran, the Tata group has made large acquisitions, including national carrier Air India, telecom gear maker Tejas networks and online grocer Big Basket.

In the Tata Technologies IPO, parent Tata Motors, Tata Capital and Mizhou are offloading shares totalling ₹3,042 crore. The Pune-based engineering company has set the price band for its IPO that comprises only offer for sale from existing investors and promoters, at ₹475-500. The company is not looking to raise any fresh capital.

In October, in a pre-IPO stake sale, Tata Motors sold 36.5 million equity shares to TPG Rise Climate SF, a climate tech-focused fund of TPG group at ₹401.81 a share for ₹1,467 crore, valuing the company at $2 billion. This is nearly 24% lower than the upper price band of ₹500 a share.

As per the red herring prospectus filed with the market regulator Sebi, promoter Tata Motors will sell 46.2 million equity shares worth ₹2,313.75 crore in the OFS and investors Mizuho Bank through its arm Alpha TC Holdings Pte Ltd will sell 971.7 million shares worth ₹485.84 crore. Tata Capital, the investment arm of the group will sell 485.8 million shares held through Tata Capital Growth Fund I to mop up ₹242.92 crore. The issue will open on 22 November and close on 24 November.

The anchor book will open on 21 November. The demand for the IPO is robust, the book-running lead managers said. JM Financial, Citibank and Bank of America Merrill Lynch are the managers of the issue.

The company saw its revenues grow 25% to ₹4,414 crore for the period ending 31 March 2023 over the previous year. Its profit after tax grew 42.8% to ₹624 crore for FY23. For the first half ended 30 September 2023, the company recorded a revenue of ₹2,526.7 crore and its profit stood at ₹351.9 crore.