Tata Motors gives green signal for stake sale in subsidiary Tata Technologies via IPO. IPO of Tata technologies will come soon. Tata Motors holds nearly 74% shareholding in Tata technologies. Tata motors is looking at non-core businesses in two ways: Either to do value unlocking like the IPO of Tata technologies or completely divest the holdings. In 2018, Tata Motors tried to sell nearly 43% stake sale of Tata tech for 360 million USD, but the deal couldn’t hold. But it is a blessing in disguise. The valuation of Tata tech has substantially increased in these years owing to the focus on digital technologies.
Tata Technologies focuses on 4 key verticals namely automotive, aerospace, industrial machinery and industrials. It’s offerings are delivered through the following lines of business: a) Engineering, Research, and Development (ER&D) services, b) Digital Enterprise Solutions (DES), which includes offerings in Connected Enterprise IT (CEIT) and Product Lifecycle Management (PLM) services, c) Education offerings, and d) Products, which includes the product value-added reselling and iProducts offerings.
The firm has a workforce of 9300 employees, worldwide, serving clients from facilities in North America, Europe and APAC. It has 18 global delivery centres at Pune (Head Quarter), Gurgaon, Bengaluru, Thane, Chennai (India), SEA – Shanghai (China), Bangkok (Thailand), Singapore, Tokyo (Japan), Hanoi (Vietnam), Europe – Brasov, Craiova & Iasi (Romania), Gothenburg (Sweden), Gaimersheim (Germany), Warwick (UK), North America – Detroit (USA).Tata tech competes with the likes of KPIT and Tata Elxsi, among others in the ER&D space.
For the year ended 31st March 2022, Tata Technologies delivered revenue of USD 473.5 M (INR 3529.6 Cr), together with underlying operating profit of USD 86.5 M (INR 645.6 Cr) and profit after tax of USD 58.0 M (INR 437.0 Cr). These best ever results equate to year-on-year revenue growth of 47%, operating profit growth of 65%, and profit after-tax growth of 74%, in USD terms. The growth in profitability in FY22 has been higher as compared to the likes of its peers like Tata Elxsi, KPIT. Based on the current PE ratio of 60 for the companies like KPIT and Tata Elxsi, if we take 60 as the PE for Tata technologies ad based on the FY22 earnings we come at a valuation of Rs 26,000 Cr. Tata Motors 19-20k Cr. This holds good for Tata Motors as it can create value unlocking opportunities for the shareholders. This will certainly help Tata Motors in reducing their debt levels also.
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