Tata Technologies IPO GMP (Grey Market Premium)
Tata Technologies IPO will be one of the most sought after IPOs of the year. While the dates of the IPO and the indicative price band for the IPO is yet to be announced, it has generated a lot of excitement in the market. Firstly, it is a high tech issue and has few peer players in the market. Secondly, Tata Technologies will be the first IPO from the Tata group in the last 19 years. In fact, the last IPO from the Tata fold was Tata Consultancy Services (TCS), which came out with its IPO in the year 2004. So, this will be a Tata group IPO after a full 19 years and there is obviously a lot of excitement and euphoria built around it.
What exactly does the IPO entail? The IPO will entirely be an offer for sale by the promoters with Tata Motors being the predominant seller in the IPO. There is no fresh issue component to the IPO. Tata Technologies IPO will comprise of an offer for sale (OFS) of 9,57,08,984 shares (9.57 crore shares) with each share having a face value of ₹2 per share. Since the price band of the IPO has not been announced, we do not know the size of the IPO at this point of time, but that is expected during this week.
Here is how Tata Technologies proposes to allocate the IPO across different categories of investors.
QIB Shares Offered
Not more than 50% of the Net Issue
NII (HNI) Shares Offered
Not less than 15% of the Net Issue
Retail Shares Offered
Not less than 35% of the Net Issue
The promoter group of the company currently holds 76.69% of the equity of the company and while there will be no dilution of overall equity due to it being an OFS, it will certainly reduce the holding of the promoters to 53.10% post the IPO.
Financial highlights of Tata Technologies Ltd
Here are some basic points to remember on the financials of Tata Technologies Ltd ahead of the public issue.
- For the financial year ended FY22, the company reported total revenues of ₹3,578.38 crore, which represents a growth of 47.52% over the previous financial year.
- For the financial year ended FY22, the company reported Net Profits of ₹436.99 crore, which represents a growth of 82.71% over the previous financial year.
- For FY22, the company reported net profit margins of 12.21% which compares favourably with the net profit margins of 6.69% in the previous year FY21.
- For FY22, the company reported asset turnover ratio of 0.85X which compares favourably with the asset turnover ratio of 0.68X in the previous year FY21.
GMP story of Tata Technologies Ltd
Interestingly, even ahead of the price announcement and the date announcement the IPO of Tata Technologies has been trading actively in the grey market for quite some time. This GMP is based on assumptions on the likely IPO price based on what could be the tentative IPO price based on the peer group valuation comparisons. Here is how the Weekly GMP has panned out. We have only covered the continuous GMP since 28th June 2023.
Here is a quick look at what influences the GMP. There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, which includes the levels of the Nifty and Sensex as well as the general IPO market and macro conditions. Secondly, the extent of subscription for the IPO across the retail and the QIB segments also has a deep impact on the GMP as it is indicative of investor interest in the stock. Generally, strong QIB subscription is a trigger for a spike in GMP.
There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be.
GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing.
In the above case, we only know the GMP based on market assumptions. The actual indication of listing price will only be known once the price of the IPO is announced. We have to await for that now.
GMP (grey market price) is an important indicator, albeit informal, of likely listing price. One cannot take this price at face value However, the GMP tends to be quite dynamic and changes direction with the flow of news and events. Investors must note here that this is just an informal indication and has no official acceptance. The best thing one can do with the GMP is to observe the trend closely as that gives the best hints on listing status. Focus on the time series trend than on numbers.
Here is a quick word on the background of Tata Technologies Ltd. The company was incorporated in 1994 and currently it is a leading global engineering services company, offering product development and digital solutions. This includes turnkey solutions, to global original equipment manufacturers (OEMs) and their tier-1 suppliers. Being a part of Tata Motors, the company brings very deep domain expertise in the automotive industry. That has been leveraged to also serve clients in adjacent industries like aerospace and transportation, apart from heavy construction machinery. The issue is being lead managed by JM Financial Services, Citigroup Global Markets and BOFA Securities Ltd. Link Intime India Private Limited will be the registrars to the issue.
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