Tata Motors explores partial stake sale in Tata Tech via IPO

Tata Motors explores partial stake sale in Tata Tech via IPO

Tata Motors, one of the country’s biggest automotive companies, will explore partial divestment of its stake in Tata Technologies through an initial public offering (IPO).

This comes after the Tata group recently filed a confidential draft red herring prospectus (DRHP) for Tata Play, which would be its first IPO in more than 18 years. The IPO of Tata Consultancy Services (TCS) in 2004 was the last from the group.

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This announcement is an official move by the Mumbai-based owner of British brand Jaguar and Land Rover involving strategic changes at Tata Tech. Since the past few years, Tata Motors has been busy looking at ways to raise funds at Tata Technologies, including through the sale of stake to private equity companies.

In 2017, Tata Motors was in unsuccessful talks with American private equity firm Warburg Pincus for a potential stake sale.

Tata Technologies is a profit-making subsidiary of Tata Motors, where the latter holds 72% equity.

Because of the disruptions caused by the Covid-19 pandemic, Tata Motors had to keep its plans on the backburner following a meltdown in company valuations.

Tata Technologies closed FY22 as its best year in history. The company recorded an 83% growth

in net profit to Rs 436.9 crore in FY22 against FY21, while its operating revenue jumped 48% to Rs 3,529.6 crore.

The most notable aspect of the company’s growth in FY22 was the business it generated from outside the Tata group. The share of captive accounts such as Tata Motors and Jaguar Land Rover fell to 42% in FY22 from 54% in FY20.

Of its $473-million revenues, around $365 million came from outside India last year. About six years ago, 75% of the business was dependent on Tata group, particularly JLR and Tata Motors, but Tata Technologies worked to improve the non-captive share.

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Besides the automotive sector, Tata Technologies is vying for business in other sectors, including aerospace and industrial machinery. From 12-13%, the firm is expecting the non-automotive share to climb to 15-18% in two-three years.