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About the Company
Tata Technologies Limited, established in 1994 and headquartered in Pune, India, is a key player in IT consultancy and engineering design services. As a subsidiary of Tata Motors Limited, the company has a strong global presence with offices in major cities across India and internationally. Tata Technologies is renowned for its expertise in outsourced engineering, digital transformation services, and technology solutions, including software reselling and upskilling education programs. With over 12,000 employees, the company’s business is categorized into two primary segments: Services and Technology Solutions.
IPO Details
Issue Open: 22 November, 2023
Issue Close: 24 November, 2023
Price Band: Rs 475-500 a share
Transaction Type: Offer for Sale of 60,850,278 equity shares
Bid Lot: 30 Shares and in multiple thereof
Percentage of Offer SIze (Allocation)
QIB: 50%
Retail: 35%
NIB: 15%
Reservation
Tata Motors Shareholders: 6,085,027 equity shares, i.e., 10% of the offer.
IPO Timeline
| IPO Open Date | Wednesday, November 22, 2023 |
| IPO Close Date | Friday, November 24, 2023 |
| Basis of Allotment | Thursday, November 30, 2023 |
| Initiation of Refunds | Friday, December 1, 2023 |
| Credit of Shares to Demat | Monday, December 4, 2023 |
| Listing Date | Tuesday, December 5, 2023 |
| Cut-off time for UPI mandate confirmation | 5 PM on November 24, 2023 |
Financial Performance
| (Rs Cr) | FY21 | FY22 | FY23 | H1FY24* |
| Revenue | 2380.9 | 3529.6 | 4414.2 | 2526.7 |
| EBITDA | 385.7 | 645.7 | 820.9 | 464.8 |
| EBITDA Margin (%) | 16 | 18.0 | 19 | 18 |
| Net Profit | 239.2 | 437 | 624 | 351.9 |
| EPS (Rs) | 5.9 | 10.8 | 15.4 | 8.7 |
| Dividend Yield (%) | – | – | 2.4 | – |
| RoE (%) | 11 | 19.0 | 21 | 12 |
| RoCE (%) | 14 | 25.0 | 24 | 15 |
Revenue Breakdown (H1 FY24)
| Category | Sub Category | Rs Crore | % of Revenue |
| Technology | Products | 234.9 | 9.3% |
| Technology | Education | 305.4 | 12.1% |
| Services | Automotive Services | 1745.8 | 69.1% |
| Services | Other Services | 240.6 | 9.5% |
| Total | 2526.7 |
Geographical Distribution (H1 FY24)
| Region | In ₹ Crore | % of Revenue |
| India | 887.8 | 35.1% |
| UK | 572.6 | 22.7% |
| North Korea | 486.7 | 19.3% |
| Rest of World | 472.7 | 18.7% |
| Vietnam | 382 | 15.1% |
| Rest of Europe | 107 | 4.2% |
| Others | 90.7 | 3.6% |
| Total | 2526.7 |
Business Strategy
1. Deepen Engagements with Existing Clients: Enhance the use of solution offerings and cultivate long-term strategic partnerships, especially with top ER&D spenders in the automotive, aerospace, and TCHM industries.
2. Target Top ER&D Spenders in Key Verticals and Geographies: Focus on securing projects with leading ER&D spenders and new energy vehicle companies. Explore growth opportunities in key markets like France, Germany, and China with tailored strategies.
3. Expand Capabilities in Digital Engineering and Embedded Systems: Respond to growing digital technology demand in Automotive ER&D, especially in autonomous and connected technologies.
4. Strengthen Service Delivery: Optimize delivery processes and employee pyramid per engagement for increased efficiency and margins. Focus on on-campus recruitment, upskilling, and optimizing the onshore-offshore mix.
5. Expand in the Education Sector: Leverage the iGetIT platform for engineering upskilling, particularly in the disrupted global manufacturing sector.
6. Strategic Acquisitions and Partnerships: Pursue selective acquisitions for technology access, geographical expansion, and client base growth. Strengthen alliances with key industry players.
7. Talent Development Strategy: Build a strong employer brand, attract new talent, and develop current employees with a focus on digital service lines.
Industry Overview
The global Engineering, Research, and Development (ER&D) services market is growing strongly. In 2022 the addressed market reached USD 170-180 billion, up from USD 145-155 billion in 2021. Breaking this down, Global Capability Centers (GCCs) contributed USD 65-70 billion to the total ER&D spend, while third-party Engineering Service Providers (ESPs) accounted for USD 105-110 billion.
Forward-looking estimates suggest the total ER&D market could expand to USD 255-265 billion by 2026, with GCCs potentially reaching USD 90-95 billion and ESPs USD 165-170 billion. The growth forecasts indicate a CAGR of approximately 9-11% for the total market, 7-9% for GCCs, and 11-13% for ESPs. This points to an incremental market opportunity of around USD 85 billion for the total addressed market and approximately USD 60 billion for the outsourced ER&D market over the next four years.
| Year | Total ER&D Addressed Market ($ Bn) | GCC ER&D Expenditure ($ Bn) | Outsourced ER&D to ESPs ($ Bn) |
| 2022 | 170-180 | 65-70 | 105-110 |
| 2026 (Projected) | 255-265 | 90-95 | 165-170 |
Key Strengths
- Automotive Industry Expertise: Comprehensive services spanning the entire automotive value chain, including turnkey vehicle development for ICE, PHEV, and BEV.
- Advanced EV, Connected, and Autonomous Capabilities: End-to-end solutions for EV development, manufacturing, and after-sales, with capabilities in OTA services, ADAS, and EV system design.
- Strong Digital Capabilities with Proprietary Accelerators: Extensive digital services across the product life cycle, leveraging digital manufacturing, customer experience, and transformation solutions.
- Diverse and Marquee Client Base: Includes traditional OEMs, tier 1 suppliers, and new energy vehicle companies, ensuring a balanced mix of stability and growth opportunities.
- Global Delivery Model: Offers a balanced onshore/offshore model, enhancing client engagement and operational efficiency.
- Proprietary e-Learning Platform in Manufacturing: The iGetIT platform addresses the growing need for engineering upskilling and reskilling.
- Reputable Brand and Experienced Leadership: Backed by Tata Motors and the Tata Group, ensuring strong corporate governance and global network advantages.
Revenue from Anchor Clients (JLR and Tata Motors)
| Fiscal Year | Revenue from Anchor Clients | % of Revenue |
| FY21 | 1021.1 | 42.9% |
| FY22 | 1112.3 | 31.5% |
| FY23 | 1505.4 | 34.1% |
| H1FY24 | 953.3 | 37.7% |
Key Risks
- Client Concentration: Heavy reliance on top clients, including Tata Motors and Jaguar Land Rover, poses a risk if these clients reduce their dealings or face business deterioration. For instance, in Fiscal 2023, these top 5 clients accounted for 88.40% of the revenue from TTL’s Services segment.
- Automotive Sector Dependence: High dependency on the automotive sector means any economic downturn in this sector could significantly impact business and operations.
- New Energy Vehicle Market Uncertainties: Significant future revenue is expected from new energy vehicle companies, many of which are startups. Their uncertainties in funding, growth management, and creditworthiness could adversely affect the business.
- Talent Dependency: Business success heavily relies on attracting, retaining, and optimally utilizing skilled engineering professionals and the management team.
- Vendor Reliance in Products Business: Dependency on single-source or limited-source software vendors and partners could affect service availability and cost.
- Intense Market Competition: The highly competitive engineering services market could affect pricing and profitability.
- Client’s Shift in Outsourcing Strategy: Clients reducing outsourced engineering work or setting up captive R&D centers could lead to a significant reduction in work volume.
Peer Comparison
| Particulars (in INR Crore) | Tata Tech | KPIT | Tata Elxsi | LTTS | Cyient |
| FY23 | FY23 | FY23 | FY23 | FY23 | |
| Profit After Tax | 624 | 387.0 | 755 | 1174 | 514 |
| Market Cap | 20,283 | 40,526.0 | 52,642 | 46,849 | 18,979 |
| PE | 33 | 105.0 | 70 | 40 | 37 |
| Revenue growth (%) | 25 | 38.0 | 27 | 22 | 33 |
| PAT growth (%) | 43 | 40.0 | 37 | 22 | -2 |
| Particulars | H1FY24 | H1FY24 | H1FY24 | H1FY24 | H1FY24 |
| Revenue growth (%) | 34 | 61.0 | 16 | 9 | 31 |
| PAT growth (%) | 35 | 61.0 | 22 | 9 | 59 |
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