Tata Technologies' unlisted shares has increased by 30% in three weeks

Tata Technologies' unlisted market shares have risen more than 30% in the last three weeks after the business announced it would issue free shares and Tata Motors announced it was considering partial disinvestment via an initial public offering.

According to a dealer, the shares rose to Rs 7,300 per share from Rs 5,500 in unlisted markets.

Tata Technologies has announced a bonus issue of one new share for every share held, with the record date set for January 16. The corporation also announced a 5:1 stock split. Tata Motors announced in a stock exchange filing on December 12 that it is considering a partial stake sale in the company.

"The planned corporate action of split and bonus can be considered as a preparatory move towards the IPO," UnlistedArena.com's Manan Doshi, who trades in unlisted and pre-IPO shares, said.

Tata Technologies is an outlier in the unlisted area, where most investors have quit and gone on to blue-chip and conventional companies.

From Rs 1,050 in September 2020 to Rs 6,300 in October 2022, the shares had increased sixfold. In November, the stock plummeted to Rs 5100 before rebounding again.

Other unlisted equities, such as API Holdings, the owner of Pharmeasy, have dropped more than 70% in the last two years. According to a dealer, ixigo owner Le Travenues lost more than 60%, Oyo owners Oravel Stays lost more than 42%, and One Mobikwik Systems lost 70%.

Profit expansion

Analysts attributed Tata Tech's six-fold increase in stock price over the last two years to better-than-expected earnings.

Tata Technologies, founded in 1989, provides a variety of services in areas such as electric vehicles, aerospace, heavy engineering, and software products.

In FY22, the company reported revenue of Rs 3,529.57 crore, up 48 percent from the previous year, while net profit increased by 83 percent to Rs 436.97 crore. Its operating margin was 18.3 percent in FY22, up from 16.3 percent the previous year.

Service income climbed 38.4 percent to Rs 2,654.8 crore from Rs 1,917.7 crore in FY21, while revenue from technological solutions increased 88.6 percent to Rs 873.61 crore.

The Tata Group, particularly Tata Motors and Jaguar Land Rover, is the company's main source of revenue. Tata Tech, on the other hand, has expanded its percentage of business generated outside the company. Its non-captive account contribution climbed to 64% in FY22, up from 46% in FY20.

"The most pleasing part of this growth is that it has been driven by accounts other than TML and JLR (captive accounts)," the company wrote in its annual report.

Its cash position increased by 43% to $165 million. Its services order book increased by 29 percent to $250 million in March 2022, from levels in March 2021.

"Tata Technologies posted solid growth in FY22, and investors are excited about the company's continued expansion due to its presence in the EV industry," Doshi remarked.

Tata Motors owns 74.4 percent of Tata Tech. Tata Motors proposed selling a 43 percent share in Tata Tech to private equity firm Warbug Pincus for $360 million in June 2017. However, the proposal was cancelled in February 2018 due to a lack of governmental licences and performance issues caused by market conditions.

Separately, direct-to-home platform Tata Play was said to have submitted its draught red herring prospectus with the Securities and Exchange Board of India on November 29 in a private manner.

Tata Tech and Tata Play's IPOs would be the first for the Tata Group since Tata Consultancy Services went public in 2004. They would also be the first under Tata Group Chairman N Chandrasekaran, who took over in 2017.