Tata Tech IPO: After 2 decades a Tata group firm will test public markets

Engineering services company files DRHP; seeks to raise Rs 4,000 cr

Tata Motors subsidiary Tata Technologies is heading for an initial public offering (IPO), almost two decades after IT bellwether Tata Consultancy Services became the last Tata group firm to test Indian public markets in 2004.

Pune-based Tata Technologies' IPO consists of an offer for sale up to 95.71 million shares, representing up to 23.60 per cent of its paid-up share capital.

The offer for sale comprises up to 81.13 million equity shares by Tata Motors, 9.71 million shares by Alpha TC Holdings Pte. Ltd. and up to 4.86 million shares by Tata Capital Growth Fund I, each representing up to 20 per cent, 2.40 per cent and 1.20 per cent, respectively of Tata Technologies paid-up share capital.

Tata Technologies provides global clients engineering services that include product development and digital assistance. Some key sectors which it serves are automobiles, original equipment manufacturers, aerospace, transport, and construction.

The company’s revenue from operations for the nine-month period ended December 31, 2022 and December 31, 2021 was Rs 3011.79 crore and Rs 2607.3 crore. Its employee count (both full time and contracted personnel) grew from 8,620 as of March 31, 2020 to 11,081 in December 31, 2022.

Tata Technologies, which is headed by Warren Harris, operates in the engineering and product development space. Its global engineering research and development (ER&D) spend for 2021 was approximately $1.64 trillion: the expenditure is expected to grow to $2.28-2.33 trillion by 2025.

The ER&D spend outsourced to third-party service providers was $85-$90 billion in 2021 and is expected to grow at a 10-12 per cent CAGR between 2021 and 2025, according to a Zinnov report cited in the firm’s draft red herring prospectus (DRHP).

Key growth drivers in the ER&D market include outsourcing, regulatory interventions for safe products, shrinking product innovation and new product technologies.