Tata Technologies may be first Tata group IPO after 18 years

Tata IPOs always have a certain aura about them because they have rarely disappointed investors and stakeholders. The last time the Tata group had come out with a marquee IPO was in the year 2004 when Tata Sons had sold part of its stake in TCS (Tata Consultancy Services) to the public through the IPO route. Now, a full 18 years later, it looks there may be another major IPO from the Tata group. Tata Motors confirmed that its board of directors had given in-principle approval for partial divestment of their corporate investment in Tata Technologies. Tata Technologies is a global product engineering and digital services company, which will be the technology engine of the group in the future.

As of now, the approval has been given and only after due deliberations the next steps would be taken. For instance, the IPO itself would be ultimately subject to market conditions, necessary approvals, regulatory clearances, observations from SEBI, timing of the issue, valuations etc. The company is expected to make significant announcements pertaining to the granular details of the issue as part of the IPO draft red herring prospectus to be file with SEBI. This will enable Tata Motors to unlock value for the company so that it can reduce its auto sector debt to more reasonable and manageable levels.

Obviously, Tata group is looking to put all its focus on the two major business verticals of aviation and electrical vehicles. That would mean reducing debt in other businesses and reinvesting the money into the core businesses. There are several other IPOs also lined up, which would be used by the Tata group to monetize its holdings in the group. For instance, Tata group had shelved the IPO of Tata Autocomp Solutions while the Tata Sky business is also planning a listing. In fact, Tata Sky plans to file a confidential IPO prospectus, wherein details will only be disclosed at a later stage.

For Tata Motors, the strategy would be to use this divestment to get to “zero net automotive debt” status by FY24. This was something the company had even mentioned in its FY22 annual report to shareholders. The company has been making losses for quite a few quarters mainly due to the pressure of profits on its international operations. The lower debt would enable the company to make productive use of its hidden assets in the form of group investments. Currently, Tata Motors has net auto debt, including leases, of Rs48,679 crore in FY22. This has risen sharply from Rs40,876 crore in FY21 and the first priority for the group is to cut down this debt at the earliest.