Shares of recently-listed Tata Technologies traded flat in the morning trade on Tuesday, April 9, after 30.6 lakh shares, or 0.8 per cent equity, changed hands via multiple block deals today.
The stock was in the news last week after the company announced a JV with the BMW Group. The JV aims to establish automotive software and IT development hubs in Pune, Bangalore, and Chennai. In automotive software, the focus of the JV will be on automated driving, infotainment, and digital services. In business IT, the JV will emphasise digitalising and automating product development, production, and sales.
Tata Technologies will contribute 100 resources to the JV at inception. This is expected to grow swiftly to 1,000+ resources over the next few years.
Significance of JV
Analysts at JM Financial, in their report issued on April 2, noted that a deal with a leading European OEM in automotive software ticks many boxes for Tata Technologies. They are as below:
- It addresses investor concerns that Tata Tech’s parentage (i.e., subsidiary JLR) prevents it from winning traditional global automotive clients.
- Two, it demonstrates Tata Tech’s improving software ER&D capabilities, contrary to the perception that it has predominantly mechanical ER&D skill sets.
- Three, it should alleviate concerns around client concentration and offset the Vinfast ramp-down.
Importantly, it strengthens our overarching thesis that growing software complexity and multiple constraints facing OEMs will likely trigger an offshoring wave in auto ER&D. “Tata Tech’s full vehicle EV/ICE proposition, combined with a string of recent partnerships—Intel, Arm, Agratas, and BMW—put it in an enviable position to capture this burgeoning opportunity,” it added.
What investors in Tata Tech need to know
The brokerage said that the BMW Group has been building a network of global technology partners since 2016. “Tata Tech’s inclusion in that network is a significant positive and should offer the company a marquee referenceable client to win more accounts/cross-sell to existing ones,” it added.
At 45x FY26E PER, the valuation is now at par with KPIT/ELXSI (47x/44x). With capabilities now spanning the entire spectrum of OEMs’ ER&D spend, comparable valuations are justified, it added. JM Financial has reiterated its buy rating on the stock with an unchanged target price of Rs 1,370.
About Tata Technologies
Tata Technologies was incorporated in 1994. It is a global engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers (OEM) and their Tier 1 suppliers.
Backed by Tata Motors Ltd. (TML), the company boasts extensive knowledge in the automotive sector and has expanded its expertise into the aerospace and transport, construction, and heavy machinery industries (TCHM).
Tata Tech IPO and listing
Tata Technologies made a stellar debut on the bourses on November 30, with a 140 per cent premium over the issue price of Rs 500. The scrip of Tata Technologies was listed at Rs 1,200 on the NSE and Rs 1,199.95 on the BSE.
The company’s IPO was overall subscribed 69.43 times. The public issue subscribed 16.50 times in the retail category, 203.41 times in QIB, and 62.11 times in the NII category. The IPO ran between November 22 and November 24, 2023.
