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Tata Motors announced on October 13 that it has reached an agreement to divest a 9.9 percent stake in Tata Technologies to TPG Rise Climate SF Pte. Ltd., a climate-focused private equity fund, and the Ratan Tata Endowment Foundation (RTEF), for a total of INR 1,613.7 crore. This move values Tata Technologies at INR 16,300 crore. TPG, an investor in Tata Motors’ electric vehicle business, will acquire a 9 percent stake in Tata Technologies, while the remaining 0.9 percent will be purchased by RTEF.
Tata Motors will receive INR 1,467 crore from the sale to TPG, and RTEF will pay INR 146.7 crore. The transaction is set to be finalized by October 27, 2023. Tata Technologies, a global engineering services company, specializes in providing product development and digital solutions, including turnkey solutions, to global original equipment manufacturers. Leveraging its domain expertise in the automotive industry, the company serves clients in sectors such as aerospace, transportation, and heavy machinery.
Tata Technologies is gearing up for its impending initial public offering (IPO), marking the first such offering from the Tata Group in nearly two decades. The IPO involves the sale of up to 9.57 crore equity shares, accounting for 23.6 percent of the company’s paid-up share capital, by Tata Motors, Alpha TC Holdings, and Tata Capital Growth Fund I.
In terms of financial performance, Tata Technologies reported a 25 percent increase in revenue for FY23, reaching INR 4,418 crore, while its profit after tax surged by 63 percent to INR 708 crore. Over the period from FY21 to FY23, the company achieved a compound annual growth rate (CAGR) of 30 percent in revenue, leading to a remarkable 46 percent CAGR in EBITDA and a substantial 61.5 percent CAGR in profit after tax.
Tata Technologies’ revenue CAGR over the last three years has outpaced that of competitors such as Tata Elxsi, L&T Technologies, and KPIT Technologies. The company’s EBITDA margin stands at a robust 23.7 percent, in line with industry standards.
In terms of financial indicators, Tata Technologies reported a return on equity (RoE) of 19.8 percent in March 2022, which improved to 23.7 percent in March 2023. The return on capital employed (RoCE) also increased, reaching 19.5 percent in March 2023 compared to 16.7 percent in March 2022.
Earlier in the day, Tata Motors’ stock witnessed a 5 percent rise, reaching INR 667.15.
