TATA TECHNOLOGIES

LIMITED

IPO NOTE
 OVERVIEW
Tata Technologies Ltd, was incorporated in 1994 and is a subsidiary of Tata Motors Ltd. It is a leading global engineering services
company that offers product development and digital solutions including turnkey solutions to global original equipment manufacturers
(OEMs) as well as their Tier-1 suppliers. It leverages its deep domain expertise in the automotive segment and caters to adjacent
verticals as well like aerospace, transportation and construction heavy machinery. A pure play manufacturing focused ER&D
(engineering, research and development) company that is currently engaged with ~7 out of the top 10 automotive ER&D spenders. The
company has grown organically as well as inorganically through acquisitions. As of 30th September 2023, it has 19 global delivery centres
spread across North America, Europe and Asia Pacific.

FINANCIAL HIGHLIGHTS ISSUE DETAILS

FY21 FY22 FY23 Issue Date 22 Nov’23 to 24 Nov’23

Revenue from Operations 2,381 3,530 4,414 Price Band ₹475-₹500

EBITDA 386 646 821 Bid Lot 30
Net Profit 239 437 624
Issue Size ₹3,043 cr
₹ crore
ISSUE SIZE No. of Shares (Post Issue) 40.6 cr

Fresh Issue Post-Issue Implied Market Cap* ₹20,283 cr

Total - P/E Ratio

32.5x
(FY23)*
₹3,043 cr Offer For Sale * At upper price band
₹3,043 cr
IPO NOTE
ABOUT THE COMPANY- REVENUE SOURCES

• Services- Majority of the revenue comes from this segment Revenue (FY23)
(~₹3,535 cr). This segment includes providing outsourced
engineering services as well as digital transformation services
Total: ₹4,414 cr
to global manufacturing clients helping them conceive, design,
develop and deliver better products. These solutions help
OEMs address challenges of process effectiveness across their 20%
value chain from product development to customer experience
and accelerate the digital transformation journey.

• Technology solutions- Remaining of the revenue (~₹877 cr)

comes from technology solutions that complement the service
offerings. Through the Products business (~11% of revenue),
the company resells third-party software applications,
primarily product lifecycle management software as well as
value-added services like consulting, implementation, systems 80%
integration and support. Through the Education business (9%
of revenue), it provides education solutions in manufacturing
skills including upskilling and reskilling in relation to the latest
engineering & manufacturing technologies to public & private
institutions through its proprietary platform ‘iGetIT’. Sale of services Sale of technology solutions

• A small portion (~₹2 cr) comes from other operating revenue.

IPO NOTE
 ABOUT THE COMPANY- REVENUE SPLIT
FY23 Revenue- ₹4,414 cr
Revenue by geography (FY23) Revenue by vertical (FY23)

21%
30% 29%

23%
71%

26%

India Rest of the World* Europe North America Automotive Others#

*Rest of the world majorly includes Vietnam & others; #Others include Aerospace and Construction heavy vehicles
IPO NOTE
SECTOR OUTLOOK

• The global ER&D spend stood at $1,811 billion (~₹148.7 lakh cr) as of 2022 and is expected to grow by a CAGR of ~10% to reach
$2,672 billion (~₹219.4 lakh cr) by 2026. Out of the total spends in 2022, manufacturing-led spending accounted for ~48% of the
total share, with automotive being the top vertical under the manufacturing ER&D spend. The transition towards electrification as
well as advent of new age digital technologies would ramp up the overall ER&D spends.

• The global automotive ER&D spend stood at $180 billion (~₹14.8 lakh cr) as of 2022. It is expected to grow by a CAGR of 7% by
2026 to reach $238 billion (₹19.6 lakh cr). The top 20 ER&D spenders like Volkswagen, General Motors, Toyota, etc account for
~73% of the overall spend. As the demand for autonomous & connected technologies rise aided by regulatory pressures for
emission controls, the spend on automotive ER&D would advance going ahead.
Global ER&D Spend (in $ billion) Global Automotive ER&D Spend (in $ billion)
3000 250 238
2672
2500 200 180
167
2000 1811
1648 150
1500
100
1000
50
500

0 0
2021 2022 2026 2021 2022 2026
Source: Zinnov Research

IPO NOTE
SECTOR OUTLOOK

• In terms of geography, North America has the highest share (~50%) of the ER&D spends followed by Western Europe (~25%) and
APAC (Asia Pacific) (25%). The spend of North America, Europe and APAC is expected to grow by a CAGR of 13%, 7% and 8%
respectively by 2026.

• The market for outsourced ER&D spend to third-party engineer service providers (ESP) stood at $105-$110 billion in 2022 and is
poised to reach $165-$170 billion by 2026. The total ER&D GCC (global capability centres) in offshore locations stood at $65-$70
billion in 2022 and would reach $90-$95 billion by 2026. More than ~85% of the top 50 ER&D spenders have GCCs in India owing to
its software engineering maturity and digital talent availability. The total of outsourced as well as GCC ER&D spend forms the global
addressable market.

• In terms of geography for the automotive ER&D spend, Europe has the highest market share (~49%), followed by APAC (38%) and
North America (13%) as of 2022. The outsourced automotive ER&D spend market stood at $18-$20 billion during the same period
and is expected to grow by a CAGR of ~11% to reach $27-$29 billion by 2026.

• The key growth drivers for higher automotive ER&D spend lies in ‘CASE’ (Connected, Autonomous, Shared Mobility and
Electrification); from vehicle motion control, infotainment, smart assistance to efficiency requires transition towards digitization
and AI. Thus, as the transition ramps up, the spends would rise in tandem, boosting overall ER&D spend market.

Source: Zinnov Research

IPO NOTE
SECTOR OUTLOOK

• The ER&D spend for the aerospace & defense industry stood at $52 billion (~₹4.3 lakh cr) in 2022 and is expected to reach $62
billion (₹5.1 lakh cr) by 2026. In 2022, the highest spend came from Europe (48%), followed by North America. The top 10
aerospace ER&D spenders account for more than 65% of the overall spending.

• The outsourced aerospace ER&D market stood at $9-$10 billion as of 2022 and is expected to grow by a CAGR of 10% by 2026. The
growth would be driven by a renewed focus from aerospace enterprises towards digitization and use of electric systems to reduce
costs. Key players like Airbus, Boeing, Pratt & Whitney, etc have already made significant investments towards autonomous flight
technologies.

• The global transportation & construction heavy machinery (TCHM) ER&D spend stood at $43 billion (~₹3.5 lakh cr) in 2022 and is
poised to grow to $49 billion (~₹4 lakh cr) by 2026. The industry is investing in various digital engineering initiatives to improve
asset utilization as well as performance optimization. The key future growth drivers would include smart factories, electrification
aided by reduced carbon footprint requirements, autonomous fleet and connected equipment.

• The outsourced TCHM ER&D market was $3 billion in 2022 and is expected to grow to $4 billion by 2026. Mechanical design &
manufacturing engineering are the key outsourced sub segments of the outsourced TCHM industry.

• The total tech talent demand and supply stood at 5.2 million and 4.7 million, respectively in 2022 and the same is expected to
reach ~9.6 million and ~7.8 million, respectively by 2026. Tata Technology is uniquely positioned in terms of manufacturing tech
upskilling as there are no other major players.
Source: Zinnov Research

IPO NOTE
COMPETITIVE LANDSCAPE

• Market Cap: • Market Cap: • Market Cap: • Market Cap:

₹41,341 cr ₹48,446 cr ₹52,299 cr ₹20,283 cr

L&T TECHNOLOGY SERVICES LIMITED

KPIT TECHNOLOGIES LIMITED

TATA TECHNOLOGIES LIMITED

• Revenue: • Revenue: • Revenue: • Revenue:

TATA ELXSI LIMITED

₹3,365 cr ₹8,014 cr ₹3,145 cr ₹4,414 cr

• Employee base: • Employee base: • Employee base: • Employee base:

11,013 22,233 11,864 11,616

• EBITDA Margin: • EBITDA Margin: • EBITDA Margin: • EBITDA Margin:

18.8% 21.3% 30.6% 18.6%

• RONW: • RONW: • RONW: • RONW:

22.91% 23.54% 36.21% 20.87%

• P/E Ratio: • P/E Ratio: • P/E Ratio: • P/E Ratio:

84.90x 39.08x 66.62x 32.50x

Figures are for FY23

IPO NOTE
 COMPETITIVE LANDSCAPE
Key Metrics KPIT Technologies L&T Technology Tata Elxsi Tata Technologies
Services
Attrition rate (%) - 22% 17% 22%

Employee cost as a % of revenue 64% 57% 51% 44%

Offshore employee mix (%) - 56% 75% 85%

Top 5 clients revenue contribution (%) - 16% 40% 61%

Top 10 clients revenue contribution (%) - 27% 48% 81%*

Top 20 clients revenue contribution (%) 83% (#) 42% - 88%*

% of revenue from Automotive 99% 35% 43% 71%

Major geography revenue contribution

Europe, 48% North America, 62% Americas, 43% India, 30%
(Geography, % of revenue)

All figures as of FY23; #Top 21 client; *attributable to Service segment revenue only

IPO NOTE
PROMOTER BACKGROUND AND SHAREHOLDING
Ajoyendra Mukherjee is the Chairman & Independent Shareholding Pre IPO Post IPO
Director of the company. He holds a bachelor’s degree in
engineering (electrical & electronics) from the Birla Promoter & Group 66.8% 55.4%
Institute of Technology and Science. He was previously Public 33.2% 44.6%
associated with Tata Consultancy Services Ltd for almost
Total 100% 100%
four decades, where he held position as the head of
business operations in Eastern India, Middle East, Africa,
Share in Issue
and Switzerland. Allocation of offer % of Issue
(₹ crore)
Warren Kevin Harris is the CEO and the Managing Director
QIB 1,522 50%
of the company. He holds a bachelor’s degree in
engineering (technology) from the University of Wales Retail 1,065 35%
Institute of Science and Technology, a doctorate in NIB 456 15%
philosophy from Amity University and has done an
advanced management program from Harvard Business Total 3,043 100%
School. He is a chartered mechanical engineer who has
been with the company since 2005.

Major Shareholders Shareholding % Pre Issue Shareholding % Post Issue % of OFS Issue

Tata Motors Ltd 64.8% 53.4% 76%

Alpha TC Holdings Pte Ltd 7.3% 4.9% 16%
Tata Capital Growth Fund I 3.6% 2.4% 8%

IPO NOTE
RISK FACTORS

• The company derives a substantial portion of its revenue from its Top 5 clients and any inability to renew or retain the contracts
could materially impact the ongoing business operations.

• The company’s business model depends upon the strength of skilled manpower, therefore the inability to attract and retain
skilled manpower could impact the operations of the business.

• As the company majorly deals with the automotive segment, any economic slowdown or specific factors affecting the vertical
could lead to adverse impact for the company.

• The company earns ~70% of revenue from foreign regions and any exchange rate fluctuations or macro-economic factors
negatively affecting those particular regions could have an impact on the profitability of the company.

• In terms of its technology solutions revenue stream, it relies on third-party software providers and partners and any delay or
termination of the alliance could potentially impact this revenue stream.

IPO NOTE
STATEMENT OF PROFIT AND LOSS
Data for the six
Particulars Data for the period (₹ crore)
months period
2021 2022 2023 30th Sep 23
Revenue From Operations 2,381 3,530 4,414 2,527
Other Income 45 49 88 61
Total Income (I) 2,426 3,578 4,502 2,587
Purchase for technology solutions 338 689 682 424
Employee benefit expense 1,216 1,513 1,929 1,132
Finance costs 18 22 18 9
Depreciation & Amortization 92 86 95 50
Other Expense 440 683 981 506
Total Expense (II) 2,105 2,992 3,706 2,121
Profit Before Tax (III) = (I)-(II) 321 587 796 466
Exceptional Item (IV) 5 - - -
Tax Expense (V) 76 150 172 114
Net Profit for the Period (VI)= (III)-(IV)-(V) 239 437 624 352

IPO NOTE
STATEMENT OF ASSETS AND LIABILITIES
Particulars Data as on 31st March (₹ crore) Data as on
2021 2022 2023 30th Sep 23
Property, plant and equipment 87 115 120 132
Right-of-use assets 233 188 180 185
Goodwill 726 729 763 766
Trade receivables 596 768 1,106 1,225
Investments 497 528 30 90
Bank Balance 2 101 616 386
Cash & Cash Equivalents 781 768 383 429
Other assets 651 1,021 2,003 1,930
Total assets 3,076 3,690 5,172 5,142
Total Equity 2,142 2,280 2,989 2,853
Non-Current Liabilities 248 242 239 243
Trade payables 224 337 658 480
Other current liabilities 959 1,359 1,316 1,566
Total Equity and liabilities 3,076 3,690 5,172 5,142

IPO NOTE
STATEMENT OF CASH FLOW

Particulars Data for the year ended 31st March (₹ crore) Data for the
six months
ended
2021 2022 2023 30th Sep 23
Net cash generated from / (used in) operating activities (A) 1,113 (39) 401 (8)
Net cash generated from / (used in) investing activities (B) (674) 74 (487) 580
Net cash generated from / (used in) financing activities (C) (44) (44) (347) (527)

Net increase / (decrease) in cash and cash equivalents (A+B+C) 395 (9) (433) 46

IPO NOTE
 KEY METRICS
Particulars Data for the year ended 31st March Data for six
months ended
2021 2022 2023 30th Sep 23
EBITDA Margin (%) 16.2 18.3 18.6 18.4
Net Profit Margin (%) 6.8 12.4 14.1 13.9
Employee base 7,954 9,338 11,616 12,451
Repeat client (%) 95.7 97.2 98.4 97.7
Revenue contribution by Anchor Client (%) 42.9 31.5 34.1 37.7
Utilization rate (%) 75.8 86.8 87.1 87.6
Active client band base:
$50 million+ 2 3 3 3
$20 million+ 2 3 3 3
$10 million+ 6 6 6 6
$5 million+ 8 11 7 10
$1 million+ 27 31 34 38
Anchor Client: Tata Motors (including Jaguar Land Rover)
IPO NOTE
FUTURE OUTLOOK

• The company plans to expand its client as well as geographical reach through acquisitions going ahead.

• They would be focused on scaling up their embedded & digital software defined vehicles (SDV) capabilities & offerings through
increased investments.

• The company plans to drive revenue through offshoring, optimize the employee pyramid and recruit campus hires to drive
margins.

• They would leverage its experience and relationships with the public sector to expand its education business portfolio and
improve its ‘iGetIT’ platform.

IPO NOTE
SWOT ANALYSIS

• Tata Technologies is a pure play manufacturing ER&D services

Strengths Opportunities company that enables automotive, aerospace and its adjacent
verticals to digitally enhance and improve operations.
Brand loyalty Push for
electrification and
Key clients
ramp up in ER&D • The company may have several opportunities going ahead as the
High repeat rate spend ramp up for electric vehicle & transport penetration rises.

• Manufacturing ER&D is a key need for automotive makers. The

brand name of the Tata Group along with years of experience in
this sector gives the company an edge against others.

Threats Weakness
Automotive sector Client concentration
headwinds
Increase in
competition

IPO NOTE
TIMELINES

Finalization Credit of
of basis of shares to
Issue Opens allotment depository

22 24 30 01 04 05
Nov Nov Nov Dec Dec Dec

Issue closes Initiation of IPO Listing

refunds Date

Disclaimer:
This document is published for learning purposes only and nothing contained herein shall be
construed as a recommendation on any stock or sector.

IPO NOTE
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CASE STUDY