Why rally in Tata Motors share may continue before Tata Technologies IPO launch — explained

Stock market experts said that Tata Technologies IPO contains shareholding of Tata Motors and the auto major is offering its shares for sale in this public issue, which is 100 per cent offer for sale (OFS). This means, net proceeds of Tata Technologies IPO will strengthen the balance sheet of Tata Motors instead of Tata Technologies. They said that Tata Motors had acquired Tata Technologies shares at a price of ₹7.40 apiece (as mentioned in the DRHP), whereas Tata Technologies share price is quoting around ₹850 per share in the unlisted stock market. So, market is expecting huge monetary benefit for Tata Motors from this upcoming IPO of Tata Technologies. They said that Tata Motors share price may go up to ₹615 apiece levels ahead of Tata Technologies IPO launch date.

Why Tata Motors share is surging?

On how Tata Technologies IPO has injected momentum in Tata Motors shares, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “Tata Technologies IPO is 100 per cent OFS and Tata Motors has offered its shares in upcoming IPO. This means, net proceeds of the Tata Technologies IPO is going to strengthen balance sheet Tata Motors. As Tata Motors acquired Tata technologies shares at ₹7.40 apiece and Tata Technologies share price is quoting around ₹850 in grey market, market is expecting whopping returns for Tata Motors from its investments in Tata Technologies.”

Avinash Gorakshkar went on to add that both primary and secondary market is looking bullish on Tata Technologies IPO as it has a strong brand image that Tata group has build over a long time. So, the public issue is expected to perform well as and when it gets open for subscribers. He said that uptrend in Tata Motors shares may continue as market is expecting strong quarterly numbers after the launch of Tata Technologies IPO.

Expecting more upside in Tata Motors shares, Ganesh Dongre, Senior Manager — Technical Research at Anand Rathi said, “After channel breakout at ₹470 to ₹480 apiece levels, Tata Motors share price has witnessed a decisive rally in recent sessions. Those who have this stock in portfolio are advised to maintain trailing stop loss at ₹510 and hold the scrip for next targets of ₹600 and ₹615.”

Probable Tata Technologies IPO price

On Tata Technologies IPO price that one can expect once it is launched, Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio said, “Tata Technologies has reported TTM revenue of ₹3,983 crore and TTM Net Profit of ₹513 crore, resulting an TTM EPS of ₹12.65. If we want to compare Tata Technologies, we can compare with Cyient, as Cyient is mostly into same business and TTM revenue of ₹6,016 crore. Currently, Cyient is trading at 23.5x TTM EPS of ₹46.52. We have valued Tata Technologies at 10 per cent discount to the multiple assigned to Cyient at 21.2x TTM EPS to arrive at intrinsic value of ₹268 per share.”

Tata Technologies IPO details

Tata Technologies has filed DRHP with the SEBI for its IPO on 9th March 2023. It plans to sell up to 9.571 crore shares, representing approximately 23.6% of its paid-up share capital through offer for sell. The IPO is an offer for sale by its existing shareholders, including Tata Motors, Alpha TC Holdings Pte and Tata Capital Growth Fund-I. Tata Motors currently holds a 74.69% stake in the company, while Alpha TC Holdings Pte and Tata Capital Growth Fund-I have a 7.26% and 3.63% stake, respectively.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

Updated: 10 Jun 2023, 08:23 AM IST