Tata Technologies, after a hiatus of 19 years, is making waves with its new IPO. The last notable IPO from the Tata conglomerate was that of TCS, which turned out to be a multi-bagger, yielding substantial returns. Fast forward to 2023, and Tata is back in the IPO game with the current offering. As of now, the grey market premium hovers around ₹400, while the issue price is set at ₹500, indicating a potential 80% listing gain. Online chatter suggests the possibility of doubling your investment. However, before delving into the optimistic aspects, it’s crucial to issue a substantial disclaimer. With only a day left to apply for the IPO as of the live date, investors need to tread cautiously, understanding the risks involved.

Before any investment, a SWOT analysis is imperative. For Tata Technologies, a company deeply entrenched in engineering research and development, primarily catering to the automotive sector, including Tata Motors, Jaguar, and Land Rover, it’s essential to assess strengths, weaknesses, and opportunities. However, let’s divert our attention to the threats first. The company, founded in 1989 as a subdivision of Tata Motors and later established as a standalone entity in 1994, faces a significant threat due to its heavy reliance on a handful of clients. Astonishingly, 57% of its revenue is derived from its top five clients, a precarious situation that could spell trouble if any of these clients shift allegiance to competitors or face financial challenges.

Furthermore, the company operates in a sector, of engineering and development for automobiles, that is inherently cyclical. The automotive industry’s performance is intricately linked to economic cycles; a thriving economy sees a robust automotive sector, while economic downturns can significantly impact demand. Tata Technologies, with a staggering 69% of its revenue tied to the automotive sector, is susceptible to economic fluctuations, adding another layer of risk.

Now, let’s shift focus to the positive aspects, starting with the SWO in SWOT analysis. Examining the company’s financial performance is pivotal before considering any investment. Looking at the data from 2021 to 2023, a promising trend emerges. The company’s revenue has experienced consistent growth, ascending from ₹2380 crores to ₹4414 crores, showcasing a robust year-on-year increase.

Delving into the company’s assets, there’s another positive trajectory. The total assets have expanded from ₹3500 crores to ₹5200 crores, underscoring the company’s financial health and growth. A company with escalating assets is often viewed favorably in the investment landscape.

Equally encouraging is the profit trajectory. Tata Technologies has not only maintained profitability but has demonstrated a commendable increase in profits over the years. The profit has surged from ₹240 crores to ₹624 crores, reflecting a strong financial performance and signaling a positive outlook for potential investors.

These financial metrics, namely revenue growth, increasing assets, and rising profits, position Tata Technologies as a company on an upward trajectory. The consistent positive trend in these fundamental aspects bodes well for those considering investment in the IPO.

As the IPO window is closing on the 24th of November, investors need to weigh these factors carefully. While the threats of client concentration and exposure to a cyclical sector loom large, the company’s financial indicators paint a promising picture. It’s crucial for potential investors to conduct thorough due diligence and factor in the risks before deciding whether to partake in this IPO.

As we step into the investment arena, timing is of the essence. If you decide to invest on the 24th, the subsequent steps in the IPO process become crucial to understand. Shares will be allotted on the 30th of November, and by the 4th of December, you should witness the shares credited to your Demat account. This assumes, of course, that you successfully secured an allotment. If not, rest assured that by the 1st of December, any unallotted funds will be refunded.

When can you actively trade these shares? The listing date is set for the 5th of December, signaling the point where the shares become available for buying and selling in the open market. Now, let’s discuss some pertinent details about this IPO.

The issue size stands at a substantial ₹3042.51 crores, with a price range spanning from ₹475 to ₹500. However, it’s crucial to acknowledge the present scenario – the IPO is already oversubscribed ten times over. This overwhelming demand suggests that bidding at the lower end of the range might not be sufficient. If you aim for an allotment, a bid at ₹500 becomes imperative, though even then, securing shares may pose a challenge given the high demand.

For those curious about the financial commitment, the lot size stands at 30. Therefore, a single lot at ₹500 totals ₹15,000. However, considering the current subscription rate, especially for retail investors who have subscribed over nine times, it’s advisable to apply cautiously, understanding the potential challenges in securing an allotment.

The minimum investment, calculated at the lower end of the price range (₹475), would amount to ₹14,250 for a single lot. Retail investors, adhering to the lot size of 30, can apply for up to 13 lots, translating to an investment of around ₹1,95,000. This keeps the investment well below the ₹2 lakh mark, making it accessible for retail participants.

Examining the subscription rates further illuminates the demand dynamics. Qualified institutional buyers have subscribed more than four times, non-institutional investors a staggering 22 times, and retail investors over nine times. Special employee quotas have also seen substantial demand, reaching almost two times the allocated shares. The overall subscription rate stands at an impressive ten times.

It’s worth noting a special opportunity for those who held Tata Motors shares before the 13th of November. A reserved quota of 10% increases the likelihood of allotment for these individuals, offering a strategic advantage. However, this opportunity is only valid for shares held before the specified date.

One key indicator to gauge market sentiment is the Grey Market Premium (GMP), which currently stands at a robust ₹400. This premium, coupled with the IPO’s issue price of ₹500, suggests a potential listing gain of around 80%. This makes the IPO enticing for those seeking quick returns.

Now, let’s shift focus to the critical question of whether this investment is suited for the long term. Considering the earlier discussion on threats faced by the company, it becomes evident that caution is required. Heavy reliance on a few clients and sectoral concentration in the automotive industry poses significant risks.

On the flip side, the company’s future growth prospects lie in diversification. The red herring prospectus indicates a strategic focus on e-learning, skilling initiatives, and support for emerging startups in the manufacturing, automotive, and energy sectors. This diversification signals a proactive approach to tap into evolving markets and could potentially fuel the company’s growth.

Moreover, the broader trend in the engineering research and development sector is promising. Over the last five years, the sector has witnessed a steady 15% growth, with expectations of continued growth exceeding 15% in the coming years. These growth projections paint a positive picture for Tata Technologies.

The Tata Technologies IPO presents an intriguing opportunity with the potential for a significant listing gain. The oversubscription, GMP, and the company’s financial performance make it an attractive proposition for short-term investors. However, the long-term viability requires careful consideration of the associated risks and the company’s strategic initiatives for future growth.

As the IPO deadline looms, investors should weigh the pros and cons, considering their risk appetite and investment goals. The intricate dance between risk and reward is ever-present in the world of finance, and it’s up to the individual investor to navigate this terrain wisely. For now, the market awaits the outcome of this IPO, anticipating the next move in this strategic play by Tata Technologies.