Tata Technologies IPO Launches Amidst Questions on Tata Elxsi's Existence

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Tata Technologies’ IPO has been launched with a subscription status of 2.38 times on the first day, priced between ₹475 to ₹500 per equity share. Confusion arises among investors regarding the existence of both Tata Technologies and Tata Elxsi within the Tata Group, considering their focus on the auto industry. Let’s delve into the differences between these two companies.

Core Business Models:

  • Tata Technologies: Primarily engages in hardcore engineering and manufacturing, focusing on product and process improvement, especially in the manufacturing sector.
  • Tata Elxsi: Specializes in design and software engineering services, crafting the look and feel of products and developing software for diverse sectors.

Primary Industries Focus:

  • Both companies have a significant presence in the automobile industry, with Tata Technologies relying heavily on it, contributing about 88% of its income in the first half of the financial year. Tata Elxsi, while earning 46% from the automobile sector, diversifies into healthcare, life sciences, and media communications.

Global Operations:

  • Tata Technologies adopts a balanced approach with approximately half of its work done in India (onshore) and the other half abroad (offshore).
  • Tata Elxsi leans heavily on offshore work, with only about a quarter of its activities in India.

Revenue Sources:

  • Tata Elxsi has witnessed more rapid revenue and profit growth over the past three years, outpacing Tata Technologies.
  • Tata Elxsi’s profits grew by 43.4% annually, compared to Tata Technologies’ 35.4%. Despite Tata Technologies making more in sales, Tata Elxsi earns a higher profit and maintains a higher net margin of 24% compared to Tata Technologies’ 14.1%.

Market Valuation:

  • Tata Technologies is priced more modestly, seeking a valuation of 32.5 times its earnings in its IPO.
  • Tata Elxsi holds a higher valuation at 68.5 times its earnings.

These differences in specialization, revenue sources, and financial performance contribute to the distinct market positioning and valuation of Tata Technologies and Tata Elxsi within the Tata Group.

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