The initial public offering of Tata Technologies Ltd, the first Tata Group company to go public in nearly two decades, was fully subscribed within a couple of hours of the share sale opening for bidding on Wednesday.
The offering of 45.03 million shares, excluding the anchor investors’ portion, was covered 6.54 times at the end of the first day after receiving bids for about 294.4 million shares, stock-exchange data show.
The portions reserved for institutional investors and retail investors were covered four and five times, respectively. The quota of non-institutional investors, including high-net-worth individuals and corporate houses, was subscribed more than 11 times.
Ahead of the IPO, Tata Technologies raised Rs 791 crore by selling 15.8 million shares to a bunch of anchor investors including mutual funds and life insurance companies. Norway’s sovereign wealth fund and funds managed by Oaktree also took part in the anchor round.
Tata Tech is targeting a valuation of as much as $2.44 billion in the IPO, which closes Nov. 24. The technology services unit of automaker Tata Motors Ltd has fixed a price band of Rs 475-500 per share for the IPO. This will give Tata Technologies a valuation of Rs 19,269.26 ($2.3 billion) at the lower end of the band and Rs 20,283.43 crore ($2.44 billion) at the upper end, back-of-the-envelope calculations show.
This is the first Tata Group IPO since Tata Consultancy Services, India’s biggest IT company, went public in 2004.
The IPO comprises an offer for sale of 60.9 million shares, representing 15% of its paid-up capital, according to the company's red herring prospectus. This is lower than the 95.7 million shares, or a 23.6% stake, specified in the draft prospectus filed in March. The total size of the IPO would be Rs 3,042 crore ($365 million) at the upper end of the price band.
Tata Technologies isn't selling any fresh shares and the entire IPO is an offer for sale by Tata Motors and Tata Capital Growth Fund, one of a clutch of private equity vehicles managed by Tata Group’s financial services flagship Tata Capital Ltd.
Tata Motors will sell an 11.4% stake while the PE firm, via two entities, will divest a 3.6% shareholding. The automaker currently owns a 64.8% stake in Tata Technologies while the two PE funds hold a total of 10.9%.
The IPO size was reduced after Tata Motors last month sold a 9% stake in the company to US private equity firm TPG’s Rise Climate fund for Rs 1,467 crore and a 0.9% stake to Ratan Tata Endowment Foundation for Rs 146.7 crore at a valuation of Rs 16,300 crore, or about $2 billion. Tata Motors sold that stake at a price of Rs 401.81 per share, meaning that the IPO price range is 18-24% higher.
The Tata Capital PE fund is set to reap multibagger returns by making a partial exit from one of its oldest active bets in the country, VCCircle reported previously. At the upper end of the price band, it will mop up Rs 728.8 crore. Its remaining stake after the IPO will be worth almost Rs 1,480 crore, per VCCircle estimates. The PE firm had invested about Rs 141 crore in Tata Tech in 2011 and booked a partial exit last year.