Tata Technologies Buy, Sell Or Hold? Here's What Analysts Say

Tata Technologies Ltd.'s shares rose up to 180% over the issue price as they opened on the exchanges on Thursday, making it the best market debut in the Indian stock market.

The shares listed on the National Stock Exchange at Rs 1,200 apiece and on the BSE at Rs 1,199 per share, with a premium of 140% over its IPO price. The shares touched the high of Rs 1,400 apiece, with a jump of 180% and later pared gains to trade over 160% higher than the IPO price at Rs 1,303.15 per share at 2:45 p.m. The NSE Nifty 50 was trading 0.15% higher at that time.

The engineering services company allotted 1.58 crore shares at Rs 500 apiece to 67 anchor investors. SBI Multi Asset Allocation Fund secured the highest allocation of 4.30%. Other buyers include Fidelity International, Nippon Life India, BNP Paribas, HSBC, Kotak, DSP, Motilal Oswal, Edelweiss, Goldman Sachs and others.

Here is what analysts have to say about the debut.

"Tata Tech is one of the finest ER&D plays catering to complete product value chain in automotive and now focusing on defence, aerospace, and energy," said Gurmeet Chadha, managing partner and chief investment officer, Complete Circle Wealth Solutions LLP.

"At 150% plus premium it trades at over 70 times earnings and bridges valuation gap with KPIT and Elxsi...I would hope to get better valuations in coming weeks/months to build a long-term position in my portfolio," he said.

Tata Technologies Ltd. is a long term play, according to Rajnath Yadav, research analyst at Choice Broking. At current market price of Rs 1,337, the stock is trading at a P/E multiple of 75.6 times, which seems to be in-line with peers, he said.

"Thus, short term investors are advised to book profit, while long term investors can remain invested. Long only investor's can consider for investment at this level."

"There are very few times in the equity market when such a bumper listing happens," said Sunny Agarwal, head of fundamental equity research, SBICAP Securities Ltd.

Retail investors who are brand new to the market and have received this IPO should book profits. However, if there is an investor whose portfolio is above Rs 10 lakh, then he can hold it, considering the good growth of the company, he said.

Investors who have not received the IPO should wait for a slight decline to make the purchase, according to Agarwal.

"Tata Technologies made a strong debut, opening with a 160% increase over its IPO price of INR 500 per share. Despite its distinctive business model, solid fundamentals, and substantial growth potential, the current share price of Rs 1,304 seems to surpass these factors," said Vinit Bolinjkar, head of research at Ventura Securities Ltd.

He has also set a target price for the stock at Rs 955 per share, with a 26.7% downside.

As for IPO allottees, though the valuation now is not cheap, they could book some profits or remain invested and ride the run till next financial details or results come, said Narendra Solanki from Anand Rathi.

“Listing has happened at a premium valuation, but it’s still trading at a fair valuation—at 47 times P/E multiple. It’s still at a fair discount to KPIT which is pricier still,” said Omkar Tanksale, research analyst at Axis Securities Ltd.

Tanksale advises against profit booking on the stock. He wants shareholders to hold on to their allotments and accumulate when possible.

“Valuation growth may taper hereon, but the business is poised for exponential growth, given the automation we are seeing in the automotive space,” Tanksale said. 

Operational profitability will also grow at 30-40 basis points, he said.

There’s however one chink in the armour—that of revenue concentration in anchor clients Tata Motors Ltd. and Jaguar Land Rover, Tanksale said. But the company is planning to diversify, specifically into aerospace on the back of deals with Airbus SE and Air India. That should broaden the revenue stream, he said.

Investors should "hold on" after the strong listing despite valuations becoming pricey, "as long-term growth prospects look strong", according to Avinash Gorakshakar, head of research at ProfitMart Securities Pvt.

"The market will await clarity from the management post Q3 numbers."