TATA group has raked up efforts in order to enlist its auto components manufacturing business, Tata Autocomp Systems (TACO) and the formal process of the same shall begin later this year.
Another TATA Group IPO?
As per the people who are privy to the developments, the discussions are at an early stage and the discussions around the Tata Group entities that will divest their stakes in the company is in process and also what shall be the quantum of stake which shall be divested in the IPO is also in the process.
Owned fully by the Tata Group entities with direct holding by Tata Sons, TACO was founded in 1995 and operates as the vehicle for the group’s ventures in the auto components business.
Notably, Tata Sons owns around 21 percent of TACO while the remaining is held by Tata Industries Ltd.
Tata IPO: Market conditions are More Favourable
It is to be brought into the attention of the reader than this is not the very first time that the group has planned to enlist TACO in the market. Same efforts were did in the year 2011, wherein the company had planned to raise Rs 750 crore from the capital markets and also got an approval from the SEBI regarding the same. However, the group later withdrew the IPO and did not specify any particular reason at the time. In the financial circles, the reason was most probably the unfavourable market conditions.
One of the person said that the “The market conditions are far better now and as a company TACO has come a long way. It is a certainty that the IPO will be a success this time around but other details such as to which Tata group entity will divest stake and how much quantum is something that needs careful evaluation”.
He added that “It is also possible that the group may want to bring in an investor before the IPO as it did in the case of IPO bound Tata Technologies in which Tata Motors a part of its stake to global private equity fund TPG group”.
TACO is already one of the leaders in the auto component space and has it name carved out when in the sector when it comes to the product segments such as interior plastics and composites, radiators, exhaust systems, batteries, stampings, suspensions, seating, mirror assemblies, EV powertrains, EV battery energy storage systems, and engine cooling systems.
As per the company’s filings, for the fiscal 2023 the revenues have been increased by approx. 57% yoy to Rs 14,372 crore. This can be attributed to the strong volume growth on a standalone basis as well as across subsidiaries and joint venture partnerships.
The company is currently ramping up the capacity for the EV segment, such as EV battery packs and powertrains, among others. These are the same reasons cited by credit rating agency Crisil, due to which the company’s turnover is expected to continue to grow at mid-to-high double digits.
In order to leverage the growth, TACO is expected to step up capital expenditure investments over the medium term towards capacity enhancement and new product launches.
As per the estimation by Crisil, the same shall be funded largely through internal accruals with limited dependence on debt owing to sustained healthy cash generation.
