- Tata Technologies’ bumper listing in late 2023 showed huge promise but has left its investors in dismay, thanks to a tepid business show and a crashing stock
- Tata Elxsi, its high-flying engineering, research and development peer from within the group, has also seen its business and stock fortunes dwindle over the past couple of years
- Their overlapping exposure to the beleaguered auto industry and the potential to churn out a bigger entity with varied offerings make a strong case for a merger
- While some large shareholders bailed from Tata Tech when the going was good, a merger now is essential to serve the interests of smaller shareholders. The valuation dynamic is favourable, too
Enter your email address to receive a daily summary of all our stories.
On 21 January, Tata Technologies threw a wet blanket over its investors yet again.
The company posted a decline in profit in the December quarter compared to the same period last year—the fourth consecutive quarter of such decline. The stock, already on the back foot, slipped even more. If its shareholders feel edgy and angry, they can hardly be blamed. Tata Technologies has flattered to deceive.
Its dream debut on the bourses in November 2023 saw record investor participation. The stock more than doubled at listing from the IPO price of Rs 500. This first public issue from the storied house of Tatas in nearly two decades was an
Except, the dream has soured. The stock is down 40% from its heady highs—the drop being steep since September—bringing its market capitalisation down to about Rs 31,500 crore ($3.6 billion).
The pain primarily comes from the automotive segment, the mainstay accounting for more than two-thirds of the Rs 1,317 crore revenue Tata Technologies posted in the December quarter. The company’s niche engineering, research and development (ERD) offerings are seeing weak demand from its clients in the US and Europe, who are feeling the heat from Chinese carmakers like BYD and the rocky transition to electric vehicles.
The tough times seem set to continue.
“The automotive industry is going through somewhat of an existential challenge,” Warren Harris, the chief executive of Tata Technologies, conceded in the latest earnings call, even as he played up its medium- to long-term prospects.
Not everyone is convinced that things will be looking up anytime soon. Research house JPMorgan, in a post-results report, remained “underweight” on the stock. Among other concerns, it cited “high client concentration” with promoter Tata Motors and its subsidiary JLR, which account for almost half of Tata Technologies’ revenue. These group companies are facing big growth
Share this article with your network
Send the article link to friends or colleagues who might find this story interesting or insightful.
Send the article link to friends or colleagues who might find this story interesting or insightful.