Tata Motors to partially sell stake in subsidiary Tata Tech via IPO

Tata Motors’ board has approved a partial divestment of the company in Tata Technologies, its wholly owned subsidiary, through an initial public offering (IPO), the parent firm said in an exchange filing. The subsidiary is into product engineering and digital services.

“We wish to inform you that the IPO committee (duly constituted by the board of directors of Tata Motors) at its meeting held on December 12, 2022, has accorded its in-principle approval to explore the possibility of partial divestment of the company’s investment in Tata Technologies, a subsidiary of the company, through an IPO route at an opportune time,” it said in the filing.

The IPO would be the Tata group’s first since it listed Tata Consultancy Services in 2004, if this offering comes before Tata Play’s. It would also be the first under the chairmanship of N Chandrasekaran, who took over as Tata group chairman in 2017.

Tata Play, too, is preparing for an IPO. The direct-to-home platform pre-filed its draft red herring prospectus (DRHP) confidentially with the Securities and Exchange Board of India (Sebi) on November 29. It’s the first company to take the pre-filing route for its IPO.

The Tata Technologies IPO will be subject to market conditions, applicable approvals, regulatory clearances (including observations from Sebi), and certain other considerations, Tata Motors said.

The company would make further announcements of all the developments relating to the IPO, as and when required, as per the SEBI LODR Regulations and other applicable laws, it added.

Tata Motors has a 74.42 per cent stake in Tata Technologies, according to the company’s 2022 annual report. The Tata group flagship has been keen on exiting the technology services business for over five years as part of the larger strategy of leaving non-core subsidiaries.

In 2018, it called off the sale of a significant minority stake (43 per cent) in Tata Technologies to private equity major Warburg Pincus for $360 million after an official announcement on the deal, citing non-receipt of regulatory approvals and challenges in internal performance due to market conditions.

Founded in 1989, Tata Technologies offers technology services across the automotive, industrial machinery, aerospace, and adjacent engineering and manufacturing verticals.