Rewarding journey for pre-IPO investors in TATA Technologies

22 November 2023

Tata Technologies Limited, a subsidiary of the Tata Group, has spent decades quietly building one of India's most respected engineering services businesses. Its clients include global automotive and aerospace giants, and its reputation for technical depth has never really been in question. But for a certain set of investors, the real story was not the business; it was the price at which they got in.

Three years before the IPO, TTL shares were available in the pre-IPO market at Rs. 90–100. That was the entry point for early investors who tracked the unlisted space closely. Over the next few years, the stock climbed steadily, eventually touching Rs. 1,000+ levels in the unlisted market. Depending on when someone had entered, the returns ranged from 500% to 1,100%. Not many investments, listed or unlisted, can claim that kind of run in such a short period of time.

• As IPO preparations got underway, Planify had advised pre-IPO holders to consider booking profits. The reasoning was simple. The unlisted market had priced the stock at a P/E of around 56x, roughly in line with the broader industry average of 55x at the time. But based on how IPO pricing typically works in India, the listing was expected to come in at a lower multiple. That call proved right. The IPO price band was fixed at ₹475 to ₹500, which worked out to a P/E of 32.5x, a meaningful discount to where the stock had been trading in the grey market.
• For investors entering at the IPO stage, this represented a reasonable opportunity to own a quality engineering services company at an attractive valuation. GMP data in the run-up to listing indicated a 10%–20% listing premium, signaling good demand from both retail and institutional investors.
  

But for those who had sat tight through the entire pre-IPO journey, the listing was simply the last act of a trade that had already delivered remarkable returns. Tata Technologies remains one of the better examples of what pre-IPO investing can look like when the fundamentals are right.