Tata Technologies, a division of India's Automake. Tata Technology has applied to go public with an initial public offer. It is the IT services arm of Tata Motors catering to JLR and Tata Motors. Within two years, the cost of an electric four-wheeler will be equivalent to the petrol cost of a petrol vehicle, and the country will change. Tata Tech offers digital services for engineering and product development. Now, the fundamentals of Tata Technologies are very strong, and brokerages are quite bullish as well. Tata Tech's total profit increased by 23% to almost $50 million. The company reported a 15.5% increase in revenue.
Tata Technology will be one of the most exciting initial public offerings of 202. And this is a huge event since it is the first Tata firm to go public in 18 years, following the renowned Tata Consultancy Service. And everyone watched how TCS rose to prominence in the Indian stock market, with a 2600% increase.
Just like TCS became a pioneer in the It revolution of India, Tata Technologies is a pioneer in the EV revolution of India. But while most news channels only spoke about the numbers and the financials of Tata Tech, only a some few taught us the fundamental business strategy of Tata. In this blog, we dive deep into why the Tata Tech IPO is a major investor issue. What is Tata Technologies' most important business vertical? What are the market conditions that benefit Tatas in the twenty-first century? What are the market risks that are posing a threat to Tata Technologies' position?
What are the Fundamentals of Tata Technology that Make it So Special?
Apart from the Tata brand and the EV revolution, investors are excited to see the company's strong finances. Their revenues have been growing steadily from 2000 and 380 crores to 3011 crores from FY 21 to the third quarter of FY 2. Similarly, its profits increased from 239 crores in FY 21 to 407 crores in the same period.
Second, this is a debt-free firm with no debt commitment. And last, their current ratio is really high. The current ratio is a financial statistic that assesses a company's ability to meet its short-term obligation. And it is computed by dividing the company's current assets by its current liabilities. Hence, the higher this ratio, the better for the firm. Reliance now has a ratio of one point eleven, Adani Port currently has a ratio of 1.29, and Tata Tech currently has a ratio of 1.8. This means that it owes every rupee of short-term liabilities. It has Rs87 in assets to pay it off.
But suppose you compare the current ratio of Tata Tech with its direct competitor. In that case, you will see that while KPID's current ratio stands at 2.51, Tata Alexey stands at 4.13, LNT Technology Services stands at 3.27, and Tata Tech stands at 1.8. And generally, the current ratio, 1.5 to three, is considered very good. So the Tata brand, its revenues, profits, and strong financial ratios are why the Indian investors are keen to see Tata Technologies go IPO.
The Case Study of Tata Technologies
Within two years, the cost of an electric two-wheeler, electric three-wheeler, or electric four-wheeler will be equivalent to the cost of a petrol vehicle, and the country will change. Tata Technologies is partnering with ambitious manufacturing companies, particularly companies that engineer products for the marketplace. Tata Tech is a product engineering company that serves the automotive technology needed for Tata's automotive business. They have mastered the art of making low-cost EVs and are doing well with the vision to help.
Tata Technologies works in a domain called engineering research and development Service. And if you need to learn how a company works, here's a very, very simple explanation of the same.
Example:
Tesla is releasing their new EV model, Model X, and they need expertise in designing, developing, and testing. And one of their problem statements is the reduction of cos. Now, to do this, Tesla has two options. Number one would be to set up an in-house team of scientists, researchers, and engineers to design, develop, and test the product.
This will involve a tedious equipment process, payroll processes, HR heads, office infrastructure giant high-tech equipment, and a ton of other procedural work that will cost Tesla a ton of time and money. But the second option that they have is to outsource this particular problem to a particular company that already has engineers, scientists, and researchers who specialize in this type of problem-solving. This particular company is nothing but an engineering research and development company. So what this company will do is they will use computer simulations to identify the areas where the materials of the car can be changed.
Example of Aluminium Alloy Usage
Aluminum alloys are commonly used to make cars because they are light and have high tensile strength. So it helps keep the car's overall weight low and improves fuel efficiency. However, the problem with aluminum alloys is that they are very expensive compared to other materials like steel. And this increases the cost of manufacturing the product.
But at the same time, if you use steel, steel is a very heavy material, increasing the car's weight and decreasing fuel efficiency. This is where the company would use computer simulations to identify the aluminum components' most efficient shapes and thickness. Similarly, scientists can identify which parts could be made using alternate materials like polymers or stee. And the engineers will also analyze the manufacturing process to identify ways to reduce waste.
Eventually, they'll be able to advise Tesla on where to use steel, aluminum alloys, and polymers and how to reduce waste in their manufacturing uni. And when this structure is followed, Tesla may be able to decrease the cost of its car by 4.5. This is how an engineering research and development company solves the pain points of its clients.
Advantages:
The client doesn't have to spend time, money, and resources hiring scientists, researchers, and engineers. They don't have to buy expensive equipment, set up office infrastructure, or give funding. So they can easily reduce a lot of their cost.
Even at a lesser cost, the client still has access to world-class talent with advanced engineering capabilities, research centers, and even skilled scientists.
This partnership can be crucial in an automaker's development of innovative EV technologies. And this could include battery management systems, powertrains, and even autonomous driving features. So these clients could innovate faster, better, and less cheaply.
Eventually, they could bring new products into the market faster. This is how an engineering research and development company can benefit an automotive client. And this is exactly what Tata Technologies does.
Vertical Major Business of Tata Technology
In this case, Tata Technologies has three major verticals of business.
The Automotive Industry
Tata Technologies is a Tata Group business that provides engineering and design services to numerous sectors, notably the automobile industry. Following are some ways Tata Technology assists Tata Motors in the automobile industry:
Design and Development of Products: Tata Technology has assisted Tata Motors in the design and development of new vehicles, including passenger automobiles, commercial vehicles, and electric vehicles. Tata Technology assists Tata Motors in bringing new and high-quality automobiles to the market by providing product styling, engineering, and prototyping services.
Digitalization and Automation: Tata Technology has assisted Tata Motors with its digitalization and automation effort. Tata Technologies offers services such as digital simulation, virtual prototyping, and automation to increase the efficiency of Tata Motors' production processes and minimize product development time and costs.
Supply Chain Management: Tata Technology has also supported Tata Motors with its supply chain management activities. Tata Technology assists Tata Motors in streamlining its supply chain and ensuring the timely delivery of high-quality components and materials by offering services like supply chain optimization, supplier collaboration, and logistics management.
Innovation and Technology Adoption: Tata Technologies has been assisting Tata Motors in remaining at the forefront of innovation and technology adoption. Tata Technologies offers services such as technology scouting, research and development, and innovation management to assist Tata Motors in identifying new technologies and trends and incorporating them into its products and processes.
The Aerospace and Defense Sector
For this, we have a case study whereby a company in the aviation industry was looking to make their engines more efficient. And here's where the customer sought a partner with a unique combination of engineering skills, application, know-how, and development experience. And here's where Tata Technologies came into the picture. And amongst the many things they did, they implemented tool harmonization. Tool Harmonization refers to standardizing and aligning tools, methodologies, and processes across different teams, departments, and organizations so that the company performs more efficiently. Tool harmonization is aligning and integrating multiple tools, software, and technologies in an organization or project to promote uniformity, efficiency, and maximum performance. It entails analyzing and selecting the best tools for each activity, ensuring they function together effortlessly, and reducing redundancies and inconsistencies. Tool harmonization simplifies workflows, improves cooperation and communication, eliminates mistakes, and boosts productivity and output quality.
Transportation and Construction
Tata Technologies is a global engineering services firm that offers design, engineering, and product lifecycle management solutions to various sectors, including transportation and construction. Here is how Tata Technology is assisting various industries:
Transportation: Tata Technology supports the transportation industry with its experience in vehicle design and engineering. To assist manufacturers in developing economical, dependable, and safe automobiles, the organization offers services such as vehicle styling, chassis design, powertrain engineering, and vehicle simulation. Tata Technologies is also utilizing its experience in digitalization and automation to assist transportation firms in optimizing their production processes and supply chain management.
Construction: Tata Technology's experience in building design and engineering supports the construction sector. Building information modeling (BIM), structural analysis, and construction simulation are some of the services offered by the organization to assist architects, engineers, and contractors in designing and constructing efficient, sustainable, and safe buildings. Tata Technologies is also utilizing its experience in digitalization and automation to assist construction organizations in optimizing their project management, scheduling, and cost-estimating processes.
Conclusion
Tata Technologies, a Tata Motors business, has filed for an initial public offering (IPO. The organization provides digital engineering and product development services for Tata Motors and Jaguar Land Rove. The company's two most important business verticals are engineering research and development services, where it collaborates with manufacturing businesses to build items for the market, and EV technology, where it has perfected the art of producing low-cost EVs. Tata Technologies has minimal debt and good financials, with revenues and earnings increasing gradually, making it an attractive investment for Indian investors. Tata Technologies' current ratio is 1.87, which is regarded as respectable. However, it is lower than its immediate competitor. Yet, the Tata brand, solid financials, and engineering and product development capabilities distinguish i. Its primary competencies are the business's partnerships with ambitious manufacturing companies and its ability to outsource problem-solving to an engineering research and development company.
