Shares of Tata Technologies gained more than 4.2 per cent to Rs 1138.80 during the trading on Wednesday, commanding a total market capitalization of more than Rs 46,000 crore.
Tata Technologies was listed at the bourses in November 2023, when the company raised a total of Rs 3,042.51 crore via IPO by selling its shares of Rs 500 apiece.
Tata Technologies Ltd, the recent debutant for the Tata Group, has joined hands with Germany’s luxury carmaker BMW Group to form a joint venture to establish an automotive software and IT development hub in Pune, Bengaluru and Chennai. However, analysts continue to have a mixed view on Tata Motor’s tech arm.
The BMW-Tata Technologies venture, the first partnership between the two, will develop automotive software for automated driving and the dashboard system among other features, the Tata company said but didn’t disclose any financial details of the agreement. However, both The BMW Group and Tata Technologies will each hold a 50 per cent stake in the newly-formed JV.
The JV with BMW for SDV programs is a step in the right direction. The global investment bank still awaits clarity on accounting and margin profile. It still needs to see a scale-up of revenues from non-anchor clients to more than $20 million, said JP Morgan in its report.
“India remains an attractive location for ER&D outsourcing. The global investment bank maintained an underweight rating as the valuation is excessive,” said the overseas brokerage firm maintaining an underweight rating on Tata Technologies with a target price of Rs 800.
India is a software development hub for global automakers and auto parts makers including Volvo and Magna International, while also witnessing rising investments from companies including Toyota Motor and Mercedes Benz to boost production.
Shares of Tata Technologies gained more than 4.2 per cent to Rs 1138.80 during the trading on Wednesday, commanding a total market capitalization of more than Rs 46,000 crore. The stock, which settled at Rs 1,092.10 on Tuesday, has gained about 12 per cent in the last two trading sessions.
Tata Technologies’ JV entails building a software hub with over 1,000 resources offering automotive software and digital engineering services for the BMW group. Our back of the envelope calculation indicates the JV, at steady state, could add 4-5 per cent to our current earnings estimates. Near-term earnings upside aside, the implications of the deal seem far reaching, said JM Financial.
It is always concerned that Tata Technologies’ parentage is a hurdle in getting business from traditional OEMs. Further, an automotive software partnership with BMW establishes its credentials in software ER&D, augmenting its full vehicle engineering proposition, thus expanding addressable spend, JM said.
It is also an important marker in Tata Technologies’ efforts to diversify its revenue mix from anchor clients. Importantly, the JV corroborates the argument that rising software complexity and multiple constraints facing OEMs can trigger a multi-year offshoring wave. The trend, though still early, seems undeniable, with a ‘buy’ rating and a target price of Rs 1,370 on the stock.
Shares of Tata Technologies were listed at the bourses in November 2023, when the company raised a total of Rs 3,042.51 crore via IPO by selling its shares of Rs 500 apiece. The stock is about 125 per cent above its issue price but has been range-bound for a long-period.
Among other brokerage firms, Citi has a ‘sell’ rating on Tata Tech and revised its target price of Rs 920 apiece from Rs 1,000. However, BofA Securities had upgraded the stock with a target price of Rs 1,250 per share.
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