Tata Technology can get 5% to 6% of current market cap of additional value :Mitul Shah

"Company has indicated it is not going to sell out everything and it will be a partial divestment so it is not great thing in terms of the getting sizable money but, of course, it is a value unlocking," says Mitul Shah, Head of Research, Reliance Securities.

Tata Motors board has given approval for Tata Tech IPO. What it means for the stock price today and in the short term?
This subsidiary of Tata Technologies is primarily into the business of engineering and technology and it caters to three industries. One is automobile on the EV side, aerospace and third one is industrial engineering.

Company has indicated it is not going to sell out everything and it will be a partial divestment so it is not great thing in terms of the getting sizable money but, of course, it is a value unlocking .

Certainly we believe that Tata Technology can easily get around 5% to 6% of the current market cap of additional value.

So Tata Tele maybe a big hit but do you think it will not really help the big picture for Tata Motors because even if it raises a billion dollar plus from this IPO that is not going to take care of the JLR problem and the cash flow crisis problem?
I believe that they will not sell out major portion and would retain major portion with them because JLR and all other businesses are also dependent on Tata Technologies. So there could be a partial stake selloff maybe 25-30-40% which would be much lower than the number which you indicated.

The value of the 25% to 30% stake would give only Rs 2000 crore to Rs 3000 crore which is only a small amount compared to the net debt of Tata Motors which is close to 60,000 crore. But, yes in terms of value unlocking it is close to more than one billion of value that can give easily 20 to 25 rupees additional valuation in the SOTP value of Tata Motors.

Have you already revised your price target?
Right now limited details are available on how much they are into the EV segment and how much they are in aerospace because though it is a technology company and at present we all know that whether it is Infosys or any other company they are under pressure. But if any company is doing major work related to EV they are getting totally different level of valuations. There are different level of multiple. If it is a normal technology company certainly it is in a lower PE band or lower price to sales band. So once we get more details one can justify the valuation or target multiple.