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Tata Technologies, a subsidiary of Tata Motors, has shown decent revenue growth over the last three years, with a Compound Annual Growth Rate (CAGR) of 8.6% from FY20-22. Meanwhile, KPIT Tech, LTTS, and Tata Elxsi grew at rates ranging from 4-21.2% in the same period. The company recently filed draft papers with Sebi for an offer that includes the sale of up to 20% of capital, or 8.11,33,706 equity shares, by Tata Motors. Other selling shareholders include Alpha TC Holdings and Tata Capital Growth Fund-I.
B&K Securities analyzed Tata Technologies' competitive position against its peers such as KPIT Tech, Tata Elxsi, and LTTS based on parameters such as revenue growth, vertical exposure, regional exposure, margin, client exposure, top client concentration, offshore/onshore revenue mix, headcount growth, and attrition. On a 9MFY23 basis, the company reported relatively low revenue growth, low margin expansion, and higher attrition, attributed mainly to de-growth in the education business.
Tata Technologies had a CAGR of 8.6% in revenue growth over the last three years, while KPIT Tech, LTTS, and Tata Elxsi had a compounded annual growth rate of 4%, 5.8%, and 21.2%, respectively, during the same period. B&K Securities noted that the Covid-19 pandemic affected automotive industry revenue growth in FY21, but the growth bounced back in FY22 (44.7%) and reported 35.6% YoY growth in 9MFY23.
Tata Technologies' EBIT margin in FY22 was 15.9%, which increased to 16.9% in M9FY23, expanding by 3 percentage points from 13% in FY20. This was achieved through robust growth and decreased employee benefit costs. However, in comparison to its peers such as KPIT Tech, Tata Elxsi, and LTTS, the company had relatively low margins (except in comparison to KPIT), low offshore revenue, and higher attrition in FY22.
Tata Technologies has the highest exposure to the top 5 clients at 65.8% in FY22, which increased to 72.8% in 9MFY23, while its peers Tata Elxsi and LTTS had exposure ranging from 17-38%. The company also topped the list for the top 10 clients with 77.7% in FY22, which increased to 80.7% in M9FY23. Tata Technologies had the highest exposure among peers for the top 20 clients at 87% in FY22, which increased to 88.4% in 9MFY23.
Like KPIT Tech, Tata Technologies focuses on the automotive vertical, which accounts for 75% of its overall revenue. The company's strategy is to focus on its top 5 clients and anchor clients (Tata Motors and JLR), which account for 73% and 40% of overall revenue, respectively. On the positive side, the company reported the highest revenue growth in the automotive vertical at 35.6% compared to 31.4%, 35.1%, and 34.9% for KPIT Tech, Tata Elxsi, and LTTS, respectively.
Tata Technologies has lagged behind its peers in mining clients, as seen in the addition of $20 million, $10 million, $5 million, and $1 million-plus clients. However, the company plans to expand its client base by hunting and mining to grow in the medium and long term.
The company has reported the highest attrition in
