PUNE, India - In a strategic shift, Tata Technologies, an engineering and product development digital services company, is planning to lessen its revenue dependence on its parent company, Tata Motors (NYSE:TTM). Warren Harris, the CEO of Tata Technologies, announced this move just before their much-anticipated Initial Public Offering (IPO), marking the first IPO from the Tata Group in two decades.
Harris emphasized that Tata Technologies will maintain operational independence from Tata Motors to broaden its collaboration with other potential partners. Currently, over a third of the company's revenue for the fiscal year 2023 comes from Tata Motors and its subsidiaries, including Jaguar Land Rover (JLR). However, Harris projects that this figure will decline in the medium to long term.
While Tata Motors' significant investment in the electric vehicle (EV) sector might temporarily increase Tata Technologies' workload, Harris envisions a gradual reduction in their revenue contribution. Despite experiencing a slower revenue growth rate than most of its peers—except for Cyient—from FY20 to FY23E, Tata Technologies is optimistic about its financial outlook.
The automotive sector has been a major revenue driver for the company, contributing 64.5% in FY22 and increasing to 75% in the first nine months of FY23. Additionally, 30% of the company's revenue is generated from India. Despite the slower growth trends, Harris remains confident that Tata Technologies can match or surpass market growth rates organically. Looking ahead to FY24, he anticipates double-digit growth in the Engineering, Research and Development (ER&D) markets.
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