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India’s largest conglomerate Tata does everything from IT consulting to car manufacturing. advance proof of its omnipresence came on Thursday with the successful flotation of Tata Technologies. Shares in the first Tata company to go public in almost two decades rose as much as 180 per cent, valuing the group at $7bn.
The Indian stock market is at record highs. Global investors now see the world’s most populous nation as a better proposition than China, where growth is lagging.
As allocations to India rise, the deal serves to highlight some of the market’s quirks. Large share price jumps are common at debut. Para Defense which listed in 2021 soared almost 200 per cent on its debut. Of four recent Indian IPOs that made triple digit debut gains, all experienced sharp pull backs within the first few months of trading.
Indian ownership structures leave minority shareholders at the mercy of powerful captains of industry. Half the shares in the top 500 companies are in the hands of founders and controlling owners. At Tata Technologies the market will own just 15 per cent of the shares outstanding.
The roots of Tata Technologies are in the research and design bureau of Tata Motors. The group’s specialisations in product engineering services span heavy industry and aerospace sectors too.
The group listed at around a 22 times price to forward earnings ratio and settled closer to 50 times. Faster-growing rival KPIT Technologies is trading on a 65 times P/E multiple.
Both groups are heavily exposed to electric vehicle development. At Tata Technologies, direct EV revenues accounted for about a third of total and are growing.
Average returns on Indian equity are ahead of the global average at 16 per cent, notes Barclays. Valuations tend to be higher as a result. The Nifty 50 index is at record highs but the forward P/E of 19 times is below 2021 highs.
India is positioning itself as a key member of the Global South group of nations. The trend has advance to go and is one investors should follow.
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