Tata Technologies IPO leads in grey market premium among this week's five issues.

Tata Technologies' upcoming IPO has generated significant interest in the grey market, with the shares commanding a premium of 70% over the upper price band of Rs 500 per share. This marks the highest grey market premium among the five mainboard IPOs scheduled for this week. The grey market serves as an unofficial platform for buying and selling IPO shares until they are officially listed.

Tata Technologies, the first IPO by the Tata Group in nearly two decades, plans to raise Rs 3,042.51 crore by issuing over six crore equity shares at a price band of Rs 475-500 per share. The grey market premium of Rs 850 per share reflects positive sentiments, attributed to the company's robust financials, reasonable valuations, potential future growth, and the strong Tata brand.

Experts believe that Tata Technologies' healthy financial performance, coupled with its promising industry outlook, contributes to the premium. The IPO's price-to-earnings ratio, at 32.5x on a consolidated basis, is considered reasonable compared to peers like KPIT Technologies (80.3x), L&T Technologies Services (37.5x), and Tata Elxsi (61.55x), which are trading at higher valuations.

The IPO is entirely an offer-for-sale (OFS) by the promoter Tata Motors, as well as investors Alpha TC Holdings and Tata Capital Growth Fund I. Despite the premium, the company's IPO pricing surpasses its pre-IPO placement price of Rs 401.8, indicating strong confidence in its market potential and future growth.

Tata Technologies has witnessed impressive financial performance, with a 60% increase in profit and a 36% rise in revenue from FY21 to FY23. The EBITDA margin also grew by 240 basis points during this period. Investors seem confident in the company's prospects, given its 34% revenue growth and 18.6% operational profitability, along with backing from investors like TPG Rise Climate SF Pte and the Ratan Tata Endowment Foundation.

Despite the premium, Tata Technologies is entering the market with a lower price-to-earnings ratio compared to peers, making it an attractive investment option. The Tata brand's reputation is expected to further enhance investor confidence in the IPO.