Tata Technologies IPO: How Is Tata Technologies Different From Tata Elxsi?

Tata Technologies IPO has been launched with a range of ₹475 to ₹500 per equity share. Surprisingly, the subscription status is 2.38 times till 12 p.m. on its first day. However many people are still confused as to why Tata Group has this company when they already had Tata Elxsi.

So let’s understand the difference between both companies! Tata Technologies and Tata Elxsi, both companies belong to the Tata family and share a focus on the auto industry, but still, they have distinct specializations, operational models, and financial growth trajectories. 

The Core Business Models

Simply, Tata Technologies is more about hardcore engineering and manufacturing, while Tata Elxsi leans towards design and software in diverse sectors, reflected in their financials and market valuation.

Tata Technologies primarily focuses on engineering, research, and development, especially in the manufacturing sector. This means they work on creating and improving products and processes in industries like automobiles. 

Tata Elxsi, in contrast, specializes in design and software engineering services. They’re more about crafting the look and feel of products and developing the software that powers them.

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Primary Industries They Focus On

Both companies have a strong presence in the automobile industry. For Tata Technologies, cars and other vehicles are a big deal, making up about 88% of their income in the first half of this financial year. 

Tata Elxsi also earns a good chunk (46%) from this sector. However, Tata Elxsi diversifies more, earning significantly from healthcare, life sciences, and media communications as well.

The way these companies operate globally is quite different. Tata Technologies has a balanced approach, with nearly half of its work done in India (onshore) and the other half abroad (offshore). On the other hand, Tata Elxsi leans heavily on offshore work, with only about a quarter of its activities in India.

Differences Between Revenue Sources

Financially, both are strong, but they have different growth stories. Tata Elxsi has seen more rapid growth in revenue and profit over the past three years, outpacing Tata Technologies. 

For example, Tata Elxsi’s profits grew by an impressive 43.4% each year, compared to Tata Technologies’ 35.4%. In the last financial year, Tata Technologies made more in sales (Rs 4,414 crore) but earned less profit (Rs 624 crore) than Tata Elxsi, which had Rs 3,145 crore in sales but a higher profit of Rs 755 crore.

This difference is also reflected in their net margins, with Tata Elxsi having a higher margin of 24% compared to Tata Technologies’ 14.1%.When it comes to their market value, Tata Technologies is priced more modestly. It’s asking for a valuation of 32.5 times its earnings at its Tata Technologies IPO, while Tata Elxsi is valued much higher, at 68.5 times.