Tata Technologies Limited

IPO Note
November 20 2023
Tata Technologies Limited

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 Tata Technologies Limited

Background & Operations:

Issue Snapshot:
Issue Open: November 22 – November 24, 2023
Tata Technologies Limited (TTL) is a leading global engineering services company
offering product development and digital solutions, including turnkey solutions, to
Price Band: Rs. 475 – 500 global original equipment manufacturers (“OEMs”) and their tier 1 suppliers globally.
With over two decades of experience, it has deep domain expertise in the
*Issue Size: 60,850,278 eq sh (Entirely Offer for automotive industry and leverage such expertise to serve its clients in adjacent
Sale (including employee reservation of upto industries, such as the aerospace and transportation and construction heavy
2,028,342 eq sh + Reservation of Upto machinery (“TCHM”) industries. Through globally distributed execution model, TTL
6,085,027 eq sh for TML Shareholders) leverage the skills and capabilities of its employees worldwide, ensuring balance
between onshore client proximity and offshore efficiency to provide added value to
Reservation for:
QIB upto 50% eq sh
its clients.
Non-Institutional atleast 15% eq sh
((including 1/3rd for applications between Rs.2 The Company primarily categorize its lines of business as follows:
lakhs to Rs.10 lakhs)) Services: Its primary business line is services (“Services”), which includes providing
Retail atleast 35% eq sh outsourced engineering services and digital transformation services to global
manufacturing clients helping them conceive, design, develop and deliver better
Face Value: Rs 2 products.
Book value: Rs 70.27 (September 30, 2023)
Technology Solutions: It complements its service offerings with its Products and
Education businesses (collectively, “Technology Solutions”). Through its Products
Bid size: - 30 equity shares and in multiples
thereof business it resells third-party software applications, primarily product lifecycle
management (“PLM”) software and solutions and provide value-added services such
100% Book built Issue as consulting, implementation, systems integration and support. Its Education
business provides “phygital” education solutions in manufacturing skills including
Capital Structure: upskilling and reskilling in relation to the latest engineering and manufacturing
Pre Issue Equity: Rs. 81.13 cr technologies to public sector institutions and private institutions and enterprises
*Post issue Equity: Rs. 81.13 cr through curriculum development and competency center offerings through its
proprietary iGetIT platform.
Listing: BSE & NSE

Book Running Lead Managers: JM Financial TTL is a pure-play manufacturing focused ER&D company, primarily focused on the
Limited, Citigroup Global Markets India Private automotive industry and it is currently engaged with seven out of the top 10
Limited, BofA Securities India Limited automotive ER&D spenders and five out of the 10 prominent new energy ER&D
spenders in 2022 (Source: Zinnov Report). Its automotive revenue attributable to the
Sponsor Bank: ICICI Bank Ltd & Kotak Mahindra Services segment for Fiscal 2023 and the six-months period ended September 30,
Bank Limited 2023 was Rs.31,314.66 million and Rs.17,457.56 million, respectively, comprising
88.68% and 87.89% of its revenue attributable to the Services segment for the
Registrar to issue: Link Intime India Private
respective periods. Additionally, its revenue attributable to the Services segment
Limited
from verticals other than automotive for Fiscal 2023 and the six-months period
Shareholding Pattern
ended September 30, 2023 was Rs.3,996.89 million and Rs.2,406.34 million,
Pre issue Post issue
Shareholding Pattern % %
respectively, comprising 11.32% and 12.11% of its revenue attributable to the
Services segment for the respective periods.
Promoter and Promoter 66.79 55.39
Group The Company is positioned in the “leadership zone” by Zinnov Zones for ER&D
services ratings in 2023 for the seventh consecutive year. It is also ranked first among
Public & Employees 33.21 44.61
all India-based ER&D service providers and are among the top two globally, in
electrification. For automotive ER&D services, it is ranked first among India service
Total 100.0 100.0
providers and third globally among rated service providers by Zinnov. In addition, it is
*=assuming issue subscribed at higher band also ranked in the “leadership zone” in the aerospace ER&D ratings in 2023 by Zinnov
Source for this Note: RHP Zones and were ranked in the “leadership zone” for digital thread by Zinnov Zones in
2021. It is also ranked in the “established-expansive” zone in the 2023 rankings for
Industry 4.0 by Zinnov Zones. TTL is part of the Tata Group, which has been
recognized as the most valuable brand in India by Brand Finance, a leading
international brand valuation agency (Source: Brand Finance India 100 2022 report).
As a subsidiary of Tata Motors Limited (“TML”), it benefits from long-term
relationships with both TML and JLR. The long-standing engagements with TML and
JLR (collectively, “Anchor Clients”) have enabled the incubation of skills and
capabilities that has assisted it in pursuing opportunities outside of the Tata Group

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Objects of Issue:
The objects of the Offer are to (i) achieve the benefits of listing the Equity Shares on the Stock Exchanges; and (ii) carry out the Offer for
Sale of up to 60,850,278 Equity Shares by the Selling Shareholders. Further, the Company expects that the proposed listing of its Equity
Shares will enhance its visibility and brand image as well as provide a public market for the Equity Shares in India. TTL will not receive
any proceeds of the Offer for Sale by the Selling Shareholders. Each of the Selling Shareholders will be entitled to the respective
proportion of the proceeds of the Offer for Sale after deducting their portion of the Offer related expenses and the relevant taxes
thereon.

Competitive Strengths
Deep expertise in the automotive industry: TTL’s comprehensive portfolio of services for the automotive industry addresses the
product development and enterprise optimization needs of traditional OEM’s and new energy vehicle companies, together with their
associated supply chains. Its automotive ER&D services span the entire automotive value-chain and includes concept design and styling,
tear down and benchmarking (“TDBM”), vehicle architecture, body engineering, chassis engineering, virtual validation, ePowertrain,
electrical and electronics, connected, manufacturing engineering, test and validation and vehicle launch. In addition to the spectrum of
discrete service offerings, it also offers turnkey full vehicle development solutions for traditional internal combustion engine (“ICE”)
powered vehicles, plug-in hybrids (“PHEV”) and battery electric vehicles (“BEV”) which have been developed over a period of 10 years.
In this area its services extend from concept, detailed design and development, test and validation to the production launch of the
vehicle.

TTL’s automotive domain expertise and deep understanding of client requirements underpins the approach it takes to helping its clients
leverage digital technologies to optimize the manner in which they conceive, develop, manufacture, sell and service new products.
Additionally, its long-standing partnership with Anchor Clients, including the relationship with JLR since 2010, provides with
opportunities to cultivate skills and refine its value proposition for the automotive sector. Its sizeable portfolio of automotive services
provides cross-selling opportunities into the TCHM and aerospace sectors.

Differentiated capabilities in new age automotive trends – electric vehicles (“EVs”), connected and autonomous: TTL’s end-to-end
solutions for EV development, manufacturing and after-sales services are designed to help OEMs develop competitive EVs while
maintaining a balance between cost, quality and timelines. The first step in creating EVs is a compelling vehicle concept and engineering
design. Its suite of product engineering solutions including outsourced turnkey EV development, product benchmarking, electric vehicle
modular platform (“eVMP”) for accelerating product development timelines and its light-weighting framework can help OEMs develop
products within competitive timelines. Further, its suite of omnichannel after-sales solutions powered by the Power of 8 platforms can
help OEMs engage with their EV customers early and manage the entire customer journey effectively. This capability of integrating the
mechanical engineering aspect of product development with digital engineering, embedded solutions, and software allows it to provide
end-to-end solutions to its clients for EV development, manufacturing and after-sales services. It has a long-standing history of
developing EV capabilities since as early as 2010.

With an increased regulatory focus on sustainability and changing consumer preferences, electrification is expected to be the primary
focus for the automotive industry. New technologies are disrupting the automotive sector with increased ER&D complexity, requiring
specialized support. Global automotive companies are increasing their research and development (“R&D”) investments across the
broader theme of ‘ACES’ technologies – autonomous, connected, electrification and shared. The shift to alternative propulsion systems
and specifically electric vehicles has enabled this transformation. The Company offers a one stop platform for automotive OEMs to
meet new engineering needs across the value chain.

In addition, its partnerships with new energy vehicle companies have provided further opportunities outside of its traditional strength
in body engineering. It has developed a wide range of differentiated capabilities and offerings for EV projects, including EV
architectures, over-the-air (“OTA”) connected services, level 2 and level 3 autonomous driver assistance systems (“ADAS”), embedded
electronics, EV system design, embedded solutions, computer aided engineering (“CAE”), vehicle engineering and integration,
prototype build and test and program management. TTL also developed a proprietary connected vehicle cloud platform ‘TRACE’ to
provide solutions across the automotive value-chain. It provides a range of solutions on safety, vehicle management, remote
applications, fleet management, navigation and entertainment, among others. It is also ranked first among all India based global
engineering service providers and are among the top two globally, for electrification of vehicles by Zinnov Zones in its 2023 ER&D
report.

Strong digital capabilities bolstered by proprietary accelerators: TTL’s suite of digital services and accelerators are designed to help
OEMs and tier 1 suppliers manage the entire digital product life cycle and engage the customer throughout the product journey. The
solutions leverage its deep manufacturing domain knowledge and intimate understanding of clients. Its solutions and accelerators

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across new product introduction (“NPI”) increase the efficiency of automotive, TCHM and aerospace clients in introducing new products
to the market. Its range of offerings span across digital product development solutions to strengthen NPI processes, digital supply chain
solutions for agility and risk management, digital manufacturing solutions for better quality, agility and operational efficiencies, digital
customer experience and after sales solutions to manage the entire customer journey effectively and digital transformation solutions
enabled by proprietary digital wall to manage the digital thread.

Digital technologies are changing the way the manufacturing sector is developing, building and servicing products around the globe.
These technologies create value by connecting machines through a ‘digital thread’ across the value chain—making it possible to
generate, securely organize, and draw insights from disparate sources of data. It has built expertise in integration across PLM, ERP and
MES solutions by developing proprietary integration accelerators. The Company also has experience deploying Industry 4.0 at scale with
the ability to identify and deploy emerging technologies, tools and solutions to transform the manufacturing operations of its clients. Its
strong digital capabilities span across product development services, customer experience management, smart manufacturing,
application management, data intelligence, business transformation and process automation, among others. TTL’s proprietary
platforms provide it with a strategic competitive advantage, creating strong barriers to entry and help in cost competitiveness, faster
deployment, scalability, de-risking, improving program management and driving operational logistics more efficiently. Its proprietary
platforms and accelerators across the value chain are listed below:

TTL resell PLM application software through long-standing partnerships with Siemens Industry Software Inc., Dassault Systemes, and
Autodesk. Strategic benefits from these partnerships include visibility of future product roadmaps, better client solutions and reduced
client acquisition costs. PLM software is also an integral component of its Education offering.

Marquee set of clients across anchor accounts, traditional OEMs and new energy vehicle companies: TTL has a diversified global
presence across Asia Pacific, Europe and North America and partner with many of the largest manufacturing enterprises in the world. As
of September 30, 2023, its clients are comprised of more than 35 traditional automotive OEMs and tier 1 suppliers and more than 12
new energy vehicle companies. Its client portfolio includes its Anchor Clients, TML and JLR, leading traditional OEMs and tier 1 suppliers
such as Airbus, McLaren, Honda, Ford, and Cooper Standard as well as new energy vehicle companies such as VinFast, among others
such as Cabin Interiors and Engineering Solutions, ST Engineering Aerospace. Its key accounts are comprised of seven out of the top 10
and 12 of the top 20 global automotive ER&D spenders and five out of the 10 prominent new energy ER&D spenders globally. TTL has
deep and long-lasting relationships with its clients.

The Company actively engage on multiple projects with clients and have a high repeat rate of over 97.72%, 98.38%, 97.24% and 95.71%
across its Services business for the six-months period ended September 30, 2023, Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
It has developed a strong client NPS globally, achieving a NPS of 58 for the twelve months ended September 2023, 64 for the twelve
months ended September 2022 and 63 for the twelve months ended September 2021, as compared to an NPS of 40 for technology
services providers, placing it in the top 20 percentile of technology services players. The combination of Anchor Clients, traditional
OEMs and new energy vehicle companies provide a balanced mix of stability and growth, with revenue stability and further growth
opportunities from Anchor Clients and traditional OEMs and significant growth opportunities with new energy vehicle companies.

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Global delivery model enabling intimate client engagement and scalability: TTL has a global workforce of 12,451 employees serving
multiple global clients from 19 global delivery centers in Asia Pacific, Europe and North America, as of September 30, 2023. Its globally
distributed execution model ensures balance between onshore client proximity and offshore efficiency. This efficiency is achieved
through leveraging its low-cost offshore delivery model to move a greater portion of the work offshore to India and Romania. With the
right skill set at a global scale, an optimized engagement model and a balance of onshore/offshore employees, it is able to provide
aligned onshore client proximity and support the iterative nature of product development services together with the capacity and cost-
effectiveness of offshore delivery centers. TTL had approximately 1,717 employees based out of its strategic onshore locations, enabling
greater proximity to its clients. In addition, its onshore delivery centers are made up of a majority, as of September 30, 2023 of local
national talent and it has local presence in all the key automotive ER&D markets globally. The Company also has a delivery headcount of
11,534 employees as depicted below:

Proprietary e-learning platform leveraging manufacturing domain knowledge to tap into the large upskilling and reskilling market:
Technological innovations are driving change within the global manufacturing sector, resulting in an increase in demand for new age
engineering skills and capabilities. Its digital and technology capabilities and long-standing manufacturing expertise coupled with its
many years of experience of providing skills training, initially through teacher led classroom training and subsequently through its
proprietary iGetIT platform, has positioned it to help address the growing engineering upskilling needs. TTL leveraged its manufacturing
expertise and its iGetIT platform to impart industry-oriented, job-specific skills for reskilling engineers and technicians. The platform has
over 25,000 hands-on exercises and over 2,000 courses across various skill sets, including design thinking and multiple computer aided
design (“CAD”) software. Its iGetIT platform is used by enterprise clients as well as public sector institutions in India to train engineering,
polytechnic and industrial training institute (“ITI”) students. It has partnered with four state universities and six private universities
along with over 150 private enterprises that use its iGetIT platform, as of September 30, 2023.

TTL’s partnerships in India has recently extended beyond its iGetIT offering to the development of an entire “phygital” (physical and
digital) proposition. It has been engaged by various State Governments in India for upgradation of their ITIs, to include EV labs and meet
Industry 4.0 demands, and curriculum design and as a result, it has been able to build strong capabilities and a presence in the
educational sector. Its relationships within the public sector will allow it to invest and further improve the course content on its iGetIT
offering, which will further reinforce its private sector enterprise proposition.

Well-recognized brand with experienced Promoter, board of directors and management team: TTL benefit from the strong track
record, reputation and experience of its Promoter, TML, which is part of the Tata Group. The Tata Group is one of the leading business
conglomerates in India, with a heritage of over 100 years, comprising of more than 28 equity listed companies across multiple verticals
such as technology, steel and automotives. Its Promoter is one of the leading global automobile manufacturers in the world, providing
integrated and smart e-mobility solutions to customers in over 125 countries. With an employee base of over 81,800 as of March 31,
2023, its Promoter’s manufacturing facilities are located across India, the United Kingdom and South Korea. Its Promoter is the only
OEM in India that offers an extensive range of mobility solutions, covering cars, utility vehicles, trucks and buses. TTL’s Promoter has a
strong global network of 90 subsidiaries, equity-accounted associates and joint ventures, including JLR in the United Kingdom and Tata
Daewoo in South Korea.

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The Company is well positioned to benefit from the Tata group’s business priorities to increase investment in EVs, aerospace and
defense. The ‘One Tata’ philosophy further benefits group companies with focus on utilizing scale, simplification, and synergies between
Tata group companies. In addition to benefiting from the high standards of corporate governance and brand value associated with the
Tata Group, it also has the opportunity to leverage and benefit from the Tata Groups’ global network for exploring potential business
opportunities and acquiring direct access to senior decision makers at potential end clients. It is led by a highly experienced and
professional board of directors, from diverse backgrounds with execution track records across various industries such as automotive,
electronics, legal, IT services, fast moving consumer goods and insurance.

Business Strategy:
Deepen engagements within existing client base: There is a significant opportunity within current client base to increase the use of
solution offerings and further develop deeper, long-term strategic engagements. Given the high concentration of ER&D spend among
select automotive, aerospace and TCHM companies globally, TTL methodically target large spenders in its chosen industries, devoting
substantial time and resources in cultivating relationships. There is still significant potential to increase its market share among its
existing clients. Its fundamental approach of client centricity, long-term strategic partnering and joint engagement governance has
consistently enabled it to develop and expand long-term relationships. Additionally, it may enter into strategic partnerships or joint
ventures with parties for providing strategic services to its end clients, which will improve its engagement with its existing or new
clients.

Currently, TTL top 20 clients by revenue attributable to the Services segment account for 88.40% of its revenue attributable to the
Services segment for Fiscal 2023. It plans to drive further value by prioritizing the right high potential accounts through strategic
account planning. It also plans to identify investment requirements, set-up and scale account coverage through established roles, key
performance indicators, incentives and processes across sales, delivery and enabling functions and further deepen practice and
account-based marketing capability to drive improved client outcomes. To achieve this, it plans to undertake sales analytics driven
identification in its top accounts for cross selling and account planning in its top accounts.

Target top ER&D spenders in select high priority verticals and key geographies: TTL endeavor to secure projects with the top ER&D
spenders within its focus verticals of automotive, aerospace and TCHM. Automotive ER&D is highly concentrated among the top 20
companies, in terms of ER&D spend for 2022, which account for 73% of the global spend. It aims to strengthen its dedicated business
development strategy to focus on high potential accounts with large annual ER&D spends and new energy vehicle companies. It has also
recently been empanelled by Airbus which is expected to become a strong avenue of growth. Its organic approach to targeting top
ER&D spenders is complemented by tuck-in acquisitions. It continues to be open to opportunistic targets that complement its strategy
and accelerate client acquisition or capability building. It also aims to increase spending and strengthen its dedicated business
development strategy for new energy vehicle companies.

In addition, TTL is committed to building a presence in all geographies that has a significant manufacturing sector. It sees large growth
opportunities in select geographies, including France, Germany and China. Territory specific strategies, such as the EV proposition for
China, aerospace proposition for France and embedded solutions for Germany, are being cultivated to ensure a sustainable growth
trajectory. TTL will continue to rely on its global delivery model and complement it, as necessary, with additional delivery centers that
are exclusively focused upon delivering country specific services, as necessary.

Expand capabilities in digital engineering and embedded systems: The global share of digital technologies in Automotive ER&D spend
is expected to grow at a CAGR of 16% from fiscal 2022 to fiscal 2026, with an expected increase from 26% of the total spend to 36% in
the same period. Engineering service providers are being leveraged for silicon design, embedded software, and integration of digital
technology, thus accelerating the growth opportunities for engineering services outsourcing. Digital engineering is expected to grow at
16% CAGR from 2022 to 2026. As demand for autonomous and connected technologies rises, driven by regulatory pressure for
passenger safety and cost consideration, OEMs will maintain their commitment to providing improved and safer experiences to their
customers through the integration of connected and autonomous technologies. TTL also intends to expand its business through
selective acquisitions that provide it access to better technology, a broader geographical reach, capabilities and key clients. It has also
invested in establishing strong partnerships and alliances, such as with Dassault, Logility, Siemens Industry Software Inc., Codincity and
Fantasy and by availing Microsoft AZURE products/services that augment its efforts and enable it to expand its client reach across
verticals and geographies.

Strengthening service delivery through capacity and capability building and optimizing delivery processes: As TTL scale its business
across geographies, it is critical that it strengthen its work systems and processes, including through the optimization and management
of the employee pyramid per engagement, to increase efficiency of service delivery, thereby increasing margins. The Company continue
to work on strengthening its forecasting processes, resource management processes and automation of non-core processes in order to
enhance delivery excellence and strengthen pricing models that will enable it to improve its margins while creating value for all

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stakeholders. TTL aims to focus on campus recruitment and university hires for entry level and mid-career positions as well as upskilling
current employees, which will have a positive impact on its margins. In addition, it endeavors to reduce employee costs per
engagement through an optimized onshore-offshore mix. It is strategically analyzing workstreams at its current accounts and aims to
move select workstreams to its offshore talent (India and Romania and also increase its offshore workforce). TTL is also focused on
building a strong talent development strategy to onboard and upskill its employees and have launched various campaigns to strengthen
its employer brand in order to attract new talent. In addition, it has launched initiatives to develop talent in digital lines of services,
supported by differentiated compensation strategies with a view to launch a holistic career path strategy in the near future including
predictable growth opportunities for talent with niche skills.

Expand capabilities and enterprise client base in the education sector: The global manufacturing sector is being disrupted by
technological change. There is a large engineering upskilling requirement globally, and particularly in India, in the manufacturing sector.
TTL train its engineers through a combination of classroom training and utilizing its proprietary iGetIT offering, an online learning
system with courses related to engineering design software and skills. Its iGetIT platform is used by enterprise clients as well as public
sector institutions in India to train engineering, polytechnic and ITI students. It aims to leverage its experience and relationships within
the public sector to improve its iGetIT platform and will continue to invest and develop the platform with additional modules as needed
to reinforce its private sector enterprise proposition.

Industry:
Global ER&D Services Industry Overview
Global Engineering Research & Development (“ER&D”) Services Industry
ER&D services is defined as the set of services offered to enterprises on activities which involve the process of designing and developing
a device, equipment, assembly, platform, or application such that it may be produced as a product for sale through software
development or a manufacturing process. The ER&D services are broadly broken down into software, embedded, and mechanical
engineering services as shown below:

Players in the ER&D services industry typically focus on the design, development, testing, rollout, and maintenance aspects of the
product and process development chain, and not on mass manufacturing. The ER&D services market is comprised of product
engineering services and process engineering services. Product engineering services most commonly address the product development
lifecycle for companies, while process engineering services involve services to assist in the production of facilities and processes that
produce value-added outputs and components through plant design engineering, manufacturing engineering, industrial engineering,
and process control systems.

Global ER&D Services Spend

In 2022, ER&D spending continued its upward trend, marking another significant year of steady growth. Enterprises, committed to
sustaining innovation while funding it through cost optimization and productivity improvements, have maintained their focus on future-
proofing and transformation, with an intensified emphasis on digital engineering. The engineering services and technology solutions
industries are marked by rapid technological changes, evolving industry standards, shifting client preferences, and the introduction of
new products and services. Currently, global ER&D spending is estimated at $1,811 billion (Rs.1,48,676 billion). The current macro

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environment presents a complex landscape, with inflation peaking in certain countries and persistent concerns about ongoing global
recessionary pressures, alongside sustainability and energy challenges. However, as companies strive for strategic endurance, there is a
renewed focus on investments in innovation, and ER&D spending is expected to remain resilient, continuing its steady growth
trajectory. Out of the $1,811 billion (Rs.1,48,676 billion) ER&D market in 2022, $810 billion (Rs.66,498 billion) was attributed to digital
engineering spending. This mainly comprised of spending on new-age technologies like the Internet of Things (“IoT”), blockchain, 5G,
augmented reality, virtual reality, cloud engineering, digital thread initiatives, advanced analytics, embedded engineering and
generative artificial intelligence (“AI”), among others. Additionally, digital engineering spending is expected to grow at a compound
annual growth rate (“CAGR”) of approximately 16% from 2022 to 2026.

Key Drivers of Growth in ER&D Spending:

Focus on sustainability
With sustainability taking on a more important role in developmental plans, global enterprises have clearly defined timelines and
targets to incorporate carbon net zero and/or carbon neutrality. This has led to an enhanced focus on energy-efficient product design
and clean energy transition for operations across industries. Countries across the globe are announcing plans to phase out internal
combustion engines (“ICE”) powered vehicles, with electrification-powered modes of transport expected to replace them. Across
industries, electrification is expected to be at the core of sustainable decarbonization, offering the most effective way to cut carbon
dioxide emissions from end-use sectors such as heating and cooling, transport, and industrial applications.

Shrinking Innovation Cycles

As consumers evolve, the market is forced to produce more innovative products to meet their demands at a faster pace. This has led to
shortened product lifespans and rapidly shrinking product innovation cycles. Over the period from 2022 to 2026, automakers are
projected to introduce an annual average of 61 new models, which is 50% more than the average number of new models introduced in
the preceding two decades.

Digital Thread
Digital technologies are changing the way the manufacturing sector is developing, building, and servicing products around the globe.
These technologies create value by connecting machines through a ‘Digital Thread’ across the value chain—making it possible to
generate, securely organize, and draw insights from disparate sources of data. Product lifecycle management (“PLM”), manufacturing
execution systems (“MES”), and enterprise resource planning (“ERP”) solutions are the fundamental aspects of product realization. The
cornerstone of any ‘Digital Thread’ is strong digital integration across the digital foundation of any manufacturing enterprise, which
includes PLM, ERP, and MES. Additionally, challenges faced in manufacturing operations such as the lack of collaboration between
complex and scattered infrastructure, lack of flexibility due to individual dependency on separate platforms, restrained decision-making
due to the lack of integration between channels and restricted data visibility due to the lack of centralized monitoring platforms and
high costs of connectors are further driving the need for integration. This information technology(“IT”)/operational technology
convergence enables real-time manufacturing insights about a product’s performance and use – from design to production, sale, use,
and disposal. Accordingly, many large manufacturing firms are increasing their focus on factory automation by leveraging the industry
4.0 technology stack. The need for ‘Digital Thread’ is further accentuated by macro factors like supply chain disruptions, capital re-
allocation needs owing to demand swings, reconfiguration of management and manufacturing flows due to remote work and increasing
focus on the environmental impact of manufacturing.

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Growing Product Complexity

Technology advancements are accelerating at a rapid pace across industries, leading to an increasing level of product complexity – from
the development phase to aftermarket support. For example, in the automotive industry, digital technologies have percolated across
the value chain in the wake of changing consumer patterns. Connected experiences, for instance, have replaced driving experience as a
car-maker’s primary source of competitive advantage. Car-makers are also investing towards digitizing their sales and services
operations while offering a range of add-on services such as battery-as-a-service (“BaaS”) and over-the-air updates.

Advent of Generative AI
The rise of generative AI is spurring a wave of fresh investments as companies aim to enhance engineering efficiency and pioneer
intelligent products and services. While still in its infancy, generative AI carries profound transformative potential, ready to reshape
entire industries. This surge in innovation is fueled by increased funding, paving the way for numerous cutting-edge applications. This
technology is on the verge of transforming business operations and products, heralding a new era of innovation and efficiency.

ER&D Spend Across Industry Verticals:

Manufacturing-led verticals (automotive, industrial, aerospace, defense, etc.)
Manufacturing-led verticals have been the largest contributors, and account for close to half of the global ER&D spending. In terms of
the expenditure, the automotive sector is the largest manufacturing ER&D vertical, and the second largest ER&D vertical overall,
accounting for approximately 10% of global ER&D spend for 2022.

Hi Tech-led verticals (Software & Internet, Semiconductor, Telecom, etc.)

Hi Tech-led verticals currently account for 40% of the global ER&D spend. Software and internet is the largest ER&D vertical, accounting
for approximately 20% of global ER&D spend and is among the fastest growing verticals.

Services-led verticals (BFSI, Healthcare Payers & Providers, Media & Entertainment, etc.)
Services-led verticals account for 12% of global ER&D spend, primarily driven by digital engineering investments. Though they currently
make up the smallest portion of the ER&D spend pie, they are the fastest growing category.

Global ER&D Services Addressed Market

The ER&D services addressed market refers to the sum of the ER&D expenditure by global capability centers (“GCCs”) and the ER&D
expenditure outsourced to third-party engineering service providers (“ESPs”). The global ER&D addressed market was pegged at $170-
180 billion (Rs.13,956-14,777 billion) in 2022 – which was an increase from $145-155 billion (Rs.11,904-12,725 billion) in 2021, and
accounts for approximately 10% of the overall ER&D spend. Of the $170-180 billion (Rs.13,956-14,777 billion), $65-70 billion (Rs.5,336-
5,747 billion) is accounted for by GCCs, and they are expected to witness a steady growth of seven-nine percent to reach $90-95 billion
(Rs.7,389-7,799 billion) by 2026. The outsourced ER&D spend to third-party ESPs was at $105-110 billion (Rs.8,620-9,031 billion) in 2022
and is poised to reach $165-170 billion (Rs.13,546-13,956 billion) in 2026, growing at a rate of 11-13%.

ER&D Spend Addressed Through GCCs

With increasing reliance on global talent for building scalable engineering teams, enterprises have set up GCCs to strengthen their
technology and ER&D capabilities. Key considerations for setting up a GCC in a country include talent availability to build scalable
engineering teams, presence of a mature technology ecosystem, ease of doing business, and the ability to build teams at affordable
costs. India and China are key locations for offshore in-house ER&D centers, accounting for more than 60% of the total $65-70 billion
(Rs.5,336-5,747 billion) GCC spend. More than 85% of the top 50 ER&D spenders have GCCs in India owing to its software engineering
maturity and digital talent availability.

ER&D Spend Outsourced To Third-Party ESPs

Industry trends and technological advancements are transforming the way companies develop and manage products as well as their
ability to provide engaging user experiences, leading to changes in business models, operations, and supply chains. As the pace of
innovation accelerates, enterprises across industries are turning to trusted third-party ESPs for support. These service providers with
comprehensive end-to-end capabilities help enterprises upgrade and service existing products and processes, as well as develop new
products and processes to better compete and drive competitive differentiation.

The emergence of cloud and 5G exponentially increases compute power and network speeds that enable greater innovation. Moreover,
advancements in AI, machine learning, and Software 2.0 (machine-written code) have enabled products such as autonomous vehicles to
become a reality. The pace of innovation has forced enterprises to increase reliance on the ESPecosystem. Given the emergence of the
aforementioned market trends around embedded and digital engineering, there has been significant increase in investments in these
areas. This in turn, has made new product development dynamic.

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Both traditional/established and new-energy enterprises are leveraging the ESP ecosystem. The demand from traditional enterprises is
primarily focused on addressing capacity requirements as they look to balance their R&D investments between traditional and new
products and services. As enterprises focus on building new core capabilities, they carve-out traditional products through end-to-end
relationships with service providers. Verification & validation, product sustenance, and end of life management offer the highest
outsourcing opportunity. At the same time, new-energy enterprises require capacity and experience across domain areas and are open
to leveraging the ESP ecosystem for ER&D outsourcing initiatives. The key growth drivers for increased outsourcing opportunities
include:

Need for Skilled Talent: Increasing focus on sustainability, embedded and digital engineering, Digital Thread, and factory automation
has made new product development dynamic and more challenging. Shortage of skilled talent in these domains has accelerated the
adoption of outsourcing to third-party ESPs by multiple large manufacturing firms.

Shortening Product Development Timelines: Rapid advancement of technology and faster innovation has translated to a drastic
reduction in product development timelines. This increases the need for partnership with experienced third-party ESPs with end-to-end
capabilities in traditional as well as new-age products.

Faster Time to Market: To realize faster time-to-market, enterprises are increasingly relying on the presence of a skilled workforce
which is geographically diversified to ensure round-the-clock product innovation and development.

Cost Savings: Driven by cost reduction and product lifecycle pressures, OEMs are increasingly focused on developing effective
outsourcing strategies that drive significant improvement in global engineering and ER&D operations. At the same time, they also look
to leverage cost-arbitrage benefits from ESPs based out of low-cost countries like India and Romania.

Since the onset of COVID-19, global OEMs have gained confidence in remote and hybrid-working models which in turn will translate to
an increased propensity towards outsourcing as they realize the benefits driven by access to global talent pools across time zones.

Comparison Between IT Services and ER&D Services Outsourcing

The nature of ER&D services compared to IT services is quite distinct and differentiated because of its decision makers, focus areas, and
outsourcing maturity. ER&D services have a higher headroom for growth and outpaces the traditional IT Services industry. The key
differentiator for ER&D specialists is their strong domain knowledge. Their pointed focus on translating their niche ER&D prowess into
business is expected to help them outgrow IT generalists. Further, ER&D services require a higher onshore mix and a trust and track
record due to the involved nature of business. Owing to the high maturity of IT-BPM (Information Technology and Business Process
Management) outsourcing, and the nascent maturity of ER&D outsourcing, there exists a longer runway for the ER&D industry to
deliver stronger growth as compared to the IT services industry.

Aerospace & Defense

The aerospace sector is experiencing a notable resurgence following the challenges brought about by the COVID-19 pandemic. With air
travel gradually rebounding and global demand for aviation services increasing, aerospace companies are reinvigorating their R&D
efforts. The ER&D spend for the aerospace and defense industry for the year 2022 stood at $52 billion (Rs.4,269 billion) and is estimated
to grow by $10 billion (Rs.821 billion) to reach $62 billion (Rs.5,090 billion) in 2026. Currently the highest spend comes from Europe,
accounting for nearly 48% of the overall spend, followed by North America. France is a key geography, accounting for more than 20% of
the overall ER&D spend in this industry. The top 10 aerospace ER&D spenders account for more than 65% of the overall spending of the
industry.

The aerospace outsourced ER&D market currently stands at approximately $9-10 billion (Rs.739-821 billion) for 2022 with service
providers being leveraged across the value chain. The outsourced ER&D opportunity for this industry is estimated to continue to grow
at more than 10% over the period from 2022 to 2026.

The growth in the ER&D spend is driven by several factors. Post-COVID, there is a renewed focus on research and development within
the industry, as companies seek to innovate in areas such as digitalization, sustainability, and improving manufacturing throughput to
meet increased demand. The pandemic has led to a shift in focus towards narrow-body aircraft, as well as an increase in the demand for
air cargo and passenger-to-freighter conversions. The maintenance, repair, and overhaul (“MRO”) segment was impacted by
plummeting passenger demand, but the overall outlook is positive as passenger air travel recovers. Aerospace enterprises are focusing
on digitalization to reduce costs, including shop-floor intelligence, smart supply chain, and predictive maintenance. Digital technologies
are finding use cases all the way from asset tracking and inventory management to digital MRO, and the ER&D service provider
ecosystem is being leveraged for digital thread enablement. Aerospace tends to follow innovation in the Automotive vertical. There is a

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growing interest in the use of hybrid and electric propulsion systems in the aviation industry, as advances in electric car technology have
led to improvements in batteries, electric motors, and other hardware.

Moreover, increasing demand for zero carbon emissions, global competition, and growing commercial aircraft backlog are the primary
trends putting increased pressure on OEMs to deliver high-precision products faster. Key aircraft and component manufacturers (for
instance, Airbus, Boeing, GE, and Pratt & Whitney) have recently announced capacity expansion plans and new manufacturing plants to
address aircraft backlog and meet customer requirements. Further, some of the top spenders such as Airbus and Boeing have made key
investments around the areas of autonomous flight and digital thread technologies.

Transportation & Construction Heavy Machinery (“TCHM”)

The global TCHM ER&D spend was pegged at $43 billion (Rs.3,530 billion) in 2022 and is estimated to grow to $49 billion (Rs.4,023
billion) by 2026. The TCHM service provider outsourced ER&D market is currently pegged at $2.5-3 billion (Rs.205-246 billion) and is
expected to grow to $3.5-4 billion (Rs.287-328 billion) by 2026. Mechanical design and manufacturing engineering are the key
outsourced sub segments for the TCHM industry.

The TCHM industry is investing in various digital engineering initiatives to improve asset utilization and optimize performance. Key focus
areas include smart factories, electrification, and connected equipment. While TCHM industry lags behind the automotive sector in
innovation by 3-5 years, they have similar regulatory, engineering and technology challenges which will accelerate the demand for
outsourced engineering services. Companies like John Deere and Volkswagen have announced investments in electrification, showing
that the industry is following the trends in the Automotive sector. Key trends for the future of the industry include electrification,
autonomous fleet, connected equipment, and reduced carbon footprint. OEMs are also looking to increase revenue and bring new
products to market faster, reduce costs, improve customer experience, and rapidly scale up production and accelerate product
development. The COVID-19 pandemic has resulted in rapid adoption of digitalization initiatives by Off-Highway and Heavy Engagement
equipment OEMs as well with digital connectedness and performance optimization emerging as key use cases.

Key Concerns
 TTL continues to derive a material portion of its revenues from top 5 clients by revenue generated in each of the six-months period
ended September 30, 2023 and September 30, 2022 and for Fiscals 2023, 2022 and 2021 (“Top 5 Clients”) which include Tata
Motors Limited (its Promoter) and certain of its subsidiaries (other than Jaguar Land Rover Limited) (collectively, “Tata Motors”)
and Jaguar Land Rover Limited (and certain other subsidiaries of Jaguar Land Rover Automotive PLC) (collectively, “JLR”, and
together with Tata Motors, the “Anchor Clients”). If any or all of TTL’s Top 5 Clients were to suffer a deterioration of their business,
cease doing business with it or substantially reduce their dealings with it, its revenues could decline, which may have a material
adverse effect on the business, results of operations, cash flows and financial condition.

 Revenues are highly dependent on clients concentrated in the automotive segment. An economic slowdown or factors affecting
this segment may have an adverse effect on the business, financial condition and results of operations.

 Certain of TTL’s corporate records and filings and instruments of transfer are not traceable. It cannot be assured that no legal
proceedings or regulatory actions will be initiated against it in the future in relation to any such discrepancies.

 TTL expects a significant amount of future revenue to come from new energy vehicle companies, many of whom may be startup
companies. Uncertainties about their funding plans, future product roadmaps, ability to manage growth, creditworthiness and
ownership changes may adversely affect the business, financial condition and results of operations.

 TTL invest in unsecured debt instruments, from time to time, which may carry interest rates lower than the market rate and thus
affect its profitability.

 TTL is subject to laws, rules and regulations related to system failures, disclosure of confidential information or data security
breaches that are frequently evolving and may require it to incur additional expenses. Its failure to comply with these laws, rules
and regulations could harm its reputation, damage its relationship with clients and cause it to lose clients.

 TTL may be liable to its clients for damages caused by system failures, disclosure of confidential information or data security
breaches, which could also harm its reputation, damage its relationship with clients and cause it to lose clients.

 Exchange rate fluctuations in various currencies in which TTL do business could materially and adversely impact its business,
financial condition and results of operations.

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 Tata Technologies Limited

 Some of the client contracts contain benchmarking and most favoured client provisions which, if triggered, could result in lower
contractual revenues and profitability in the future.

 Certain of TTL’s Group Companies operate in a similar line of business, which may lead to competition with these entities and could
potentially result in a loss of business opportunity for the Company.

 Success depends in large part upon the strength of skilled engineering professionals and management team. If TTL fails to attract,
retain, train and optimally utilize these personnel, its business may be unable to grow and its revenue and profitability could
decline.

 Increases in wages and other employee benefit expenses for skilled engineering professionals and management team could
prevent TTL from sustaining its competitive advantage.

 Pricing structures and scope of offerings may not accurately anticipate the cost and complexity of performing TTL work and if it is
unable to manage costs successfully, certain of its contracts could be or could become unprofitable.

 TTL may be subject to client and/or third-party claims of intellectual property infringement. It may also be unsuccessful in
protecting its intellectual property rights.

 TTL has recently expanded its offerings in the Education business and if it is unable to achieve the anticipated returns in such new
growth areas, it could have a material adverse effect on its business, results of operations and financial condition.

 For Products business TTL relies on vendors and partners for software, many of which are single-source or limited-source suppliers.
Such reliance or adverse change in its relationships could harm its business by adversely affecting availability, delivery, reliability,
and cost.

 TTL conducts its business in various jurisdictions globally and may be unsuccessful in operating and expanding into new markets
and face numerous legal and regulatory requirements while operating and expanding and violation of these regulations could harm
its business.

 Failure to comply with standards required by TTL’s clients under its service agreements, which may include industry and country-
specific laws and regulations, could harm its reputation, result in liability claims and significant costs to it, impairing its ability to
enter into future contracts in relation to its services and solutions, and serve its existing clients.

 Any inability to manage growth could disrupt business and reduce profitability.

 TTL may not be able to extend its arrangements with its clients and may need to renegotiate the terms of its contracts from time to
time.

 TTL’s profitability could suffer if it is not able to maintain optimum employee utilization.

 Intense competition in the market for engineering services could affect pricing and have a material adverse effect on the business,
financial condition and results of operations.

 The Company’s clients may stop or reduce the scope of outsourced engineering services work or may set up captive research and
development centres, which may result in a reduction in its volumes of work. Additionally, a reduction in the research and
development budgets of its existing and prospective clients could affect its pricing and volume of work.

 If TTL is unable to collect its dues and receivables from, or invoice its unbilled services to, its clients, its results of operations and
cash flows could be adversely affected.

 Success also depends on ability to innovate, and business could be adversely affected if TTL fails to upgrade and adapt its services
and solutions to evolving clients’ requirements or if it fails to make changes to its pricing model to keep up with clients’
expectations.

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 Tata Technologies Limited

 TTL derives a material portion of its revenues from its Anchor Clients, who are related parties. Any deterioration in its relationship
with its Anchor Clients may adversely affect the business, financial condition and results of operations.

 If third-party service providers and key vendors are not able to or do not fulfil their service obligations, TTL’s operations could be
disrupted and its operating results could be harmed.

 The Company claim deductions under special tax holidays for units set up in special economic zones in India. If there is any change
in these tax holidays, other taxation laws or their interpretation within India and in the other jurisdictions in which it operates, such
changes may significantly affect the business, results of operations, cash flows, financial condition and prospects.

 There are several restrictions on special economic zones and underlying special economic zone land in India, which may adversely
affect its facilities located therein.

 TTL relies on licensing arrangements with Tata Sons Private Limited to use the “Tata” brand. Any improper use of the associated
trademarks by the licensor or any other third parties could materially and adversely affect the business, financial condition and
results of operations.

 Insurance coverage may not be adequate to protect it against all potential losses, which may have a material adverse effect on the
business, financial condition and results of operations.

 If TTL fails to maintain an effective system of internal controls, it may not be able to successfully manage or accurately report its
financial risk. Employee misconduct or such failure of its internal processes or procedures could harm it by impairing its ability to
attract and retain clients and subject it to significant legal liability and reputational harm.

 TTL may engage in acquisitions that may not be successful or meet its expectations. If it is unable to obtain indemnification
protection or other contractual protections or relief for any material liabilities associated with its acquisitions or investments, its
business, financial condition and results of operations could be adversely affected.

 Business and operations have been adversely impacted by the COVID-19 pandemic and the future impact on the business,
operations and financial performance is uncertain and could continue for an unknown period of time.

Profit & Loss

Particulars (Rs in million) H1FY24 FY23 FY22 FY21
Revenue from operations 25267.0 44141.8 35295.8 23809.1
Other Income 607.2 877.5 488.0 448.3
Total Income 25874.2 45019.3 35783.8 24257.4
Total Expenditure 20619.5 35932.4 28839.2 19952.0
Purchase for technology solutions 4235.2 6824.8 6885.4 3383.0
Outsourcing and consultancy charges 2904.6 5696.6 3998.0 2414.4
Employee Benefits Expenses 11319.4 19294.6 15126.9 12160.0
Other Expenses 2160.4 4116.5 2828.8 1994.7
PBIDT 5254.7 9086.9 6944.6 4305.4
Interest 94.8 179.8 219.0 176.6
PBDT 5160.0 8907.0 6725.7 4128.8
Depreciation and amortization 497.4 945.5 857.1 922.0
Exceptional Item 0.0 0.0 0.0 54.2
PBT 4662.5 7961.5 5868.6 3152.7
Tax (incl. DT & FBT) 1446.7 2611.6 1586.7 760.9
Current tax 1446.7 2611.6 1586.7 877.9
Deferred tax -303.2 -890.4 -88.1 -117.0
PAT 3519.0 6240.4 4369.9 2391.7
EPS (Rs.) 8.7 15.4 10.8 5.9
Face Value 2 2 2 2
OPM (%) 18.4 18.6 18.3 16.2
PATM (%) 13.9 14.1 12.4 10.0

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 Tata Technologies Limited

Balance Sheet
Particulars (Rs in million) As at H1FY24 FY23 FY22 FY21
Non-current assets
Property, plant and equipment 1,318.1 1,201.5 1,145.2 872.4
Capital work-in-progress 0.0 26.5 2.6 0.4
Right of use assets 1,848.0 1,802.9 1,878.5 2,326.4
Goodwill 7,661.7 7,629.2 7,293.0 7,259.0
Other Intangible assets 407.7 319.6 362.2 440.3
Intangibles under development 0.0 1.0 0.0 0.7
Financial assets
Loans 0.00 0.00 0.4 3.4
Other financial assets 626.66 437.00 442.2 215.7
Deferred tax assets (net) 1,859.7 1,520.8 574.4 429.7
Income tax assets (net) 303.4 305.2 303.0 219.7
Other non-current assets 948.6 796.5 376.6 84.7
Total non-current assets 14,973.8 14,040.2 12,378.3 11,852.3
Current assets
Financial assets
Investments 897.6 297.8 5,276.7 4,970.7
Trade receivables
Billed 10,134.1 9,517.5 6,472.9 4,534.5
Unbilled 2,113.1 1,544.7 1,208.9 1,423.0
Cash and cash equivalents 4,285.5 3,828.2 7,682.6 7,813.2
Other bank balances 3,859.5 6,163.8 1,011.4 20.8
Loans 1,207.5 4,902.2 462.5 2,517.1
Other financial assets 875.0 744.3 327.7 268.0
Other current assets 13,048.2 10,650.0 7,251.8 2,013.8
Current tax assets (net) 29.8 326.2 107.2 313.9
Total current assets 36,450.3 37,974.7 29,801.7 23,875.0
Total assets 51,424.2 52,014.9 42,180.0 35,727.4
EQUITY & LIABILITIES
Equity
Equity share capital 811.3 811.3 418.1 418.1
Other equity 27,719.9 29,083.4 22,383.5 21,003.5
Total equity 28,531.3 29,894.7 22,801.6 21,421.5
Liabilities
Non-current Liabilities
Financial Liabilities
Lease liabilities 2,128.3 2,147.6 2,231.6 2,327.4
Other financial liabilities 7.3 5.4 3.5 4.7
Provisions 291.8 233.3 186.5 152.0
Total non-current liabilities 2,427.3 2,386.2 2,421.6 2,484.1
Current liabilities
Financial liabilities
Lease liabilities 470.4 406.0 382.8 334.7
Trade payables
Total outstanding due of micro enterprises and small enterprises 85.3 1,071.7 172.2 0.7
Total outstanding due of creditors other than micro enterprises and small enterprises 4,710.3 5,506.3 3,193.8 2,236.0
Other financial liabilities 37.0 45.7 2,558.7 30.6
Current tax liabilities (net) 944.8 616.4 216.0 28.4
Provisions 256.1 339.1 306.9 119.1
Other current liabilities 13,961.7 11,748.8 10,126.5 9,072.3
Total current liabilities 20,465.6 19,733.9 16,956.8 11,821.7
Total liabilities 22,892.9 22,120.2 19,378.4 14,305.8
Total equity and liabilities 51,424.2 52,014.9 42,180.0 35,727.4
Source: RHP

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