Tata Technologies, a prominent player in the engineering and IT services sector, made a historic entry into the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on November 30, 2023, with its much-anticipated Initial Public Offering (IPO). Priced initially at Rs 475-500 per share, the stock defied expectations by opening at a remarkable Rs 1199.95, marking an astounding 140.0% listing gain. This robust debut underscored investor confidence in Tata Technologies’ promising growth trajectory, solidifying its standing as a global leader in engineering services.
Why stock may crash?
However, a potential storm looms over Tata Tech stock as concerns arise about its second-largest client, VinFast. VinFast, a Vietnamese electric vehicle (EV) manufacturer under the Vingroup umbrella, has seen its shares plummet by around 90%. This downturn is attributed to a series of unsettling events, notably selling 7,100 cars to a Vingroup-owned taxi company in Vietnam out of the 11,300 cars sold by VinFast. The revelation raises eyebrows, hinting at a potential conflict of interest and potentially impacting Tata Technologies.
To add to the complication, VinFast underwent a wild ride in the stock market, with a remarkable 700% increase in valuation during its IPO last August. However, the euphoria was short-lived, as the stock plummeted, resulting in losses of USD 623 million. Surprisingly, VinFast’s valuation overtook industry titans Ford and Volkswagen at its height, only to plummet in a couple of days.
VinFast accounts for 20% to 25% of Tata Technologies’ entire sales, creating a significant danger to the company’s financial health. The interwoven fate of Tata Tech and VinFast highlights the stock’s sensitivity to external variables, emphasizing the volatile character of the global automotive and technology market. Investors are now examining how Tata Technologies handles these problems and whether it can maintain its position in the face of the uncertainty associated with its partnership with VinFast.
VinFast Auto Ltd. is a Vietnam-based multinational automotive company founded by Vingroup, one of the largest private conglomerates in Vietnam that Phạm Nhật Vượng founded. An automotive manufacturer, engages in Automobiles and E-scooter related business in Vietnam and the United States. The company operates through three segments: Automobiles, E-scooters and Spare Parts & Aftermarket Services.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.