Tata Technologies IPO faces concern as top client Vinfast faces challenges

Tata Technologies, the recent entrant to the IPO market, finds itself in a situation of heightened attention due to the significant fluctuations in one of its top clients, Vietnamese electric vehicle (EV) manufacturer Vinfast.

Tata Technologies, the recent entrant to the IPO market, finds itself in a situation of heightened attention due to the significant fluctuations in the stock price of one of its top clients, Vietnamese electric vehicle (EV) manufacturer Vinfast. As Tata Technologies recently concluded its initial public offering (IPO), Vinfast, along with Jaguar Land Rover (JLR) and Tata Motors, constitutes a substantial portion of Tata Technologies’ revenue stream.

Approximately 57 percent of Tata Technologies’ overall revenue and around 71 percent of services revenue in the first half of FY24 were attributed to its five anchor clients, with Vinfast being a major contributor since 2018. However, concerns have emerged among analysts regarding Vinfast’s performance, with a focus on related party-driven EV sales, and a decline in customer traction.

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US Securities and Exchange Commission filings for the July-September quarter have revealed that a significant majority of Vinfast’s EV sales in the nine months ending September 2023 were to related parties or affiliates of its parent company.Despite facing challenges, Vinfast continues to pursue ambitious global expansion plans. The company aims to deliver between 40,000 and 50,000 vehicles in 2023, a considerable increase from the 7,400 EVs sold last year. However, some analysts view this target as unrealistic given the obstacles faced by Vinfast in terms of product reviews, delays in shipments, and a major recall due to identified safety concerns.

The company’s net loss widened by almost 34 percent to $623 million, raising concerns about its financial stability. Vinfast’s founder, Pham Nhat Vuong, has expressed optimism about the company breaking even by the end of 2024.Analysts, such as Arun George from SmartKarma, recommend avoiding Vinfast due to concerns about related party-driven EV sales, declining customer traction, operating losses, cash burn, and frothy valuation.