For a few weeks, the optimism held. But what followed was a forgotten story. The stock lost nearly 50% from its listing-day highs and has never really recovered. Two years later, the stock has long been sidelined to the corner of Dalal Street, and many brokerages are still cautious or outright negative on the stock.
The fall in the share price is brutal to say the least. Since hitting the highs on listing, the stock never seemed to have made a meaningful attempt for recovery. Of course, there were small rallies, but very few. It was and still is a long downward slide that isn’t likely to end anytime soon. The market value has eroded from a peak of Rs 53,000 crore to Rs 27,680 crore currently, leaving a loss of about Rs 25,000 crore.
What really went wrong?
Firstly, the company’s financial performance has been uneven. While Tata Technologies has pockets of strength, especially in non-auto services such as aerospace and industrial heavy machinery, the reality is that its largest clients — Tata Motors and Jaguar Land Rover (JLR) — are going through their own challenges.
Analysts say this hurt the company’s growth visibility and created a revenue concentration problem that continues to weigh on sentiment. Even though the stock belongs to the Tata Group and still enjoys brand recall, the valuation is hard to justify unless growth becomes broad-based and margins stabilise meaningfully.
Investors who entered at the IPO have had a very different experience from what the early hype promised. The stock traded at expensive multiples from day one, leaving little room for error.
When growth slowed and margins softened, the market quickly reset expectations. Today, despite the slight improvements that appear in some quarters, the commentary across brokerages remains cautious. Some advice selling, while others recommend reducing exposure. None are calling it a screaming buy.
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Revenue concentration bites
The biggest problem with Tata Technologies is its revenue concentration. The company depends on Tata Motors and JLR for more than half of its revenue.
SimranJeet Singh Bhatia, Senior Research Analyst at Almondz Group, says this continues to be the company’s biggest risk. “The company is facing short-term challenges due to impact on EBITDA margins and major dependence on Tata Motors and JLR for revenue,” he said.
EBITDA margins fell to 16% in Q2FY26, compared with 18% a year earlier. Even in FY25, revenue and PAT barely grew –both were largely flat, with topline at Rs 5,168 crore and profit at Rs 677 crore.
The situation has become more complicated because JLR is tightening its product investment plans and facing pressure in key markets, especially China. JLR has openly guided for margin cuts in its recent concall, which makes analysts worry about the trickle-down impact on Tata Technologies.
If JLR slows down spending, Tata Technologies’ auto services revenue — which forms the bulk of its business — could remain weak for several more quarters.
The second issue is uneven growth across segments. The company’s auto-focused engineering services business has been lumpy for a year. Growth has instead come from the non-auto portfolio, especially aerospace and industrial heavy machinery.
Elara Capital notes that revenue in Q2 grew 4.5% quarter-on-quarter in constant currency, aided mainly by non-auto services and the technology solutions segment. But the auto segment, which should ideally be the stable foundation, has seen repeated slowdowns.
Elara says Q3 will also be a weak quarter because of wage hikes and temporary issues at JLR. They maintain a Sell rating with a target price of Rs 515.
Margins have also been under pressure. Tata Technologies reported an EBITDA margin of 15.7% in Q2, down 40 basis points sequentially. Even if one adjusts for the one-off cybersecurity incident at JLR, the margin improvement is marginal.
The company expects further pressure in Q3 due to wage hikes for nearly 88% of employees. Attrition has also risen to 15.1%, indicating rising competition for engineering talent from global capability centres and original equipment manufacturers.
PL Capital, which recently upgraded the stock from Sell to Reduce, too remains cautious. While acknowledging the stronger-than-expected Q2 numbers and the healthy deal pipeline, the brokerage says the valuation still leaves very little room for error.
They highlight that the stock still trades around 32 times FY27 earnings, which is expensive for a company with modest medium-term growth visibility. Their revised target price is Rs 640. Importantly, the broker stresses that even though non-auto segments are doing well, the auto business will continue to drag until spending picks up.
There are some positives
Deal wins are healthy, the BMW joint venture is ramping up faster than expected, and acquisitions like Es-Tec could strengthen capabilities. The management also says Q4 could show a rebound after a soft Q3.
“While we may see some short-term tactical challenges in Q3, we remain confident in a solid rebound in Q4,” CEO Warren Harris had recently said in an earnings call.
But brokerages remain unsure whether this rebound can sustain in a meaningful way, especially when dependence on a few large clients limits pricing power and margin expansion.
Abhinav Tiwari, Research Analyst at Bonanza is a bit optimistic. He said the management’s commitment to operational discipline and thoughtful investments underscores confidence in a medium term recovery, making current valuations an attractive entry point for investors willing to endure cyclicality.
So what should investors do next?
Analysts broadly agree on one point. Tata Technologies is a stable business, but not a high-growth story right now. The stock had priced in too much optimism at listing, and the correction reflects a more realistic view of its prospects. Until the company reduces dependence on Tata Motors and JLR, or until those clients revive their spending plans, the upside may remain limited.
The market might still want clearer signs of sustained diversification and margin improvement before re-rating the stock. Brokerages are mostly saying Neutral, Reduce or Sell and none are recommending aggressive buying at current levels.
“We have a neutral stance on Tata Technologies’ share price,” said Bhatia.
Looking forward, Tata Tech remains focused on digital engineering, smart manufacturing, Gen AI, and automotive software. These are the areas that can drive stronger growth once global policies stabilize, Tiwari says, adding that while sector challenges persist, its diversified order book and strong client relationships support medium term recovery.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
