Tata Capital Ltd.

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By Nitin Negandhi

Tata Capital Ltd.

Tata Capital Ltd. (TCL), established in 2007, is the flagship financial services company of the Tata Group and the third-largest diversified non-banking financial company (NBFC) in India. The company is coming up with an offer for sale (OFS) and a fresh issue worth over Rs. 15,000 crore. The OFS will be by Tata Sons and International Finance Corporation (IFC). Post issue, Tata Sons’ holding will decline from 95.6% to 85.5%.

Objects of the issue:

The proceeds from the fresh issue will be used to:

– Strengthen TCL’s Tier-I capital base to finance future growth in lending

– Manage debt mix

– Invest in technology

– Meet general corporate requirements

– List the company on capital markets as per Reserve Bank of India (RBI) regulations

Business:

TCL is one of the fastest-growing NBFCs, with operations spanning retail lending, commercial and small & medium enterprise (SME) lending, infrastructure finance, wealth management and investor services, leasing, and treasury operations. Its wholly owned subsidiary, Tata Housing Finance, is a leader in home loans and loans against property.

Despite global uncertainties, India’s economy is projected to grow at 6.5–7%. The NBFC industry, particularly large NBFCs such as TCL, is expected to grow by 14–15%. In May 2025, TCL acquired the finance division of Tata Motors, with a loan book of Rs. 30,000 crore, to expand its vehicle financing business.

Financial Performance:                       (Rs. in crore)

TCL’s revenue recorded a CAGR of 44% between 2023 and 2025, while its bottom line grew at a CAGR of 11%. For the quarter ended June 2025, revenue growth moderated to 12.7% YoY. With a prudent financial mix, TCL maintained its net interest margin (NIM) at 5.1%, despite higher borrowing costs of 7.8% compared to 6.6% in FY2023.

The RBI has prescribed a minimum capital adequacy ratio (CRAR) of 15% for NBFCs. TCL had a CRAR of 16.6%, which is expected to improve further post-IPO to support growth for the next three years.

Peer comparison:

TCL’s main competitors are Bajaj Finance, HDB Finance, L&T Finance, Cholamandalam Investment & Finance, and Shriram Finance. TCL focuses on the retail segment, with over 95% of its loan book comprising loans below Rs. 1 crore. Its NIM of 5.1% is lower than Bajaj Finance’s 9.9%, as TCL has a larger share of secured lending.

Conclusion:

TCL’s IPO pricing appears prudent and scientifically structured after discussions with institutional investors. The pricing has surprised investors in the grey market, where shares were traded in the Rs. 750–1,000 range.

For context, HDB Financial Services, a subsidiary of HDFC Bank, traded between Rs. 890 and Rs. 732 last week against its IPO price of Rs. 740 in June 2025.

As a blue-chip, diversified NBFC, TCL offers strong long-term growth prospects. However, listing gains may remain modest given the high price-to-book valuation and weak investor sentiment amid a crowded IPO market.

Disclaimer:

The writer is not a SEBI registered analyst. He and his friends and relatives may or may not participate in the IPO. Investors should consult their financial advisor before investing.  Grey market premium is just an indicator and should not be relied upon.