Tata Capital IPO: 10 Key Things To Know Before You Bid — Read Anand Rathi's Report

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Anand Rathi Report

Here are the 10 things to know before investing

1. Tata Capital Ltd. will launch its initial public offering on Oct. 6 and will conclude on Oct. 8.

2. A flagship financial services company of the Tata group and a subsidiary of Tata Sons Pvt. Ltd. has fixed the price band between Rs 310-326 per equity share.

3. Investors can place bids starting from a minimum of 46 shares and in multiples thereafter.

4. The Rs 15,511-crore IPO comprises a fresh issue of up to 21 crore equity shares aggregating up to Rs 6,846 crore and an offer for sale of up to 26.6 crore equity shares worth Rs 8,665 crore.

5. The face value of each share is Rs 10.

6. Kotak Mahindra Capital Company Ltd., Axis Capital Ltd., BNP Paribas Citigroup Global Markets India Pvt. Ltd., HDFC Bank Ltd., HSBC Securities and Capital Markets (India) Pvt. Ltd., ICICI Securities Ltd., IIFL Capital Services Ltd., J.P. Morgan India Pvt. Ltd., Capital Markets Ltd. are the book-running lead managers for the public issue while MUFG Intime India Pvt. Ltd. is the registrar to the offer.

7. Objects of the Issue

   Augmentation of their Company’s Tier –I capital base to meet company’s future capital requirements including onward lending.

8. Strengths:

   Flagship financial services company of the Tata group, with a legacy of over 150 years.

   Third largest diversified NBFC in India, with the most comprehensive lending product suite.

   Omni-channel distribution model, comprising their pan-India branch network, partnerships and digital platforms.

   Prudent risk culture and robust credit underwriting and collections capabilities, resulting in stable asset quality.

   Digital and analytics at the core of their business, driving high quality experience and business outcomes.

9. Key Strategies:

   Continue their growth trajectory by enhancing product offerings and strengthening their distribution network.

   Continue to strengthen their risk management framework, credit underwriting and collections infrastructure to maintain high asset quality.

   Continue to leverage technology and data analytics across the lending value chain to enhance efficiency, reduce costs, improve customer experience and manage risks.

   Continue to maintain credit ratings and a diversified liability mix to optimise their borrowing costs.

   Harness merger with TMFL to become a full-stack provider of vehicle finance, while leveraging their capabilities towards superior business outcomes.

10. Key Risk:

    Gross Stage 3 Loans comprised 2.1%, 1.7%, 1.9%, 1.5% and 1.7% of their Total Gross Loans as at June 30, 2025, June 30, 2024, March 31, 2025, March 31, 2024 and March 31, 2023, respectively. Non-payment or default by their customers may adversely affect their business, results of operations, cash flows and financial condition.

    Provision coverage ratio was 53.9%, 63.5%, 58.5%, 74.1% and 77.1% as at June 30, 2025, June 30, 2024, March 31, 2025, March 31, 2024 and March 31, 2023, respectively. Company’s inability to provide adequate provisioning coverage for non-performing assets may adversely affect their business, results of operations, cash flows and financial condition.

    Unsecured Gross Loans comprised 20.0%, 22.4%, 21.0%, 24.5% and 23.1% of their Total Gross Loans as at June 30, 2025, June 30, 2024, March 31, 2025, March 31, 2024 and March 31, 2023, respectively. Failure to recover such receivables in a timely manner or at all may adversely affect their business, results of operations, cash flows and financial condition.

    Changes in their loan-mix may adversely affect their financial metrics and asset quality, which could adversely affect their business, financial condition, results of operations and cash flows.

    Secured Gross Loans comprised 80.0%, 77.6%, 79.0%, 75.5% and 76.9% of their Total Gross Loans as at June 30, 2025, June 30, 2024, March 31, 2025, March 31, 2024 and March 31, 2023, respectively. Company is exposed to potential losses in connection with recovery of the value of security or enforcement of collaterals.

    Retail Finance comprised 61.3%, 64.2%, 62.3%, 58.9% and 56.7% of Total Gross Loans as at June 30, 2025, June 30, 2024, March 31, 2025, March 31, 2024 and March 31, 2023, respectively. Any adverse developments that reduce demand for loans amongst retail customers and/or increase loan default rates amongst retail customers will adversely affect their business, results of operations and prospects.

Valuation:

Tata Capital, the flagship financial services arm of the Tata Group with a legacy spanning over 150 years, is the third-largest diversified NBFC in India. It offers one of the widest lending product portfolios and operates through an omni-channel distribution network that includes a pan-India branch presence, strategic partnerships, and robust digital platforms.

At the same time, its deep integration of digital capabilities and analytics lies at the heart of its operations, ensuring superior customer experience and driving sustainable business performance.

Tata Capital seeks to reduce its credit cost ratio below 1% by strengthening risk management and credit underwriting, supported by digital tools and analytics.

By maintaining a diversified loan portfolio across products, customers, and geographies, and increasing the share of secured lending, the company minimizes concentration risks.

At the upper price band company is valuing at P/E of 32.3x, P/B of 3.5x to its FY25 earnings and market cap of Rs 13,83,827 million post issue of equity shares. We believe that the IPO is fully priced and recommend a “Subscribe-Long Term” rating to the IPO.

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