Tata Capital IPO Opens For Subscription Today: Should You Bid? Read DRChoksey's Report For Key Issue Details

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DRChoksey Report

Tata Capital Ltd. will launch its initial public offering on Oct. 6 and will conclude on Oct. 8. 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. Investors can place bids starting from a minimum of 46 shares and in multiples thereafter.

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. The face value of each share is Rs 10.

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.

The shares of Tata Capital IPO will be listed on both NSE and BSE on Oct. 13.

Objects of the Offer

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

Valuation

Tata Capital, is one the leading Indian diversified NBFC, catering to range of customers spanning across diverse end sectors. Being a “Tata” Group Company, it has easy access to borrowing at lower cost of capital, while has entrenched trust of its existing and prospective customers on the brand and business ethics.

It offers over 25 financial products both in lending and non-lending businesses, through its large network of 1,500+ offline branches and integrated digital platform encompassing website, mobile app, and WhatsApp chatbot, for end-to-end loan processing, customer onboarding, and selfservice.

It has recently acquired Tata Motor Finance to build its presence in passenger and commercial vehicle financing, The Company sims to improve its market share through expanding its presence across Tier-2 cities and beyond, by deploying its phygital platform.

Over FY23-25, it has been able to scale its loan book at ~37.0% CAGR, while the NII and PPoP has witnessed a growth of 41.9% and 33.2% CAGR, driven by its omni-presence strategy.

Through its Initial issue the company plans to raise ~Rs 155.2 billion, split across OFS of ~Rs 86.7 billion and fresh issue of Rs 68.5 billion. Fresh issue of Rs 68.5 billion is to be raised to augment its Tier 1 capital, and strengthen its balance sheet, to grow faster, along with maintaining the overall credit quality.

Tata Capital’s initial issue is priced at 4.1x TTM P/B, compared to peer average of 3.7x TTM P/B.

On comparing its valuation and return profile of ~4.1x P/B and ~1.9% RoA, compared to peer average of ~3.7x P/B and ~3.0% RoA, it appears fairly valued.

Although, we believe that it will be able to scale its loan book at healthy pace, driven by its omni channel presence and strong parentage, its returns appear low compared to other listed NBFC’s. We assign a “Neutral” rating to the issue.

Click on the attachment to read the full IPO report:

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