Highlights: Tata Capital lists at 1.23% premium; JM Financial predicts 10% upside in 12 months

Tata Capital has the highest possible credit rating of AAA/Stable from multiple rating agencies, which include CRISIL, ICRA, CARE, and India Ratings. This enables Tata Capital to have low-cost funding (CoFs).

Supported by the strong backing of the Tata group, Tata Capital enjoys strong capital support, high credibility and easy access to capital, which also enables the highest possible credit rating of AAA/Stable by ICRA, CRISIL, ICRA, India Ratings and CARE ratings, resulting in lower cost of funds (CoFs).

Tata Capital has a highly diversified product mix, offering 25+ distinct lending products broadly classified into three businesses: 61% of its loan book comprises retail finance, 26% SME and 13% corporate loans. With the highest credit rating of AAA/Stable, Tata Capital enjoys easy access to funds at lower interest rates.

Merging Tata Motors Finance (TMFL) into Tata Capital has provided the company with an immediate operational expansion, adding 353 new branches. This expansion, along with rapid organic branch additions, brings down the pan-India network to 1,516 branches as of Q1 FY26. 

Tata Capital has witnessed strong AUM growth in the past, reporting an AUM CAGR of around  31% from FY22 to FY24. The entity maintained a posted AUM growth of 28% CAGR over FY22-25. Despite the near-term impact of the Tata Motors Financial (TMFL) merger, JM Financial expects a continued AUM CAGR of 20% over FY25-27, supported by an expected 18% growth in disbursements.

The company is ranked as the third-largest diversified NBFC in India, with an Assets Under Management (AUM) of Rs 23,340 crore as of Q1 FY26. JM Financial has recognised it as the most comprehensive among large diversified NBFCs, citing its broad range of loan products. Tata Capital provides over 25 distinct lending solutions for individuals, SMEs, and corporates. Nearly 80% of the company’s loan book is concentrated in secured segments.

Tata Capital has the highest possible credit rating of AAA/Stable from multiple rating agencies, which include CRISIL, ICRA, CARE, and India Ratings. This enables Tata Capital to have low-cost funding (CoFs).

After the merger of Tata Motors Financial (TMFL), JM Financial expects to see operating leverage in the future, with the cost-to-income ratio estimated to decline to 39% in FY27 from 42% in FY25. This could be due to the temporarily diluted profitability post TMFL merger. Nonetheless, JM Financial expects a gradual turnaround in the merged book and a consequent improvement in financials going forward.

The asset quality concern is a major factor to watch out for those investing in the Tata Capital IPO. The company recently took over the vehicle finance business of Tata Motors. Any NPA or slippages there could affect the overall asset quality of the NBFC.

Tata Capital shares end first trading session on a positive note. The stock closed at Rs 331.75 on the BSE, up 0.53%, while on the NSE, it settled at Rs 331.10, gaining 0.33% for the day.

“Listing was inline with our expectations; given the muted subscription demand and overall cautious investor sentiment. Despite valuations appeared reasonably when compared to its listed peers, the offer did not witness strong traction,” said Prashanth Tapse, Senior Vice President of Research at Mehta Equities.

Being Tata Capital’s strong brand equity under the Tata Group, its diversified business model, and robust presence across retail, corporate, and housing finance segments make it a compelling long-term play in India’s expanding financial services landscape, added Tapse. Tata Capital provides investors a credible and scalable proxy to participate in the broader NBFC growth cycle.

The NBFC has witnessed strong AUM growth in the past, reporting an AUM CAGR of around 31% from FY22 to FY24. The entity maintained a posted AUM growth of 28% CAGR over FY22-25. Despite the near-term impact of the Tata Motors Financial (TMFL) merger, JM Financial expects a continued AUM CAGR of 20% over FY25-27, supported by an expected 18% growth in disbursements.

After the merger of Tata Motors Financial (TMFL), JM Financial expects to see operating leverage in the future, with the cost-to-income ratio estimated to decline to 39% in FY27 from 42% in FY25. This could be due to the temporarily diluted profitability post TMFL merger. Nonetheless, JM Financial expects a gradual turnaround in the merged book and a consequent improvement in financials going forward.

Tata Capital enjoys the highest possible credit rating of AAA/Stable from multiple rating agencies, which include CRISIL, ICRA, CARE, and India Ratings. This enables Tata Capital to have low-cost funding (CoFs).

Tata Capital is positioned as the third-largest diversified NBFC in India with an Assets Under Management (AUM) of Rs 23,340 crore as of Q1 FY26. The company is highlighted as the most comprehensive among large diversified NBFCs based on its number of loan product offerings. It offers a broad suite of 25+ distinct lending products catering to individuals, SMEs, and corporates. Furthermore, approximately 80% of its loan book is concentrated in secured segments.

Supported by the strong backing of the Tata group, Tata Capital enjoys strong capital support, high credibility and easy access to capital, which also enables the highest possible credit rating of AAA/Stable by ICRA, CRISIL, ICRA, India Ratings and CARE ratings, resulting in lower cost of funds (CoFs).

The Rs 15,511.87 crore book-built issue was a combination of 21 crore fresh shares amounting to Rs 6,846.00 cr and offer for sale worth Rs 8,665.87 crore comprising 26.58 crore shares.The IPO was launched on October 6 and ended on October 8. The issue allotment was finalised on October 10.

Overall, it was subscribed 1.96 times. The issue price was set at 55% discount to the unlisted share price. Earlier the unlisted shares were trading at over Rs 1,000 per share levels. However, there was a significant correction in the price range.

Tata Capital allotted 14.24 crore shares at Rs 326 per share to 68 institutional investors. The key investors include LIC, ICICI Prudential Mutual Fund, Amansa Holdings, Nomura, Morgan Stanley and Goldman Sachs.

Read More: Tata Capital IPO: Tata Group’s flagship NBFC set for market debut — Key risks and growth opportunities explained

The merger with Tata Motors Finance added operational complexity, leading to increased credit costs and operating expenses. However, it also expanded Tata Capital’s footprint with 353 new branches, creating opportunities to cross-sell products. “Further, Tata Capital has also added branches at a rapid pace (1,516/267 branches as of Q1 FY26/FY22), which should help in accelerating growth and improving operating leverage, going forward. We expect the cost-to-income ratio to decrease from 42% in FY25 to 39% in FY27,” said JM Financial.

JM Financial has initiated coverage on Tata Capital from the very first day itself. The brokerage initiated the coverage with an ‘Add’ rating and a target price of Rs 360, implying an upside of 10% from the current market price.

Tata Capital has a highly diversified product mix, offering 25+ distinct lending products broadly classified into three businesses: 61% of its loan book comprises retail finance, 26% SME and 13% corporate loans. With the highest credit rating of AAA/Stable, Tata Capital enjoys easy access to funds at lower interest rates.

After listing, Tata Capital shares were trading slightly lower. On the BSE, the stock stood at Rs 326.65, down Rs 3.35 or 1.02%, while on the NSE, it was trading at Rs 327.70, slipping Rs 2.35 or 0.71% from its listing price.

Tata Capital made its entry on Dalal Street, listing slightly above its issue price. The shares opened at Rs 330 each on both the NSE and BSE, about 1.23% higher than the IPO price of Rs 326 per share.

The non-banking financial company’s IPO, which ran from October 6 to 8, received a response with a subscription of 1.95 times. The issue was priced in the range of Rs 310-326 per share.

All eyes are on the Tata Capital listing price. Anticipation is building in terms of where the issue lists. The GMP indicates listing closer to the issue price of Rs 326 per share.

The GMP for the Tata Capital IPO has slipped to issue price levels. That indicates that the issue may list closer to the issue price of Rs 326 per share.

However, investors must remember that the GMP is an unofficial indicator of investor sentiment. The actual listing price may differ significantly.

The asset quality concern is a key fator to watch out for those investing in Tata Capital IPO. The company recently took over the vehicle finance business of Tata Motors. Any NPA or slippages there could affect the overall assset quality of the NBFC.

Housing Loan segment remains a critical segment for lenders, as the credit outstanding has witnessed a steady growth of 13.7% CAGR over FY20-25 to Rs 41 lakh crore as of FY25, and is anticipated to grow at healthy pace of 14-16% CAGR over FY25-28 to reach Rs 60–63 alkh crore FY28. Segment growth and credit demand has been supported by strong demand for quality and larger homes, affordable housing segment and deleveraging of the household debt levels.

As Tata Capital grows its business, it will continue to diversify their funding sources in order to optimise its borrowing costs, and in turn, the price competitiveness of lending products. This will enable the company to drive business growth, profitability, and higher Net Interest Margin Ratio. The company will continue to leverage long-term debt instruments, such as NCDs and external commercial borrowings (ECBs), to enhance its avenues of funding and obtain funds at competitive prices.

By the end of Day 3, Tata Capital’s IPO was subscribed 1.96 times overall as of October 8.

Among categories, the Qualified Institutional Buyers (QIBs) led the charge, booking 3.42 times their allotted quota. The Non-Institutional Investors (NIIs) followed with 1.98 times subscription, while the retail category saw relatively moderate demand at 1.10 times.

Tata Capital’s digital platforms have also experienced substantial growth, with mobile app downloads surpassing 21.9 million as of June 2025, and website traffic reaching 75.8 million visits and 17.5 million visits in FY25 and the three-month period ended June 2025, respectively. The company remain committed to its ‘Phygital’ strategy, which focuses on expanding both its branch network and digital outreach.

Tata Capital’s underwriting team operates independently of its sales function, and the company adhere to defined credit policies in extending loans. They have adopted a product-based approach, whereby they tailor their underwriting processes for each lending product to enable them to better assess customer credit risk and offer their customers customised products, while managing their risks. For each lending product, the company have adopted a rule-based underwriting or high-touch methods or a combination of both.

Tata Capital offers a comprehensive suite of 25+ lending products catering to the financial requirements of a wide range of customers comprising salaried and self-employed individuals, entrepreneurs, small and medium enterprises and corporates. Their loan offerings to customers comprised a wide range of ticket sizes ranging from Rs 10,000 to over Rs 10 crore, as of June 2025.