Highlights: Tata Capital IPO subscribed 1.96 times on Day 3; GMP nears issue price – What’s the big concern?

Tata Capital, incorporated in 2007, is a leading diversified NBFC, operating as a systemically important core investment company regulated by the Reserve Bank of India (RBI). It functions as both a holding and operating company, registered as a Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC). Under the RBI’s Scale-Based Regulations (SBR) issued in October 2021, it is classified as an Upper Layer NBFC.

Tata Capital also manages several domestic private equity funds structured as subsidiaries under IndAS, including Tata Capital Growth Fund I and II, Tata Capital Healthcare Fund I and II, Tata Capital Innovation Fund, Tata Capital Special Situations Fund, and, with effect from September 2025, Tata Capital Growth Fund III.

The Tata Capital IPO has officially closed for subscription, receiving an overall demand of 1.95 times. Interest was led by institutional and high-net-worth investors, while retail participation remained steady.

Qualified Institutional Buyers (QIBs): 3.42x

Non-Institutional Investors (NIIs): 1.98x

Retail Investors: 1.10x

Employees: 2.92x

Overall Subscription: 1.95x

Tata Capital, incorporated in 2007, is a leading diversified NBFC, operating as a systemically important core investment company regulated by the Reserve Bank of India (RBI). It functions as both a holding and operating company, registered as a Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC). Under the RBI’s Scale-Based Regulations (SBR) issued in October 2021, it is classified as an Upper Layer NBFC.

The Tata Capital IPO has two components. The proceeds from the ‘Offer For Sale’ will go directly to the shareholders, diluting their stake. One of the primary objectives of the proceeds of the fresh share issuance is augmenting the Tier-1 capital base. Apart from this, Tata Capital also plans to meet future capital requirements, including onwards lending, using the proceeds of the fresh issue. A portion of the proceeds from the Fresh Issue will be used towards meeting IPO expenses as well.

The initial public offering (IPO) of Tata Capital drew robust investor interest, closing with a subscription of 1.95 times on the final day of bidding. The issue attracted 651.23 million bids against the 333.44 million shares on offer, signalling solid appetite across investor categories.

Institutional investors led the charge, with the Qualified Institutional Buyers (QIBs) portion subscribed 3.42 times. The Non-Institutional Investors (NIIs) category followed with 1.98 times, while Retail Individual Investors (RIIs) booked 1.10 times of their allotted quota.

The bidding closed on October 8, 2025, and the allotment details are expected to be finalised soon.

The Tata Capital IPO has officially closed for subscription, receiving an overall demand of 1.95 times. Interest was led by institutional and high-net-worth investors, while retail participation remained steady.

Qualified Institutional Buyers (QIBs): 3.42x

Non-Institutional Investors (NIIs): 1.98x

Retail Investors: 1.10x

Employees: 2.92x

Overall Subscription: 1.95x

It is the last day of Tata Capital IPO. The issue has been subscribed 1.95 times so far. The retail section was booked 1.09 times, while the employee category was booked 2.89 times. The QIBs booked the issue 3.42 times and the NIIs booked it 1.98 times.

Tata Capital also manages several domestic private equity funds structured as subsidiaries under IndAS, including Tata Capital Growth Fund I and II, Tata Capital Healthcare Fund I and II, Tata Capital Innovation Fund, Tata Capital Special Situations Fund, and, with effect from September 2025, Tata Capital Growth Fund III.

The Tata Capital IPO has two components. The proceeds from the ‘Offer For Sale’ will go directly to the shareholders, diluting their stake. One of the primary objectives of the proceeds of the fresh share issuance is augmenting the Tier-1 capital base. Apart from this, Tata Capital also plans to meet future capital requirements, including onwards lending, using the proceeds of the fresh issue. A portion of the proceeds from the Fresh Issue will be used towards meeting IPO expenses as well.

By maintaining a diversified loan portfolio across products, customers, and geographies, and increasing the share of secured lending, the company minimises 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 1,38,383 crore post issue of equity shares. We believe that the IPO is fully priced and recommend a ‘Subscribe-Long Term’ rating to the IPO,” said Anand Rathi Research in an IPO note.

Tata Capital adhere to a conservative approach to lending, prioritising financial stability and risk mitigation in all their lending practices. Their comprehensive underwriting platforms integrate data inputs from demographics, credit bureaus, financial statements, bank statements, collateral valuations and data sources such as Account Aggregator, enabling them to efficiently assess their customers’ credit-worthiness. Additionally, they deploy data analytics, scorecards and business rule engines (BREs), enabling an efficient credit decision-making process.

Tata Capital had one of the lowest Gross Stage 3 and Net Stage 3 Loans Ratio, and the third highest PCR among large diversified NBFCs in India as of June 2025. This is attributable to their agile and responsive risk function which fosters a prudent risk culture across their the company. Their strong risk management framework covers a wide range of risks including credit, operational, market, information security, fraud and reputational risk among others.

Singapire based, Tata Capital Pte Ltd is a wholly owned subsidiary of Tata Capital that undertakes fund management and proprietary investments, both directly and through its step-down subsidiaries, including Tata Capital Advisors Pte Ltd, which manages offshore private equity funds.

Tata Capital, incorporated in 2007, is a leading diversified NBFC, operating as a systemically important core investment company regulated by the Reserve Bank of India (RBI). It functions as both a holding and operating company, registered as a Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC). Under the RBI’s Scale-Based Regulations (SBR) issued in October 2021, it is classified as an Upper Layer NBFC.

Operational lapses can materially disrupt customer service, and can expose the business towards litigation risks and challenges. Moreover, significant litigation consumes management bandwidth, with adverse rulings posing material risks.

The share price of Tata Capital has risen a bit on October 08, fetching a premium of 2.15% in the grey market. The stock is changing hands at Rs 333. The GMP of the shares declined on October 07, but again picked up pace on the last bidding day. The issue price of the IPO is Rs 326.

“Based on FY26 annualised earnings and fully diluted post-IPO paid up capital, the company is asking for a PB of 3.2x which appears reasonably priced compare to 4x average of its comparable listed peers, leaving healthy scope for decent listing gains and long-term value creation,” said Mehta Equities in an IPO note.

Tata Capital has delivered strong growth with revenue from operations rising 33.4% in FY24 and 55.8% in FY25, alongside steady profitability improvement with net profits up 4% in FY24 and 16.3% in FY25.

Education credit outstanding has grown at a robust pace of 18.2% CAGR over FY20-25 to reach Rs 2 lakh crore as of FY25, while it is expected to continue its strong growth in the range of 15%–17% CAGR over FY25–28 to reach Rs 3-4 lakh crore by March 2028.

“With India’s rising credit penetration, formalisation of the economy, and increasing demand for consumer and business financing, we believe Tata Capital offers investors a credible and scalable proxy to participate in the broader NBFC growth cycle. Hence, looking at all attributes, we recommend investors to ‘SUBSCRIBE’ to the Tata Capital IPO for a Long-term perspective,” said Mehta Equities in an IPO note.

Tata Capital offer supply chain finance, equipment finance, and leasing solutions to its customers. Further, they offer term loans, cleantech and infrastructure finance, and developer finance to businesses with the latest available turnover of less than or equal to Rs 250 crore (SME Customers). As of June 2025, SME Finance comprised 26.2% of its Total Gross Loans.

Tata Capital operate lending and non-lending businesses. In their lending business, they provide loans to retail, SME, and corporate customers. Their non-lending businesses include the distribution of third-party products such as insurance and credit cards, providing wealth management services, and acting as a sponsor and investment manager to PE funds.

Tata Capital’s total gross loans grew at a CAGR of 28.4% from March 2023 to March 2025. The company’s asset quality stood at Gross Stage 3 Loans Ratio of 1.5%, Net Stage 3 Loans Ratio of 0.5%, and PCR of 65.8% as of March 2025. Since commencing their lending operations in 2007, they have served 7.3 million customers up to June 2025.

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 a healthy pace of 14-16% CAGR over FY25-28 to reach Rs 60–63 lakh crore by FY28. Segment growth and credit demand have been supported by strong demand for quality and larger homes, the affordable housing segment, and the deleveraging of household debt levels.

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

Tata Capital competes with six listed peers in the financial services sector. Its direct competitors include Bajaj Finance, Shriram Finance, Cholamandalam Investment and Finance Company, L&T Finance, Sundaram Finance, and the recently listed HDB Financial Services.

“The IPO is priced at 4x FY25 P/B, in line with peers. Post-merger integration impacts from Tata Motors Finance are expected to normalize, supported by AAA ratings and a resilient funding profile. Macro tailwinds like India’s economic growth and digital adoption favor the business, though risks include regulatory changes, rate volatility, and competition. Recommendation: Subscribe for long-term horizon,” said Canara Bank Securities in its IPO note.

Tata Capital has put in place a detailed risk management system designed to adapt to changing market conditions, evolving customer preferences, and regulatory shifts. As the company expands its loan book and introduces new financial products across different regions, it continues to focus on asset quality through tighter credit checks, improved collection systems, and regular updates to its risk assessment framework.

“At the upper price band of Rs 326, the issue is valued at a P/BV multiple of 3.4x on post-issue capital. Tata Capital combines the strength of its Tata Group parentage, a diversified loan portfolio, robust risk management practices, and a pan-India omni-channel network to position itself as one of the most reliable and scalable NBFCs in India,” said SBI Securities in its IPO note