After a strong stock market debut and a reasonable rally, Tata Capital has become one of the tracked financial stocks on Dalal Street. But can the company continue delivering growth from here, or are expectations already reflected in the share price?
According to the latest brokerage report by Motilal Oswal, Tata Capital remains a strong player in India’s non-banking financial company (NBFC) space. However, the brokerage believes the current valuation already factors in much of the near-term optimism.
The brokerage has initiated coverage on the stock with a ‘Neutral’ rating and a target price of Rs 390. This translates to an upside potential of around 7% from the current market price.
Let’s take a look at the why this Tata Group stock stands out despite a Neutral rating by Motilal Oswal –
A diversified lending business is one of the biggest strengths
Tata Capital had an Assets Under Management (AUM) of Rs 2.77 lakh crore as of March 2026. The company has delivered an annual growth rate of around 29% over FY23-FY26, excluding its motor finance business.
One feature that stands out is the company’s diversified loan portfolio. Around 98% of its loan accounts have ticket sizes below Rs 1 crore. Meanwhile, nearly 80% of the overall loan book is secured, reducing concentration risk.
The brokerage also noted that “no single product contributes more than 20% of total loans.”
Furthermore, Motilal Oswal in its report noted that Tata Capital is expected to deliver an AUM growth of around 23% annually between FY26 and FY28 as it gradually increases its focus on retail and higher-yielding lending segments.
| Key Business Highlights | Details |
| Assets Under Management (March 2026) | Rs 2.77 lakh crore |
| Expected AUM growth (FY26-FY28) | 23% CAGR |
| Secured loan book | 80% |
| Loan accounts below Rs 1 crore | 98% |
| Brokerage Rating | Neutral |
| Target Price | Rs 390 |
Digital expansion and branch growth remain in focus
Motilal Oswal said Tata Capital follows a “phygital” distribution model, which combines physical branches with digital platforms and partner networks. The brokerage house noted that this approach allows the company to reach customers across both urban and rural markets while improving customer experience.
The report also highlighted that the company expanded its branch network from 539 branches in FY23 to 1,477 branches in FY26. While this temporarily increased operating expenses, the brokerage expects these branches to become more productive over time.
“The realisation of merger synergies, improved productivity of newly added branches, and increased adoption of technology, AI, and digital tools are expected to drive operating leverage and enhance employee productivity,” added Motilal Oswal in its report.
Margins could improve as the loan mix changes
Another area Motilal Oswal is taking into account is profitability.
Tata Capital’s Net Interest Margin (NIM) stood at around 5.2% in FY26, but it expects this to improve to around 5.4-5.5% by FY28 as the company gradually increases lending in higher-yielding retail and unsecured segments.
The brokerage added that “portfolio yields are expected to improve gradually as the mix shifts toward higher-yielding unsecured products,” while the company’s AAA credit rating and Tata Group parentage continue to support access to relatively low-cost funding.
Asset quality is showing signs of improvement
The brokerage also pointed to improving asset quality after a challenging period.
As per the brokerage report, credit costs had risen following the merger with Tata Motors Finance (TMFL) and stress in certain unsecured loan segments. However, the brokerage said “Tata Capital is now steadily turning around its Motors Finance business, with this segment returning to profitability in Q4FY26.”
It further noted that “asset quality trends across unsecured portfolios have also improved materially,” leading to expectations that credit costs will gradually moderate to around 1.1% in both FY27 and FY28.
Tata Capital: Asset quality expectations
| What Motilal Oswal expects | Projection |
| Net Interest Margin (FY27/FY28) | ~5.4% / ~5.5% |
| Cost-to-Income Ratio (FY27/FY28) | ~35% / ~33% |
| Credit Cost | ~1.1% in FY27 & FY28 |
Why is the brokerage still “Neutral’ on Tata Capital?
Despite highlighting several positives, Motilal Oswal believes the current stock price already captures much of Tata Capital’s medium-term growth potential.
Motilal Oswal noted, “Tata Capital represents a high-quality franchise with strong parentage, a granular and increasingly retail-oriented portfolio, and a demonstrated track record of execution.” However, it added that “current valuations adequately reflect these positives.”
The brokerage therefore initiated coverage with a ‘Neutral’ rating . It also noted that “a meaningful re-rating would likely require sustained improvement in Return on Assets (RoA) and Return on Equity (RoE) and continued expansion in higher-yielding retail lending segments.”
The brokerage has also flagged a few risks that investors should monitor, including pressure on margins from rising competition, higher stress in unsecured loans and a slower-than-expected turnaround in the Tata Motors Finance business.
Disclaimer: Investment views and target prices mentioned in this report are based on a brokerage research analysis by Motilal Oswal and do not represent the editorial opinions of this publication. Individual stock performance is subject to market risks, and past performance is not a guarantee of future returns. Readers are advised to consult a SEBI-registered financial advisor before making any investment decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.