Target Price: ₹360
Current Market Price (CMP): ₹328.85
We commence coverage on Tata Capital Ltd. (TCL) with an “Add” rating and a target price of ₹360, which values the company at 2.9 times the projected FY27 price-to-book ratio.
Founded in 2007, TCL stands as a prominent diversified non-banking financial company (NBFC) in India, bolstered by the substantial backing of the Tata Group. Approximately 80% of the company’s operations are concentrated in secured business segments.
TCL offers a comprehensive product mix, featuring over 25 distinct lending products categorized into three main sectors: retail finance accounts for 61% of its loan book, small and medium enterprises (SME) comprise 26%, and corporate loans represent 13%.
Possessing a top-tier credit rating of AAA with a Stable outlook, TCL benefits from favorable access to funds, allowing for lower interest rates. Nevertheless, a higher proportion of secured loans and intensified competition from traditional banks contribute to net interest margins (NIMs) of around 5-5.5%, which, combined with reduced credit costs, translates into a return on assets (RoA) of 2.1-2.5% for FY23 and FY24.
In FY25, Tata Motors Finance Ltd. (TMFL) merged with TCL to create synergies aimed at enhancing growth and cross-selling opportunities. Despite this merger, TMFL’s individual profitability has been comparatively weak, largely due to its captive business model and widespread stress in the commercial vehicle (CV) and auto loan sectors.
The company is focusing on expanding its non-captive lending portfolio in the medium term, leading us to anticipate a gradual recovery in TMFL’s financial performance. However, we advise caution regarding asset quality in the near future.
Published on October 27, 2025.
