The Initial Public Offering (IPO) of Tata Capital Ltd. (TCL), the financial services arm of the Tata Group, has garnered predominantly positive endorsements from brokerage firms, many of which have assigned a long-term “subscribe” rating. Analysts attribute this to the company’s solid growth, strong asset quality, and the significant credibility associated with its parent brand.
The IPO, which commenced on October 6, 2025, and will conclude on October 8, 2025, seeks to raise up to ₹15,512 crore at a maximum price of ₹326 per share.
The Tata Advantage and Market Dominance
Brokerages have underscored the fundamental strength that the Tata brand provides. TCL ranks as India’s third-largest diversified Non-Banking Financial Company (NBFC), managing a substantial loan book valued at ₹233 lakh crore as of June 30, 2025, according to reports from Ashika, LKP Research, and BP Wealth.
Recognized as an ‘Upper Layer NBFC’ by the Reserve Bank of India (RBI), TCL benefits from the esteemed Tata brand, the most valuable in India as per the Brand Finance India 100 2025 report, which contributes to the company’s lowest cost of funds in the industry and fosters customer trust. This creditworthiness is reflected in its AAA domestic ratings from agencies such as CRISIL, ICRA, CARE, and India Ratings, as noted by various analysts.
TCL has achieved significant growth, recording a compounded annual growth rate (CAGR) of 37.3 percent in total gross loans between FY23 and FY25, as per analysts from Anand Rathi, Ashika, and BP Wealth.
Digital-First Operations and Superior Asset Quality
Analysts commend Tata Capital’s technology-forward approach and its risk management strategy. The company offers a diverse array of over 25 lending products across retail, SME, and corporate segments, ensuring that no single lending product contributes more than 20 percent of total gross loans.
Retail and SME customers constitute the majority, accounting for 87.5 percent of total gross loans as of June 30, 2025. Additionally, the loan portfolio is highly granular, with over 98 percent of loan accounts having amounts below ₹10 million, as highlighted by Ashika and BP Wealth.
TCL employs an omni-channel ‘phygital’ distribution model that merges more than 1,500 branches with a robust digital infrastructure. Analysts from Ashika and Canara Bank Securities noted that over 97 percent of customers were digitally onboarded in fiscal 2025.
The company maintains strong asset quality metrics compared to other large NBFCs, with a Gross Stage 3 Loans Ratio of 2.1 percent and a Net Stage 3 Loans Ratio of 1.0 percent as of June 30, 2025. This performance is attributed to TCL’s agile risk management, which utilizes advanced analytical tools, including over 80 predictive models deployed in collections, as noted by BP Wealth and Anand Rathi. Notably, TCL has one of the lowest gross Non-Performing Asset (GNPA) ratios among large NBFCs. The merger with Tata Motors Finance Ltd. (TMFL), effective May 8, 2025, is expected to further enhance the entity’s scale and product offerings, as highlighted by LKP Research.
Valuation and Key Risks
Despite the favorable subscription recommendations, potential investors have raised concerns regarding valuation and specific credit risks. Deven Choksey Research issued a “NEUTRAL” rating, noting that the issue is priced at 4.1x TTM price-to-book (P/B), which is higher than the peer average of 3.7x TTM P/B. They caution that while growth is anticipated to be robust, the return profile (RoA of approximately 1.9 percent) appears low relative to the average RoA of ~3.0 percent for peers.
Canara Bank Securities asserted that the IPO’s pricing at 4x FY25 P/B aligns with market standards. Although ICICI Direct assigned an “unrated” rating, it estimated the valuation to be about 3.5x P/B post-issue, excluding Employee Stock Ownership Plan (ESOP).
Common risks highlighted by various brokerages include:
- Unsecured Loan Exposure: Unsecured loans made up about 20 percent of Total Gross Loans as of June 30, 2025, presenting elevated credit risk, according to various analysts.
- Provisioning Buffer: The Provision Coverage Ratio (PCR) has dropped to 53.9 percent as of June 30, 2025, down from 77.1 percent in FY23, reducing the buffer against potential credit losses.
- Interest Rate Volatility: Analysts from ICICI Direct and Canara Bank Securities warned that fluctuations in interest rates could affect Net Interest Margins, particularly since 36.3 percent of loans and 55.0 percent of borrowings were at fixed rates as of June 30, 2025.
Analysts suggest that the IPO presents a significant opportunity, as fresh issue proceeds are expected to strengthen Tier-1 capital, facilitating further lending and aggressive expansion. Ventura concluded that TCL is well-positioned to maintain its growth trajectory within India’s evolving financial landscape.
Published on October 6, 2025
