Tata Capital IPO News - A Strategic Leap for the NBFC Powerhouse

Tata Capital IPO Introduction

Tata Capital Limited, the flagship financial services arm of the Tata Group, is set to hit the capital markets with its much-anticipated Initial Public Offering (IPO). Backed by a strong legacy and diversified financial offerings, the company aims to raise funds through a combination of a fresh issue and offer for sale. The Tata Capital IPO not only marks a new chapter for Tata Capital but also opens the door for investors to participate in the growth of a well-established, digitally agile NBFC. Here’s a deep dive into the company’s business, strengths, financials, and key risk factors.

Industry Overview

India’s NBFC sector has grown significantly over the past two decades, becoming a vital component of the financial system. According to CRISIL, NBFCs' total AUM has expanded from under ₹2 trillion in 2000 to ₹48 trillion by FY25. With a historical trend of outperforming GDP growth, the industry is projected to grow at a 15–17% CAGR from FY25 to FY28, driven by demand in retail, MSME, and corporate lending.

Tata Capital Business

Tata Capital is a diversified NBFC offering over 25 lending products to individuals, small businesses, SMEs, and corporates. It also provides wealth management, distributes third-party products like insurance and credit cards, and acts as a sponsor and investment manager for private equity funds. With over 7 million customers since inception and RBI classification as an ‘Upper Layer NBFC’, Tata Capital plays a significant role in India’s financial services space.

Tata Capital Strengths

• Diversified Product Suite: Balanced exposure across retail, SME, and corporate lending reduces dependency on any one segment.

• Strong Brand Equity: As a Tata Group company, it enjoys high consumer trust and market credibility.

• Capital Adequacy: With a CRAR of 16.9% (FY25), it is well above the minimum regulatory requirement of 15%.

• Digital Focus: Emphasis on digital service delivery and automation has improved operational efficiency.

• Pan India distribution Network: Omni-channel distribution model, comprising our pan-India branch network, partnerships and digital platforms

• Strong risk collection capabilities: Prudent risk culture and robust credit underwriting and collections capabilities, resulting in stable asset quality

Tata Capital Risk Factors

• Asset Quality Concerns: Gross Stage 3 Loans stood at 1.9% in FY25. Provision coverage has declined to 58.5%, suggesting rising stress.

• Real Estate Exposure: 33.8% of gross loans are in Home Loans, LAP, and Developer Finance—exposing the firm to sectoral volatility.

• Interest Rate Sensitivity: A high share of fixed-rate borrowings (54%) could affect margins if rates rise.

• Borrowing Costs: Average borrowing cost increased to 7.8% in FY25 from 6.6% in FY23, impacting profitability.

• Provision Coverage Ratio: Their provision coverage ratio was 58.5%, 74.1% and 77.1% as of March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

• Unsecured Gross Loans: Unsecured Gross Loans comprised 21.0%, 24.5% and 23.1% of our Total Gross Loans as of March 31, 2025, March 31, 2024, and March 31, 2023, respectively.

• Changes in loan-mix: Changes in our loan-mix may adversely affect our financial metrics and asset quality, which could adversely affect our business, financial condition, results of operations and cash flows.

Tata Capital Financials & Peer Comparison

*Approximate, based on public disclosures.

Tata Capital Profit and Loss Statement (Consolidated)

Tata Capital Cash Flow Statement (Consolidated)

Directional summary based on prospectus. Exact values not disclosed in the available summary.

Conclusion

Tata Capital's IPO represents a compelling opportunity for investors seeking exposure to a large, diversified, and professionally managed NBFC. Its strong backing from the Tata Group, healthy financials, and growth-ready capital base are strong positives. However, investors should monitor asset quality trends, interest rate risks, and sector-specific exposures closely. As India’s financial ecosystem continues to expand, Tata Capital appears well-positioned to participate in and shape that growth.