Tata Capital IPO Day 2 Highlights: Issue booked 75% — GMP signals 4% listing gains: Review & other details

Tata Capital IPO was booked 75% as of the second day of the bidding process today. The issue garnered bids for 24,96,66,472 shares as against 33,34,36,996 shares on offer. Here's how different quotas were booked:

QIB: 0.86x

NII: 0.76x

Retail: 0.67x

Employee: 1.95x

Tata Capital maintained a well-diversified funding base, with no single lender accounting for more than 10% of its total borrowings. According to the CRISIL Report (Section 27.5, Page 190), the company held the second-largest outstanding debt securities among large, diversified NBFCs in India as of March 31, 2025.

Tata Capital has further broadened its borrowing mix through funding from the National Housing Bank (NHB) via its material subsidiary, Tata Capital Housing Finance Limited (TCHFL). Demonstrating its commitment to funding diversification, the company completed its maiden dollar-denominated bond issuance in January 2025, successfully raising $400 million from overseas investors.

This diverse funding strategy enables Tata Capital to sustain a balanced maturity profile across its borrowings, enhancing financial stability and flexibility.

Tata Capital’s digital platforms include its website, mobile applications, and various communication channels, along with external interfaces established through partnerships with agents and other partners. As of June 30, 2025, the company's mobile apps had been downloaded over 21.9 million times.

Website traffic also demonstrated strong growth, increasing by 16.6% in Fiscal 2025 to reach 75.8 million visits compared to the previous fiscal year. In the three-month period ended June 30, 2025, the website recorded a 4.8% increase in traffic, reaching 17.5 million visits compared to the same period in the previous year.

Tata Capital's in-house sales staff, along with external partners such as Direct Selling Agents (DSAs), Original Equipment Manufacturers (OEMs), and dealers, are equipped with digital tools and technologies that enable efficient loan sourcing, customer servicing, and collections. The company's platforms offer both assisted and self-service options, allowing customers to choose a journey that best suits their preferences.

Here are the key strengths of Tata Capital:

Strong Parentage: The company is a part of the “Tata” Group, which provides strong customer trust, enhances organizational credibility, and offers access to low-cost capital.

Diversified Lending Portfolio: It has a diversified AUM comprising retail, SME, housing, clean-tech, and corporate loans. Further, with the acquisition of TMFL, it is now present in vehicle financing, reducing overall concentration risk.

Robust Book Growth: The company has scaled its gross loan book at a robust pace of 37.3% CAGR over FY23–25, while maintaining asset quality in financing across diverse end-sectors — reflecting prudent underwriting and effective risk control mechanisms.

Healthy Offline and Digital Presence: The company has a large network of 1,500+ physical branches along with a robust digital ecosystem, strengthening its phygital presence. Over 97% of customers are onboarded digitally.

The Indian NBFC sector has emerged as one of the fastest-growing components of the financial system, expanding its AUM from ₹23 trillion in FY2019 to about ₹48 trillion in FY2025, registering a strong CAGR of 13.2% over six years. Looking ahead, NBFC credit is projected to grow at a healthy 15-17% CAGR between FY2025 & FY2028, driven largely by retail, MSME, and corporate segments, with retail credit alone expected to maintain 14-16% CAGR during the same period. Going forward, NBFCs are expected to continue to gain market share over other lenders due to their ability to provide flexible lending solutions and tailored services, focused approach to tap under-served and niche customer segments, ability to penetrate deeper into geographies, leveraging technology to reimagine the lending process, strong origination skills and shorter turnaround time.

Tata Capital’s initial issue is priced at 4.1x TTM P/B, compared to the peer average of 3.7x TTM P/B. When comparing its valuation and return profile — ~4.1x P/B and ~1.9% RoA — to the peer average of ~3.7x P/B and ~3.0% RoA, it appears fairly valued.

Although we believe the company will be able to scale its loan book at a healthy pace, driven by its omni-channel presence and strong parentage, its returns appear lower compared to other listed NBFCs.

We assign a “NEUTRAL” rating to the issue.

Tata Capital IPO was booked 60% as of the second day of the bidding process today. The issue garnered bids for 20,01,17,112 shares as against 33,34,36,996 shares on offer. Here's how different quotas were booked:

QIB: 0.55x

NII: 0.63x

Retail: 0.61x

Employee: 1.76

With gross loans of ₹2,334 billion as of June 30, 2025, the company is the third-largest diversified NBFC in India. Among large peers, it also offers the most extensive product range, with over 25 loan products designed for salaried professionals, entrepreneurs, SMEs, and corporates. Loan sizes vary from as small as ₹10,000 to over ₹1 billion, giving it a wide reach across customer segments.

Insurance & Credit Cards: IRDAI composite license; 8.6 million policies in force; 2.5 lakh active Tata Corporate Cards (via SBI Cards).

Wealth Management: AUM of ₹69.8 Bn, CAGR 26.4% (FY23–FY25).

Private Equity Funds: Eight thematic funds across growth, healthcare, innovation, special situations. Raised ₹70 Bn; executed 53 deals over 15 years.

Retail Finance: ₹1,430.95 Bn (61.3% of loans), CAGR 39% (Mar 2023–Jun 2025). GNPA 3.0%, NNPA 1.5%, PCR 52.1%.

SME Finance: ₹612.27 Bn (26.2%), CAGR 21.9%. GNPA 0.7%, NNPA 0.2%, PCR 68.6%.

Corporate Finance: ₹290.76 Bn (12.5%), CAGR 44%. GNPA 0.2%, NNPA 0.1%, PCR 71.2%.

Products Offered: Home loans, LAP, personal & business loans, auto finance (2W, car, CV, CE), loans against securities, microfinance, education loans, supply chain & equipment finance, leasing, infrastructure finance.

The company has a well-diversified liability base supported by a credit rating of AAA from CRISIL, ICRA, CARE and India Ratings. As per the CRISIL report, this is the highest possible credit rating that can be assigned to any NBFC in India

The IPO is a mix of OFS ( ₹8,666 crore) and fresh issue ( ₹6,846 crore). Trust is a key factor in financial services, and TCL benefits from the strong Tata brand. TCL is one of the most diversified NBFCs with a strong geographical presence. It enjoys a strong domestic rating (AAA) and the best possible international rating (BBB, capped by sovereign rating), ensuring the lowest cost of funds in the industry.

Liabilities are well-diversified across banks, NCDs, CPs, financial institutions (NHB, SIDBI), and overseas sources (ECBs, bonds). At the upper price band, the issue is valued at 4.5x P/B (pre-issue), and post-issue it is at 4.1x on FY25 BVPS.

We recommend “SUBSCRIBE for Long Term” to the issue.

The net proceeds are proposed to be utilised towards augmentation of the company’s Tier-I capital base to meet its future capital requirements, including onward lending, which are expected to ariseout of the growth in the company’s business, and to ensure compliance with regulatory requirements on capital adequacy prescribed by the RBI from time to time.

Tata Capital’s muted GMP reflects investor caution despite fair valuations. The merger with Tata MotorFinance Ltd. has led to asset quality deterioration (gross NPA 7.1%, net NPA 4.4% for TMFL), raising consolidated NPAs to ~1% from 0.5% and reducing ROE to 12.6% in FY25 from 14.2% in FY24. These concerns around profitability and integration challenges have weighed on investor sentiment ahead of the IPO.

– Views by Abhinav Tiwari, Research Analyst at Bonanza

1. Gross Stage 3 Loans stood at 2.1% as of June 30, 2025; any rise in delinquencies or defaults could impact profitability and capital adequacy.

2. Unsecured loans form ~20% of the loan book, posing higher credit risk due to lack of collateral.

3. Retail Finance accounts for ~61% of total loans; adverse trends in this segment could affect growth and asset quality.

4. Any asset-liability mismatch or funding constraints could lead to liquidity stress and impact operations.

Tata Capital IPO was booked 50% as of the second day of the bidding process today. The issue garnered bids for 16,56,52,440 shares as against 33,34,36,996 shares on offer. Here's how different quotas were booked:

QIB: 0.52x

NII: 0.43x

Retail: 0.50x

Employee: 1.52x

We believe the Tata Capital IPO offers a compelling opportunity to invest in a market-leading, highly diversified financial services platform, directly leveraging the unmatched trust and stability of the Tata Group parentage. The company has successfully established itself as a "phygital" powerhouse, catering to the massive and rapidly growing needs of India’s retail, SME, and corporate sectors.

Tata Capital Ltd. boasts an impressive financial track record, with total income surging by 56% and Profit After Tax (PAT) reaching ₹3,655 Cr. in FY25. This superior performance is underpinned by a well-diversified loan book and strong asset quality metrics. The business is fundamentally supported by its high credit rating, which ensures a low cost of funds, and its integrated model, which includes the strategic merger with Tata Motors Finance to enhance its scale.

The IPO is driven by both strategic growth plans and the regulatory mandate for Upper Layer NBFCs to list. Proceeds from the fresh issue will strategically strengthen the company's Tier-1 capital base, providing necessary fuel for onward lending and aggressive expansion in high-growth areas like retail and green finance.

At an anticipated valuation that reflects its quality and brand premium, we recommend that investors seeking exposure to a stable, blue-chip player in India’s crucial financial services sector consider SUBSCRIBING for a long-term perspective.

Tata Capital's loan portfolio is well-diversified and granular, with ticket sizes ranging from Rs. 10,000 to over Rs. 1 billion. As of June 30, 2025, over 98% of loan accounts were below Rs. 10 million, 80% of total gross loans were secured, and the organic book contributed more than 99% of the portfolio.

Tata Capital operates in both lending and non-lending segments. The lending business, which accounts for ~97% of total income, includes loans to retail, SME, and corporate customers. The non-lending segment (~3% of income) covers distribution of third-party products (insurance, credit cards), wealth management services, and sponsorship/management of PE funds.

As of June 30, 2025, it operated 1,516 branches across 27 States and Union Territories, staffed with in-house teams for acquisition, processing, documentation, and servicing. The branch network expanded at a CAGR of 58.3% from March 31, 2023 to June 30, 2025, driven by consistent additions over the past three years.

At the upper price band, the issue is valued at an adj. P/BV of 3.6x (post-issue BVPS), broadly in line with peers, making it fully priced. The company has reported steady growth in interest income on the back of loan book expansion and a widening branch network across India.

However, its RoE and RoA remain lower than peers, which is a concern. Backed by a strong brand and the proposed merger with TMFL that will enhance its customer base, the company is well-positioned for long-term growth.

However, considering the near-term operational challenges, we assign a “Subscribe for Long Term” rating to the issue.

The initial public offer of non-banking financial company Tata Capital Ltd entered its second day of subscription after receiving 39 per cent bids on the first day of bidding on Monday.

The IPO got bids for 12,86,08,916 shares against 33,34,36,996 shares on offer, according to details available with the NSE.

The quota for Qualified Institutional Buyers (QIBs) got subscribed 52 per cent, while the category for Retail Individual Investors (RIIs) received 35 per cent subscription. The portion meant for non-institutional investors attracted 29 per cent subscription.

Tata Capital Limited, the flagship financial services arm of the Tata Group with a legacy spanning over 150 years, is the third-largest diversified NBFC in India. It offers one of the widest lending product portfolios and operates through an omni-channel distribution network that includes a pan-India branch presence, strategic partnerships, and robust digital platforms.

At the same time, its deep integration of digital capabilities and analytics lies at the heart of its operations, ensuring superior customer experience and driving sustainable business performance. Tata Capital seeks to reduce its credit cost ratio below 1% by strengthening risk management and credit underwriting, supported by digital tools and analytics.

By maintaining a diversified loan portfolio across products, customers, and geographies, and increasing the share of secured lending, the company minimizes concentration risks.

At the upper price band, the company is valued at a P/E of 32.3x, P/B of 3.5x based on its FY25 earnings, and a market cap of ₹13,83,827 million post issue of equity shares.

We believe that the IPO is fully priced and recommend a “Subscribe – Long Term” rating to the IPO.

After witnessing downward trend, Tata Capital IPO GMP steadied at ₹12.5 today. At the prevailing GMP and upper end of the price band, Tata Capital IPO listing price could be ₹338.5, a premium of 4% over the issue price.

The company is expected to list on the stock exchanges on October 13.