Tata Capital IPO Day 3 Highlights: Issue booked 1.95x on final day — GMP dips further

Tata Capital IPO was booked 1.95 times on the third and final day of the bidding process today. The issue garnered bids for 65,12,29,452 shares as against 33,34,36,996 shares on offer. Here's how different quotas were booked:

QIB: 3.42x

NII: 1.98x

Retail: 1.10x

Employee: 2.92x

Classified as an ‘Upper Layer NBFC’ by the RBI, the company manages a robust loan book of ₹2,334bn (as of June 2025) and offers a comprehensive suite of over 25 lending products across retail, SME and corporate segments, complemented by wealth management, insurance distribution and private equity services. With a pan-India presence of over 1,500 branches and a strong digital ecosystem, Tata Capital combines the Tata brand’s credibility with innovation-driven growth, positioning itself as a leading player in India’s financial services landscape.

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 assetliability mismatch or funding constraints could lead to liquidity stress and impact operations.

The IPO is a mix of OFS ( ₹8,666cr) & fresh issue ( ₹6,846cr). Trust is a key factor in financial services and TCL benefits from the strong Tata brand. TCI is one of the most diversified NBFCs with a strong geographical presence. It enjoys 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.

In May 2025, the NCLT approved the merger of TMFL with Tata Capital, effective April 1, 2024. Tata Capital issued 183.9 million equity shares to TMF Holdings Limited. The merger enhances Tata Capital’s scale in auto financing, consolidating its presence across CVs, passenger cars, and supply chain finance.

Post-integration (March 2025):

• 92.5% of commercial vehicle loans,

• 16.8% of car loans, and

• 12.8% of supply chain finance came from TMFL.

The merger strengthens the product suite, geographical reach, and capital base, creating a unified platform across the auto financing ecosystem.

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, the issue appears fairly valued.

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

We assign a “NEUTRAL” rating to the issue.

India’s NBFC sector has charted a remarkable trajectory of resilience and expansion—scaling its Assets Under Management from under ₹2 trillion at the dawn of the millennium to a staggering ₹48 trillion by Fiscal 2025.

Looking ahead, CRISIL forecasts a continued surge in NBFC credit at a robust 15–17% CAGR through Fiscal 2028, propelled by dynamic growth across retail, MSME, and corporate lending. In tandem, India’s overall systemic credit—encompassing both banks and NBFCs—is expected to grow at a healthy 13–15% CAGR, underscoring the sector’s pivotal role in driving financial inclusion and economic momentum.

As of Fiscal 2025, the NBFC sector commands a 21% share of India’s systemic credit, with CRISIL projecting a rise to 22% by Fiscal 2028. Within this expanding landscape, Tata Capital stands out as the third-largest diversified NBFC, boasting Total Gross Loans of ₹2,334.0 billion as of June 30, 2025, and registering a remarkable CAGR of 37.3% over the preceding two fiscal years—one of the fastest among its peers.

The company leads in product breadth, offering over 25 lending solutions, and maintains superior asset quality with Gross Stage 3 and Net Stage 3 loan ratios at 2.1% and 1.0% respectively, alongside a robust Provision Coverage Ratio of 53.9%.

Reinforcing its financial credibility, Tata Capital holds the highest domestic credit rating of "AAA/Stable" from all major Indian agencies and is among only three NBFCs globally to be rated 'BBB' by S&P Global Ratings.

Tata Capital is well-positioned in India’s growing NBFC sector, with strong potential in retail and SME lending supported by digital innovation. Its diversified portfolio, Tata brand trust, prudent liability management, superior asset quality, and AI-enabled “phygital” model underpin long-term growth. The IPO is priced at 4x FY25 P/B, in line with peers. Post-merger integration impacts from Tata Motors Finance are expected to normalize, supported by AAA ratings and a resilient funding profile. Macro tailwinds like India’s economic growth and digital adoption favor the business, though risks include regulatory changes, rate volatility, and competition.

Recommendation: Subscribe for long-term horizon.

The company has a diversified borrowing mix of short- and long-term loans from banks, non-convertible debentures, subordinated and perpetual debt, external commercial borrowings, and commercial papers.

The company’s average cost of borrowings was 7.8%, and the total borrowings to total equity ratio was 6.6 times in FY 2025 and as at March 31, 2025, respectively.

The company’s average cost of borrowings remained at 7.8%, and the total borrowings to total equity ratio was 6.5 times for the three months ended June 30, 2025, and as at June 30, 2025, respectively.

The company has an extensive pan-India distribution network comprising 1,516 branches across 27 States and Union Territories, as at June 30, 2025. The company’s branch network has grown at a CAGR of 58.3% from March 31, 2023, to June 30, 2025. Moreover, the company has established partnerships with direct selling agents (DSAs), original equipment manufacturers (OEMs), dealers, and digital partners to broaden its reach.

The company’s Total Gross Loans (excluding TMFL) grew at a CAGR of 28.4% from March 31, 2023, to March 31, 2025. The company’s asset quality (excluding TMFL) stood at Gross Stage 3 Loans Ratio of 1.5%, Net Stage 3 Loans Ratio of 0.5% and PCR of 65.8% as of March 31, 2025.

Tata Capital IPO sailed through on the third and final day of the bidding process today.

QIB: 1.18x

NII: 1.10x

Retail: 0.84x

Employee: 2.27x

Tata Capital IPO is a mix of offer for sale and fresh issue. While it will not receive any proceeds of the OFS, proceeds from the fresh issue will be used as follows:

➢ Augmenting its capital base to meet its future capital requirements; and

➢ General corporate purposes.

Tata Capital IPO was booked 90% as of the third day of the bidding process today. The issue garnered bids for 29,88,96,730 shares as against 33,34,36,996 shares on offer. Here's how different quotas were booked:

QIB: 0.96x

NII: 1.00x

Retail: 0.81x

Employee: 2.27x

We believe the Tata Capital IPO offers a compelling opportunity to invest in a market-leading, highly diversified financial services platform, backed by the unmatched trust and stability of the Tata Group.

The company has successfully positioned itself as a "phygital" powerhouse, serving the growing needs of India’s retail, SME, and corporate sectors through a seamless blend of physical presence and digital capabilities.

Tata Capital Ltd. boasts an impressive financial track record, with total income rising by 56% and Profit After Tax (PAT) reaching ₹3,655 Cr. in FY25. This strong performance is supported by a well-diversified loan book and robust asset quality metrics. The company also benefits from a high credit rating, which helps maintain a low cost of funds, and an integrated business model strengthened by the strategic merger with Tata Motors Finance, enhancing both scale and operational efficiency.

The IPO is driven by both strategic growth ambitions and the regulatory requirement for Upper Layer NBFCs to list. Proceeds from the fresh issue will be used to strengthen the company’s Tier-1 capital base, enabling further lending and targeted expansion into high-growth areas such as retail lending and green finance.

Given its quality fundamentals, brand premium, and alignment with long-term structural trends in India's financial services sector, we recommend investors SUBSCRIBE to the IPO with a long-term investment horizon.

Book Running Lead Managers (BRLMs):

• Kotak Mahindra Capital Company Ltd.
• Axis Capital Ltd.
• BNP Paribas
• Citigroup Global Markets India Private Ltd.
• HDFC Bank Ltd.
• HSBC Securities and Capital Markets (India) Private Ltd.
• ICICI Securities Ltd.
• IIFL Capital Services Ltd.
• J.P. Morgan India Private Ltd.
• SBI Capital Markets Ltd.

Registrar:

• MUFG Intime India Private Limited (formerly Link Intime India Private Limited)

Listing:

• BSE & NSE

IPO Open Date: Monday, October 6, 2025

IPO Close Date: Wednesday, October 8, 2025

Tentative Allotment Date: Thursday, October 9, 2025

Initiation of Refunds: Friday, October 10, 2025

Credit of Shares to Demat: Friday, October 10, 2025

Tentative Listing Date: Monday, October 13, 2025

The third day of bidding for Tata Capital IPO kicked off today at 10 am. Investors have the option to apply for the IPO till 5 pm today.

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 to 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.

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

Tata Capital IPO GMP declined further to ₹6 today. At the prevailing GMP and upper end of the price band, Tata Capital IPO listing price could be ₹332, a premium of just 2% over the issue price. The company is expected to list on the stock exchanges on October 13.