The Tata Capital stock hit an all-time high of ₹380 on Friday, extending gains since its listing on 13 October 2025 at an issue price of ₹326. The trigger appears to be management’s reiteration of its growth roadmap through FY28 during a recent analyst meeting.
The stock has largely remained range-bound since listing. But will patient investors in India’s second-largest diversified non-banking finance company (NBFC), after Bajaj Finance in terms of assets under management (AUM), be rewarded over the long term?
For context, “diversified” means there is no heavy concentration of lending to a single segment. For instance, Shriram Finance is typically viewed as a vehicle financier because that business contributed more than 50% of its AUM in FY26.
Profitability gap
Bajaj Finance remains the benchmark among diversified NBFCs because of its ability to consistently generate superior profitability. Its return on assets (RoA) stood at 3.8% in FY26, compared with Tata Capital’s 1.8%.
Despite operating on a much larger base, Bajaj Finance grew AUM by 22% year-on-year to ₹5.1 trillion in FY26, compared with 20% growth in Tata Capital’s ₹2.8 trillion loan book.
A closer look at the RoA tree highlights where Tata Capital still has ground to cover. Bajaj Finance earned an asset yield of 15.7% in FY26 versus 10.8% for Tata Capital, even though both had a similar cost of funds of about 7.2%.
To bridge this gap, Tata Capital needs to chase higher yielding assets, which brings the risk of higher defaults or NPAs.
Growth equation
Already, 27% of Tata Capital’s AUM comprises lending to small and medium enterprises, a segment that offers higher yields but is also more vulnerable during economic slowdowns. The segment accounts for only 10% of Bajaj Finance’s AUM.
Bajaj Finance does not lend to corporates, whereas corporate loans account for 14% of Tata Capital’s AUM and typically generate lower yields. While Bajaj Finance assumes greater overall risk—as reflected in its credit cost of 2.1% versus Tata Capital’s 1.2% in FY26—it still delivers a meaningfully higher RoA.
Bajaj Finance’s efficiency also shows from its cost-to-income ratio being at 34% for FY26 vis-à-vis Tata Capital’s 38%. Tata Capital aims to bring it down to Bajaj Finance’s level in two years.
Valuation ceiling
However, many of these improvements may already be reflected in analyst forecasts.
Emkay Global Financial Services’ FY28 estimates largely factor in the positives management hopes to achieve. The brokerage projects an AUM CAGR of around 23% between FY26 and FY28, broadly in line with management’s aspirational growth target. It also estimates an RoA of 2.4% for FY28, close to management’s target range of 2.5%-2.7%.
Against this backdrop, Tata Capital trades at about 17x FY28 earnings per share, based on Emkay’s estimates, compared with 20x for Bajaj Finance.
Typically, the industry leader commands a 10-15% valuation premium over the second-largest player. That suggests the scope for a relative valuation re-rating in Tata Capital may be limited unless Bajaj Finance itself sees further multiple expansion.
Another factor that could cap upside is technical rather than fundamental. To comply with Sebi’s minimum public shareholding norms, the Tata group will need to reduce its stake by nearly 11 percentage points by October 2028, bringing its holding down to 75%.