Tata Capital, the flagship financial services arm of the Tata Group, is one of India’s largest diversified non-banking finance companies (NBFCs). The IPO, priced between Rs 310 and Rs 326 per share, is a mix of a fresh issue worth Rs 6,846 crore and an offer for sale (OFS) of Rs 8,666 crore by the promoter Tata Sons. The issue will close on October 8, with listing likely on October 13.
Most analysts have praised the company’s strong fundamentals, diversified business, and trusted parentage.
Brokerages such as Canara Bank Securities, Anand Rathi, BP Wealth, and Mehta Equities have all called it a quality long-term play. They say Tata Capital’s strong retail and SME franchise, healthy asset quality, and focus on digital lending make it a key beneficiary of India’s growing credit demand.
Three reasons behind the paradox
The subdued GMP shows that investors are cautious about near-term gains. According to market experts, there are three key reasons behind this muted response.First, the IPO’s pricing leaves little room for short-term upside. At the upper end of the price band, Tata Capital is valued at about 4.2 to 4.3 times its post-issue book value — close to the average of its peers like Bajaj Finance and HDB Financial. Analysts say much of the good news, including its strong balance sheet and steady profitability, is already factored in.Also Read: Subscribe for long-term or listing gains? Here’s what top 10 brokerages said on Tata Capital IPO
Shruti Jain, Chief Strategy Officer at Arihant Capital Markets, said the grey market premium is low because the IPO is fairly priced.
“At 4.2–4.3x post-money, the IPO valuations don’t leave much on the table for listing gains. While the fundamentals are strong, the current market is cautious, with several growth companies facing valuation pressures. That’s why the GMP hasn’t picked up despite Tata Capital’s sound business model,” she explained.
Second, the company’s recent merger with Tata Motor Finance Ltd. (TMFL) has raised concerns around asset quality and profitability.
Abhinav Tiwari, Research Analyst at Bonanza, noted that while the merger strengthens Tata Capital’s presence in vehicle finance, it has also temporarily increased its gross non-performing assets (NPA) to about 1% from 0.5%.
“The merger led to a short-term rise in NPAs and reduced the return on equity (ROE) to 12.6% in FY25 from 14.2% in FY24,” he said.
Third, the IPO market itself has become extremely crowded. With back-to-back big issues and competition with LG Electronics, investor liquidity is stretched. This has limited speculative activity in the grey market, which thrives on short-term trading sentiment.
Prashanth Tapse, Senior Vice President at Mehta Equities, said investors are forced to become selective. “In the current IPO frenzy, where investor capital is limited, careful selection becomes crucial to maximize return. While Tata Capital’s IPO has attracted attention, other high-growth offerings like LG Electronics may be drawing part of the focus,” he said.
A solid long-term bet
Still, there is a consensus view that Tata Capital remains a solid long-term bet. The IPO proceeds from the fresh issue will help boost its Tier-I capital, supporting future loan growth. With a diversified portfolio across retail, SME, and corporate lending, the company is well-positioned to benefit from India’s strong credit demand over the next few years.
In short, while the grey market may be lukewarm today, Tata Capital’s fundamentals and brand strength make it a steady long-term story rather than a quick listing play.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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