Tata Capital shares in focus after steady debut; brokerages see up to 10% upside – News Air Insight

Shares of the newly listed Tata Capital are likely to be in focus on Tuesday, after the non-banking finance company made a firm yet measured debut on Monday, listing 1.23% above its issue price and closing 1.4% higher on its first trading day. Despite the muted start, analysts at Emkay Global and JM Financial have initiated coverage with buy ratings and identical target prices of Rs 360, implying a potential 10% upside from the IPO price.

Tata Capital listed at Rs 330, barely 1% above its IPO price, in a tepid market, but brokerages cited the Tata Group parentage, strong credit profile, and improving financial metrics as key positives.

“Our positive stance is based on the Tata parentage and brand name providing the vital ingredients, viz, AAA credit rating and abundant debt availability at competitive costs, toward Tata Capital becoming a meaningful NBFC lender,” Emkay Global said in its initiation note.

The brokerage expects Tata Capital to deliver about 30% earnings per share CAGR during FY25–28, driven by a turnaround in its vehicle finance segment and a higher share of secured loans. Assets under management (AUM) are projected to grow at a 24% CAGR over the same period. Emkay also forecasts return on assets (RoA) and return on equity (RoE) to reach around 2.2% and 15.4% by FY28, valuing the stock at 2.8x FY27 price-to-book.

JM Financial sees steady growth trajectory

JM Financial echoed the positive outlook, noting Tata Capital’s strong track record. The NBFC delivered 31% AUM CAGR during FY22–24, with average RoA and RoE of 2.3% and 18% respectively. However, the merger with Tata Motors Finance weighed on FY25 numbers, moderating AUM growth to 17% YoY and reducing RoA and RoE to 1.6% and 13%.

“We expect improvement in financials going ahead and project a ~20%/34% AUM/PAT CAGR over FY25–27 with average RoA/RoE of ~1.9%/13% during FY26/27,” the brokerage said, valuing the stock at 2.9x FY27 book value.

JM Financial added that at the IPO’s upper band, Tata Capital’s valuation of 2.7x FY27 price-to-book compares with 2.5x for HDB Financial Services and 3.7x for Cholamandalam Investment and Finance, “leaving limited upside in the near term.” It expects Tata Capital to trade at a 10–12% premium to HDB Financial but at a discount to Cholamandalam based on relative growth and return metrics.

IPO draws solid institutional interest

The Tata Group’s flagship NBFC saw its IPO subscribed 1.95 times, led by strong institutional participation. Qualified institutional buyers (QIBs) oversubscribed their portion 3.42 times, while non-institutional investors subscribed 1.98 times and retail investors 1.10 times. Priced between Rs 310 and Rs 326 per share, the issue came at a 56% discount to Tata Capital’s unlisted market value.

Ahead of the IPO, Tata Capital raised Rs 4,642 crore from anchor investors, led by the Life Insurance Corporation of India (LIC), which acquired 2.15 crore shares worth nearly Rs 700 crore. Other key domestic participants included ICICI Prudential, HDFC Mutual Fund, Aditya Birla Sun Life, DSP, Axis, Kotak, and Nippon Life AMC, alongside global investors Morgan Stanley, Goldman Sachs, Nomura, and Norway’s Government Pension Fund Global.

Strong balance sheet, diversified portfolio

Established in 2007, Tata Capital is a diversified NBFC with nearly 80% of its loan book in secured segments. Retail finance accounts for 61% of its total loans. The company offers products across retail, SME, and corporate segments, along with wealth management and investment banking services.

With total assets of Rs 2.52 lakh crore and a loan book of Rs 2.33 lakh crore as of June 2025, Tata Capital ranks as India’s third-largest diversified NBFC, behind Bajaj Finance and Shriram Finance. Its gross NPA ratio of 2.1% is among the lowest in the sector, supported by a broad network of 1,516 branches across 27 states and union territories.

Between FY23 and FY25, the company’s revenue rose 56%, while profit after tax increased 10% to Rs 3,655 crore.

Valuation and outlook

While both Emkay and JM Financial remain bullish on the company’s fundamentals, they caution that the moderate return profile limits near-term re-rating potential. “The moderate return profile limits the scope of a re-rating over the near-to-medium term; stock returns will largely be led by BV compounding,” Emkay said.

Investors will be watching Tuesday’s session closely to see whether Tata Capital’s shares extend their steady debut momentum, or pause as valuations settle post-listing.

Also read | TCS, Tata Motors tumble up to 42% from peak, with over Rs 4 lakh crore wiped off Tata stocks in 2025 amid boardroom turmoil

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)