Both Emkay Global Financial Services and JM Financial initiated coverage with identical target prices of Rs 360, implying a 10% upside from the IPO price. The endorsements come despite the muted listing, with analysts citing Tata Group parentage and improving financials as drivers for potential returns.
“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 said in its initiation note.
The brokerage expects Tata Capital to deliver approximately 30% earnings per share growth compound annual growth rate during FY25-28, driven by a turnaround in its vehicle finance business and high secured share in the product mix. Assets under management are projected to grow at 24% CAGR over the same period.
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JM Financial highlighted Tata Capital’s strong track record, noting that the company delivered a 31% AUM CAGR during FY22–24, with average return on assets (RoA) and return on equity (RoE) of 2.3% and 18%, respectively, in FY23–24. However, the merger with Tata Motors Finance negatively impacted FY25 performance, with AUM growth moderating to 17% year-on-year and RoA/RoE falling to 1.6% and 13%.”We expect financials to improve going forward and project a ~20%/34% AUM/PAT CAGR over FY25–27, with average RoA/RoE of ~1.9%/13% during FY26/27,” JM Financial said, valuing the stock at 2.9 times FY27 estimated book value.Established in 2007, Tata Capital is a diversified NBFC, with approximately 80% of its loan book in secured segments. Retail finance constitutes 61% of its loans, and the company offers a wide product range across multiple geographies and sourcing channels, helping minimize concentration risk.
Emkay projects that RoA and RoE will reach approximately 2.2% and 15.4% by FY28, supported by improving credit costs and operating leverage. The brokerage valued the stock at 2.8 times FY27 estimated price-to-book.
However, both brokerages acknowledged 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 book value compounding,” Emkay noted.
JM Financial also pointed out that at the IPO’s upper price band, Tata Capital’s valuation of 2.7 times FY27 price-to-book compares with approximately 2.5 times for HDB Financial Services and 3.7 times for Cholamandalam Investment and Finance Company, indicating limited near-term upside.
The brokerage believes Tata Capital should trade at a 10–12% premium to HDB Financial and at a discount to Cholamandalam, based on comparative growth and return metrics over FY25–27.
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