Speaking to ET Now, Sabharwal said Tata Capital has consciously passed on most of the benefit of lower funding costs to customers to spur demand. As a result, net interest margins (NIMs) have improved, but not to the full extent of the reduction in borrowing costs.
Credit costs trending lower, sub-1% target ahead of schedule
Tata Capital’s consolidated credit cost declined to 1.2% in the latest quarter from 1.3% earlier. Excluding motor finance, credit costs improved further to around 1% in Q3 from 1.1% in Q2.
Sabharwal said the company is confident of reducing credit costs below 1% before FY28, ahead of its stated guidance. The improvement is driven by a secured-heavy loan book, with housing accounting for nearly one-third of assets, and a diversified exposure across retail, SME and corporate segments.
23–25% growth outlook remains intact
The NBFC continues to guide for 23–25% annual growth in assets under management (AUM) through FY28, implying a doubling of AUM versus FY25 levels. Sabharwal said Tata Capital’s ability to sustain high growth stems from its wide product mix—over 25 lending products—and a strong distribution footprint of more than 1,500 branches nationwide.
Excluding motor finance, loan growth stood at about 26% in the December quarter, reinforcing confidence in the medium-term growth outlook.
Operating efficiency, GenAI to drive profitability
Tata Capital expects its cost-to-income ratio to improve from about 38% to nearly 34% or lower over the medium term. Sabharwal attributed this to scale benefits and early adoption of digital and GenAI-led solutions.The company has digitised customer journeys across products and is deploying GenAI in areas such as credit underwriting and voice analytics. These initiatives are expected to further reduce operating costs relative to assets as the loan book expands.
ROA upside from mix shift and efficiency gains
Sabharwal said return on assets (ROA) could improve towards the 2.7–2.8% range, supported by lower credit costs, better operating efficiency and a gradual increase in higher-yield products within the portfolio.
Capital position and future dilution
Tata Capital’s IPO proceeds are expected to support growth until the first quarter of calendar year 2028. Beyond that, additional capital will be required. Sabharwal said the mode of dilution—whether through a fresh issue or promoter stake sale—will be decided by the board closer to the time.
Overall, Tata Capital remains focused on balancing growth, asset quality and efficiency, even if it means moderating near-term margin expansion to build long-term scale.