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Emkay Global Financial Services initiated coverage with an Add rating on Tata Capital and a target price of Rs 360 per share, implying about a 10% upside from the IPO price. Despite a subdued market debut, analysts remain optimistic, citing the company’s strong Tata Group backing and improving financial profile as key growth drivers.
Emkay noted that Tata Capital’s AAA credit rating and access to low-cost funding, supported by the Tata brand, position it well to become a significant NBFC player. The brokerage projects around a 30% EPS CAGR over FY25–28, led by a turnaround in the vehicle finance segment and a higher share of secured lending, with AUM expected to rise at a 24% CAGR during the same period.
Domestic brokerage firm JM Financial also gave an Add rating on the stock, saying that the company has a highly diversified product mix, offering 25+ distinct lending products broadly classified into three businesses: 61% of its loan book comprises retail finance, 26% SME, and 13% corporate loans.
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“With the highest credit rating of AAA/Stable, Tata Capital enjoys easy access to funds at lower interest rates. However, a higher share of secured loans and greater competition from banks in TCL’s segments lead to lower-than-peer NIMs of about 5-5.5%, which, along with lower credit cost, translates into RoA of 2.1-2.5% (in FY23/FY24),” it added.
At the IPO upper price band of Rs 326, Tata Capital’s implied valuation stands at 2.7x FY27E P/BV. Considering its AUM growth and RoE profile, its valuation is likely to fall between peers CIFC and HDB, which trade at 3.7x and 2.5x FY27E P/BV, respectively. Downside risks include an economic slowdown affecting AUM growth, delayed NIM expansion, higher credit costs, and regulatory challenges.
However, JM and Emkay 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 BV compounding,” the latter said.
“Despite being India’s largest IPO of 2025 and backed by the strong Tata Group brand, the listing was rather subdued compared to market expectations. The IPO had received decent investor participation, getting subscribed about 1.95 times overall, led by institutional demand. Tata Capital, a leading NBFC, enjoys a diversified presence across retail and corporate lending, wealth management, and other financial services. The company’s fundamentals remain sound with steady growth and strong parentage, but valuations were seen as fair, leaving limited room for listing-day excitement. Going ahead, investors may consider booking partial profits near listing levels while holding some shares for the long term, as the company’s growth prospects remain attractive in India’s expanding financial services sector. A stop-loss around Rs 300 is advisable to protect downside risk in the near term,” Shivani Nyati, Head of Wealth at Swastika Investmart, said.
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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, with the company offering a wide product range across various geographies and sourcing channels to minimize concentration risk.
(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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