Solid subscription, tepid GMP
The Tata Group’s flagship non-banking financial company (NBFC) saw its IPO subscribed 1.95 times, led by strong institutional participation. Qualified institutional buyers (QIBs) oversubscribed their quota 3.42 times, while the non-institutional investors’ (NIIs) portion was booked 1.98 times. Retail investors were more cautious, subscribing 1.10 times.
Priced between Rs 310 and Rs 326 per share, the issue was offered at a 56% discount to Tata Capital’s unlisted market value. With the latest grey market premium (GMP) dropping from Rs 8 earlier this week to Rs 0 as of Sunday morning, analysts say the listing is likely to be flat.
Strong anchor demand led by LIC
Ahead of its IPO, Tata Capital raised Rs 4,642 crore from anchor investors, attracting interest from major domestic and global institutions. The Life Insurance Corporation of India (LIC) was the largest anchor, acquiring 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.
On the global front, investors such as Morgan Stanley, Goldman Sachs, Nomura, and Norway’s Government Pension Fund Global took significant allocations, reflecting strong confidence in the Tata Group’s financial arm.
The financial strengths
A wholly owned subsidiary of Tata Sons, Tata Capital is the group’s flagship financial services arm, offering retail, SME, and corporate lending, along with wealth management and investment banking. With total assets of Rs 2.52 lakh crore and a loan book of Rs 2.33 lakh crore as of June 2025, it ranks as India’s third-largest diversified NBFC, trailing only Bajaj Finance and Shriram Finance.
The company’s gross non-performing asset (NPA) ratio of 2.1% is among the lowest in the industry, supported by an 80% secured book and a broad network of 1,516 branches across 27 states and union territories. Between FY23 and FY25, Tata Capital’s revenue rose 56%, while profit after tax climbed 10% to Rs 3,655 crore.
“Our ambition is to strengthen our position as a leading player in the financial services sector. We see significant opportunities to expand our loan book and leverage our investments in technology,” said Rajiv Sabharwal, Tata Capital’s CEO. He added, “Our strategy has been to build a portfolio of multiple hero products rather than depend on a single offering.”
Valuation: fairly priced, say analysts
At the upper end of the price band, Tata Capital is valued at 4.1 times its FY25 book value and 33 times its earnings, slightly below the sector average. Analysts believe this offers a fair entry point.
“Given current market sentiment, Tata Capital’s management has wisely priced the IPO below the industry average, providing room for a healthy listing gain,” said Prashanth Tapse, Senior VP (Research) at Mehta Equities.
Brokerages including Aditya Birla Money, Anand Rathi, and Canara Bank Securities have recommended a “Subscribe – Long Term” rating.
Antique Stock Broking noted that “normalization of credit costs in the vehicle finance portfolio, along with realization of business synergies, would be key to achieving higher return ratios of around 15% RoEs—similar to peers like HDB Financial, currently trading at 3.5x June 2025 BVPS.”
Credit quality and risk pointers
According to ICICI Direct Research, Tata Capital’s assets under management (AUM) surged to Rs 2,33,363 crore in FY25, reflecting a 37.3% CAGR over FY23–25. The brokerage noted that while the company’s risk management framework remains strong, declining provisioning buffers are a concern, with the provision coverage ratio (PCR) falling to 58.5% in FY25.
The brokerage also highlighted the rising share of unsecured loans (~20%) and new-to-credit customers (~3.5%), which could lead to more volatile performance.
Canara Bank Securities noted that Tata Capital enjoys AAA domestic and BBB international credit ratings, with credit costs below 1% and net NPAs near 0.5%. “Daily return on equity and operating metrics outperform year-end figures by roughly 250 bps,” the brokerage said.
Anand Rathi Research valued Tata Capital at a post-issue market capitalization of Rs 1,38,382.7 crore, terming the IPO fully priced but maintaining a long-term positive stance.
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Proceeds and outlook
Funds raised will be used to bolster Tata Capital’s Tier-I capital and meet regulatory requirements, while supporting retail lending, digital initiatives, and infrastructure financing.
Antique Stock Broking noted that the company benefits from top-tier credit ratings from CRISIL, ICRA, CARE, and India Ratings, with an average borrowing cost of 7.8%. The debt mix is evenly split between floating (45%) and fixed-rate (55%) instruments, sourced primarily from banks and non-convertible debentures.
As the company readies for its market debut, all eyes will be on whether Tata Capital can match the blockbuster listing of Tata Technologies last year, or if a flat grey market is an early signal that investors are keeping expectations in check.
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(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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