IPO Note : Tata Capital Ltd by Choice Broking Ltd
Salient features of the IPO:
* TATA Capital Ltd. (TCL), the flagship financial services arm of the Tata Group and a wholly owned subsidiary of Tata Sons Pvt. Ltd., is categorized by the RBI as an Upper Layer NBFC. It is the third-largest diversified NBFC in India and ranks among the fastest-growing players in its segment, with total gross loans expanding at a CAGR of 37.3% between March 31, 2023 and March 31, 2025. Since commencing its lending operations in 2007, the company has served over 7.3mn customers as of June 30, 2025. Backed by a comprehensive suite of more than 25 lending products, TCL caters to a wide customer base that includes salaried and self-employed individuals, entrepreneurs, small businesses, SMEs, and corporates.
* The IPO is a combination of fresh issue (Rs.6,510.0 - 6,846.0cr) and OFS portion (of Rs. 8,240.6 - 8,665.9cr). The company will not receive any proceeds from the OFS portion. The net proceeds from the fresh issue will be utilized to augment the Company’s Tier-I capital base, to meets its future capital requirements, including onward lending.
Key competitive strengths:
* Flagship financial services company of the Tata group, with a legacy of over 150 years
* Third largest diversified NBFC in India, with the most comprehensive lending product suite
* Omni-channel distribution model, comprising pan-India branch network, partnerships and digital platforms
* Prudent risk culture and robust credit underwriting and collections capabilities, resulting in stable asset quality
* Digital and analytics at the core of the business, driving high quality experience and business outcomes
* Highest credit rating with a diverse liability profile
Business Strategy:
* Continue the growth trajectory by enhancing the product offerings and strengthening the distribution network
* To strengthen the risk management framework, credit underwriting and collections infrastructure to maintain high asset quality
* Leveraging technology and data analytics to drive efficiency, lower costs, enhance customer experience, and strengthen risk management
* To maintain the credit ratings and a diversified liability mix to optimise the borrowing costs
* Continue to attract, train and retain talented employees
* Leveraging the TMFL merger to become a full-stack vehicle finance provider and drive superior business outcomes
Risk and concerns:
* General slowdown in the global economic activities
* Business may be adversely affected by seasonal trends in the Indian economy
* The company's financial performance is sensitive to interest rate fluctuations
* The company operates under strict regulations governing India's financial services industry
* Competition
Valuation Overview and IPO Rating
At the upper price band, the issue is valued at a Adj. P/BV of 3.6x (post-issue BVPS), broadly in line with peers, making it fully priced. The company has reported steady growth in interest income on the back of loan book expansion and widening branch network across India. However, its RoE and RoA remain lower than peers, which is a concern. Backed by a strong brand and the proposed merger with TMFL that will enhance its customer base, the company is well-positioned for long-term growth. However, considering the near-term operational challenges, we assign a “Subscribe for Long Term” rating to the issue.
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
