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BACKGROUND

Tata Capital is the third-largest diversified NBFC in India, with gross loans of Rs. 2,334 billion and a customer base of 7.3 million as of June 30, 2025. It serves individuals, SMEs, and corporates through an omni-channel model with 1,516 branches across 27 states and UTs. Its loan mix comprises Retail (61.3%), SME (26.2%), and Corporate (12.5%) segments, alongside insurance and credit card businesses. Following its merger with Tata Motors Finance in May 2025, Tata Capital strengthened its presence in commercial vehicle, car loan, and supply chain finance segments

Details of the Issue:

The public issue consists of Offer for Sale of Rs. 8,666 cr and fresh issue of Rs.6,846 cr aggregating up to Rs 15,512 Cr.

Investment Rationale

*  Flagship Financial Services Company of the Tata Group

*  Third Largest Diversified NBFC in India

*  Omni-channel distribution model, comprising their pan-India branch network, partnerships

*  Driving Business Outcomes Through Digital and Analytics

Valuation and Recommendation:-

Tata Capital’s valuation appears fair when compared with peers such as Bajaj Finance, Shriram Finance, L&T Finance, HDB Financial, and Cholamandalam, which trade at an average P/BV multiple of around 4.1x FY25. While Tata Capital’s profitability metrics (ROA/ROE of 1.5%/10.7%) are below the peer average (2.6%/16.6%) due to lower NIMs and the ongoing integration of TMFL, the company benefits from superior asset quality (GNPA/NNPA of 1.9%/0.8% vs. peer average of 3.0%/1.5%) and strong Tata Group parentage. Considering its improving growth visibility and stable credit performance, we believe Tata Capital merits a valuation of 3.8x FY25 P/BV, implying a moderate 10% discount to peers. Backed by its diversified portfolio, prudent risk management, and expected profitability improvement post-merger, we assign a ‘Subscribe’ rating with a long-term positive outlook.

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