 |
| Tata Capital gets 2 buy calls from Emkay and JM Finance |
Introduction
Tata Capital, the financial services arm of the renowned Tata Group, made its stock market debut on Monday, and the listing caught the attention of retail and institutional investors alike. Despite being the largest IPO of 2025 in India, Tata Capital’s shares listed at Rs 330, just 1% above the IPO price, indicating a subdued market response.
The muted listing, however, has not deterred domestic brokerages like Emkay Global Financial Services and JM Financial from assigning the stock a “Buy” rating, with a target price of Rs 360, implying a 10% upside from the IPO price. In this article, we provide a detailed review of Tata Capital’s IPO performance, financial projections, investment potential, and risk considerations.
Tata Capital IPO: Subscription and Listing Performance
The Tata Capital IPO received decent investor participation, getting subscribed 1.95 times overall, led primarily by institutional investors. The strong backing from the Tata Group brand was a key factor, but the listing saw a limited pop due to fair valuations.
Analysts attribute the muted listing to the fact that while Tata Capital is a solid NBFC (Non-Banking Financial Company), the market expected valuations to offer more room for upside. Retail investors, however, still find the stock attractive for long-term growth due to its diversified business model and secured loan portfolio.
Key Highlights:
-
IPO price: Rs 330
-
Listing price: Rs 330 (~1% premium)
-
Subscription: 1.95x overall, driven by institutional demand
-
Market debut: Subdued, despite being India’s largest IPO of 2025
Brokerages’ Ratings and Target Price
Emkay Global Financial Services
Emkay has initiated coverage on Tata Capital with a positive stance, emphasizing the Tata parentage and AAA credit rating, which ensures access to competitive borrowing costs. Key financial projections from Emkay include:
The brokerage highlighted the turnaround potential in Tata Capital’s vehicle finance business and the high share of secured loans in its product mix as key growth drivers.
JM Financial
JM Financial also rated Tata Capital as a “Buy”, noting its historical performance:
-
AUM CAGR FY22–24: 31%
-
Average RoA/RoE FY23–24: 2.3% / 18%
-
AUM growth FY25: 17% YoY (impacted by merger with Tata Motors Finance)
-
Projected AUM/PAT CAGR FY25–27: ~20% / 34%
-
Average RoA/RoE FY26–27: ~1.9% / 13%
-
Valuation: 2.9x FY27 estimated book value
JM Financial emphasized the diversified product portfolio and multi-geography presence, reducing concentration risk and improving resilience against economic volatility.
Tata Capital’s Financial Performance and Growth Outlook
Established in 2007, Tata Capital has emerged as a diversified NBFC, offering a range of financial products across retail, vehicle finance, and secured loans. Around 80% of its loan book comprises secured loans, with retail finance accounting for 61%.
The company’s strategy focuses on minimizing risk through:
-
Diversified loan book across multiple geographies
-
Strong presence in secured loan segments
-
Multiple sourcing channels for loan origination
Key Financial Metrics
| Metric |
FY23–24 |
FY25 (Projected) |
FY26–27 (Projected) |
FY28 (Projected) |
| AUM CAGR |
31% |
17% |
20% |
24% |
| RoA |
2.3% |
1.6% |
1.9% |
2.2% |
| RoE |
18% |
13% |
13% |
15.4% |
| EPS CAGR |
- |
30% |
- |
- |
Both Emkay and JM Financial have highlighted that while near-term re-rating potential may be limited due to moderate return metrics, long-term returns will largely be driven by book value compounding.
Tata Capital vs Peer NBFCs
At the upper price band of the IPO, Tata Capital’s valuation is approximately 2.7x FY27 price-to-book, compared to:
This indicates that while Tata Capital is reasonably priced, investors should temper expectations for short-term gains and focus on long-term growth potential.
Investment Considerations
Pros:
-
Tata Brand Backing: Strong parentage provides credibility and easy access to capital.
-
Diversified Loan Portfolio: Secured and retail finance dominance reduces credit risk.
-
Long-Term Growth Potential: AUM and PAT projected to grow at healthy CAGRs.
-
Valuation Potential: Reasonable entry point for long-term investors.
Cons:
-
Muted Listing Performance: Indicates limited excitement among retail investors.
-
Moderate Return Metrics: RoA and RoE lower than high-growth NBFC peers.
-
Limited Near-Term Re-rating: Stock returns likely driven by book value growth rather than immediate price jumps.
Expert Recommendation: Shivani Nyati, Head of Wealth at Swastika Investmart, suggested that investors could consider booking partial profits near listing levels while holding a portion of shares for long-term growth, with a stop-loss around Rs 300 to manage downside risk.
Long-Term Outlook for Tata Capital
Analysts project that Tata Capital will witness steady growth across key financial metrics, supported by:
-
Turnaround in vehicle finance business
-
High proportion of secured loans
-
Geographical and product diversification
-
Competitive cost of borrowing and AAA rating leverage
By FY28, RoA and RoE are expected to reach 2.2% and 15.4%, respectively, while AUM continues to expand at 24% CAGR. For investors looking at a balanced NBFC with steady growth, Tata Capital presents a compelling long-term investment case.
FAQs (Semantic SEO Optimized)
Q1. What was Tata Capital IPO subscription rate?
A1. Tata Capital IPO was subscribed 1.95 times overall, with institutional investors leading the subscription.
Q2. What is the listing price of Tata Capital shares?
A2. Tata Capital shares listed at Rs 330, roughly 1% above the IPO price, indicating a subdued market response.
Q3. What target price have analysts given for Tata Capital?
A3. Both Emkay Global Financial Services and JM Financial have assigned a target price of Rs 360, suggesting a 10% upside from the IPO price.
Q4. How does Tata Capital compare with peers?
A4. Tata Capital is valued at 2.7x FY27 price-to-book, compared to 2.5x for HDB Financial Services and 3.7x for Cholamandalam Investment & Finance Company, indicating moderate near-term upside.
Q5. What is Tata Capital’s long-term growth outlook?
A5. Analysts project AUM CAGR of 24% and RoA/RoE of 2.2% / 15.4% by FY28, driven by secured loans, vehicle finance recovery, and Tata Group backing.
Backlinks for Authority
Conclusion
Tata Capital’s IPO listing may have been underwhelming in the short term, but the long-term prospects remain promising for disciplined investors. Supported by Tata Group’s strong brand, a diversified loan portfolio, and improving financials, the NBFC is well-positioned for sustained growth.
Investors looking for a moderate-risk, long-term investment in India’s financial services sector can consider Tata Capital, keeping in mind a partial profit-booking near current levels and using a stop-loss strategy to mitigate downside risk.
For those tracking NBFC IPOs, Tata Capital stock performance, and AUM/RoA growth, this IPO serves as a critical benchmark for India’s expanding financial services sector in 2025 and beyond.
Comments
Post a Comment