Tata Capital, the financial powerhouse of the illustrious Tata Group, is now gearing up for one of India's largest IPOs of 2025, valued at an impressive Rs 15,512 crore. The public issue opens for subscription on October 6 and will close on October 8, promising to be one of the most talked-about listings of the year.

Backed by the mighty Tata legacy, the IPO has already drawn pre-issue investments exceeding Rs 4,641 crore from institutional giants, even before retail investors join the fray.

IPO overview

Issue Dates: October 6 - 8, 2025

Total Issue Size: Rs 15,511.87 crore

Price Band: Rs 310 - Rs326 per share

Minimum Investment: Rs 14,996 (46 shares)

Allotment Date: October 9, 2025

Tentative Listing: October 13, 2025

How Tata Capital makes money

Tata Capital operates as a Non-Banking Financial Company (NBFC) - lending like a bank but without accepting deposits. Instead, it borrows from banks, mutual funds, and institutional investors, lending the money at higher interest rates - pocketing the spread as profit.

As of June 30, 2025, Tata Capital's loan book stood at Rs 2,33,400 crore, cementing its position as India's third-largest diversified NBFC. Retail and SME loans drive most of its business, with 98% of its borrowers holding loans below Rs 1 crore, ensuring low concentration risk.

The firm's product basket includes over 25 financial services - from car and home loans to wealth management, insurance, and credit cards. Its network spans 1,516 branches across 27 states and union territories, supported by over 30,000 agents and digital partners, extending its reach from metros to the nation's heartlands.

Where the IPO funds are headed

To Strengthen the Capital Base: Out of the total Rs 15,511.87 crore issue, Tata Capital will raise Rs 6,846 crore through fresh equity, bolstering its Tier-I capital - the financial cushion that shields against loan losses. With an existing capital adequacy ratio of 16.6%, the infusion will enhance lending capacity and regulatory comfort.

To Power Future Growth: The funds will also fuel its expanding loan book of Rs 2.33 lakh crore, enabling sustainable lending aligned with RBI's tightened NBFC norms.

To Meet Regulatory Mandate: In 2022, the RBI classified Tata Capital as an“Upper Layer NBFC,” mandating a stock market listing by 2025. This IPO thus fulfills a governance directive while unlocking new growth opportunities for investors.

Why Tata Capital stands out

The Tata Trust Factor: The Tata Group's credibility gives Tata Capital unmatched brand strength, making it the country's third-largest NBFC by loan size.

AAA Credit Ratings: Rated 'AAA' with a stable outlook by CRISIL, ICRA, CARE, and India Ratings, Tata Capital enjoys premium borrowing rates and investor confidence.

Low-Risk, Wide Loan Portfolio: With 98% of loans below Rs1 crore, the company's exposure to big-ticket defaulters is minimal, ensuring resilience.

Top-Tier Asset Quality: Its Gross Stage 3 loans (bad loans before provisioning) stand at 2.1%, while Net Stage 3 (post provisions) sits at 1% - among the cleanest in the industry.

Digitally Driven: A staggering 96% of retail loans are processed via automated systems, improving speed, accuracy, and operational efficiency.

Risks to keep an eye on

Heavy Borrowing Load: Tata Capital's debt stands at Rs2,11,852 crore, roughly 6.5x its equity, which amplifies growth but adds vulnerability to interest rate fluctuations.

Rising Credit Costs: Bad loan costs rose from 2.1% (June 2024) to 2.4% (June 2025) - a metric worth watching.

Post-Merger Adjustments: Its merger with Tata Motors Finance (TMFL) in May 2025 may cause short-term distortions in financial metrics.

Regulatory Scrutiny: Earlier RBI inspections flagged data duplication and weak KYC tracking at TMFL - issues that must remain in check.

Rate Volatility: Any global or domestic interest rate spike could tighten funding margins.

Up to Rivals Metric Tata Capital Bajaj Finance Loan Book Rs2.33 lakh crore Rs4.4 lakh crore Return on Equity (RoE) 12.6% ~19% Borrowing-to-Equity 6.6x 3.7x P/E Ratio 37.9x ~37x

While Tata Capital's leverage is higher, its growth momentum remains robust, underpinned by brand trust and digital efficiency.

Financial Highlights

Between FY23 and FY25, Tata Capital's revenue soared at a 44% CAGR, touching Rs28,370 crore, aided by the TMFL acquisition. Profit after tax surged from Rs2,946 crore (FY23) to Rs3,655 crore (FY25).

The June 2025 quarter recorded a 114% jump in profits to Rs1,041 crore, as the cost-to-income ratio improved to 36.8%, reflecting strong operational discipline. Meanwhile, the Net Interest Margin (NIM) held steady at 5.2%, a testament to stable efficiency despite mounting leverage.

IPO Valuation and Pricing

At the upper price band of Rs326, Tata Capital's market capitalization is estimated at Rs1.38 lakh crore, valuing it nearly on par with Bajaj Finance. With a P/E of 37.8x and a P/B ratio of 4.1x, the valuation captures both brand strength and growth potential - though investors should consider merger effects while comparing FY25 numbers.

Who's Cashing Out

The IPO includes an Offer for Sale (OFS) worth Rs 8,665.87 crore: Tata Sons Pvt Ltd will offload shares worth Rs 7,498 crore - a strategic diversification, not an exit.

International Finance Corporation (IFC) will sell Rs1,167.9 crore worth of shares, earning 13x returns on its 2024 investment - a testament to Tata Capital's value surge.

The company itself won't receive proceeds from this portion.

Industry Landscape

India's NBFC sector has ballooned from Rs2 trillion in 2000 to Rs48 trillion by FY25 - driven by credit-hungry small businesses, underserved borrowers, and a digital lending wave.

The key growth drivers:

Credit Boom: Loan demand expected to rise 15–17% annually till FY28.

Financial Inclusion: Only 27% of Indians are financially literate - a vast untapped market.

Tech-Driven Lending: Mobile apps and digital disbursements are cutting costs and delays.

Despite regulatory scrutiny and funding dependency, brands like Tata Capital stand poised to thrive in this evolving financial ecosystem.

Analyst Verdict

Tata Capital's IPO offers a blend of Tata reliability, regulatory compliance, and digital ambition. The fundamentals remain robust - top ratings, disciplined growth, and broad retail reach. Risks exist, but the company's credibility and structure inspire confidence.

For long-term investors seeking steady, stable growth anchored in trust, Tata Capital's debut could be a golden ticket in India's financial evolution.

(This article has been curated with the help of AI)

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