Why Everyone’s Talking About Tata Capital’s IPO—Should You Jump In or Wait?

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The much-anticipated initial public offering (IPO) of Tata Capital Ltd, the largest IPO in India for 2025, has officially opened for subscription today and will close on October 8, 2025. This IPO offers investors an opportunity to participate in one of the country’s leading financial services firms as it aims to strengthen its capital base for growth.

However, investors are encouraged to carefully evaluate the growth potential alongside the associated risks before subscribing to this landmark issue. For a detailed review, see our comprehensive IPO analysis here.

Tata Capital IPO Details 

  • Issue Details: Mainstream
  • Issue Size: Rs 15,511.87 crore
  • Fresh Issue: Rs 6,846 crore
  • Offer for Sale: Rs 8,665.87 crore
  • Price Band: Rs 310 – Rs 326
  • Lot Size: 46 shares
  • Listing Date: October 13, 2025

Overview of Tata Capital Ltd

  • Tata Capital, the flagship financial services arm of the Tata Group, is India’s third-largest and fastest-growing diversified NBFC. The company began its lending operations in 2007 and has served more than 7.3 million customers as of June 2025.
  • Tata Capital offers a wide suite of over 25 lending products, catering to salaried and self-employed individuals, entrepreneurs, small businesses, SMEs and corporates. The loan portfolio is highly granular, with 98% of accounts having a ticket size below Rs 1 crore. Around 80% of loans are secured and more than 99% of the portfolio is organic.
  • Tata Capital’s lending business is well diversified, with retail finance accounting for 61.3% of the loan book, SME finance contributing 26.2% and corporate finance forming the remaining 12.5%.

Tata Capital Key Strengths

  • Strong Market Positioning: Tata Capital is the third-largest diversified NBFC in India based on Total Gross Loans of Rs 2,334 billion as of June 30, 2025. It also offers the most comprehensive range of loan products among large diversified NBFCs in India as of March 31, 2025.
  • Robust Growth: Between FY23–25, Tata Capital’s total income grew at a CAGR of 44%, net interest income at 42% and net profit at 10%.
  • Healthy Asset Quality: Tata Capital has consistently maintained strong asset quality, reflected in a Gross Stage 3 Loans Ratio of 2.1%, Net Stage 3 Loans Ratio of 1.0%, and a Provision Coverage Ratio of 53.9% — among the best across large NBFCs in India as of June 30, 2025.
  • Extensive Distribution Network: As of June 30, 2025, Tata Capital had a pan-India presence with 1,516 branches across 1,109 locations in 27 States and Union Territories. This branch network is supported by over 30,000 direct selling agents, more than 400 original equipment manufacturers, 8,000+ dealers and 60+ digital partners.
  • Strong Credit Profile: Backed by “AAA/Stable” ratings from CRISIL, ICRA, CARE and India Ratings, Tata Capital enjoys competitive borrowing costs. Its strong ratings, diverse funding mix and long-standing lender relationships helped keep the average borrowing cost at 7.8% in FY25.
  • Diversified Loan Portfolio: Tata Capital’s portfolio is well-diversified across customer segments, sectors and geographies, minimizing concentration risks and ensuring resilience across economic cycles. Notably, no single lending product contributes more than 20% of the loan book.

Tata Capital Risk Factors

  • Declining ROA: Tata Capital’s return on assets (ROA) has continuously declined from 2.9% in FY23 to 1.8% in FY25, primarily due to the merger with Tata Motors Finance Ltd (TMFL), which had weaker profitability.
  • Asset Quality Pressure: Post-merger, Tata Capital’s standalone Gross Stage 3 Loan Ratio increased to 1.9% in FY25 from 1.5% in FY24. The Provision Coverage Ratio fell from 74.1% to 58.5% over the same period, leading to a higher Net Stage 3 Ratio.
  • Elevated Unsecured Loan Exposure: As of June 30, 2025, unsecured loans formed 20% of the loan book (down from 22.4% in June 2024 and 21% in March 2025). Despite the moderation, the exposure remains high, posing credit risk since these loans lack realizable collateral.
  • Interest Rate Risk: Fixed-rate loans accounted for 36.3% of the loan portfolio, while fixed-rate borrowings stood at 55% of total borrowings as of June 30, 2025. Any adverse movement in interest rates may increase borrowing costs, compress net interest margins (NIM), and affect both lending and treasury operations.
  • Legal Contingencies: Tata Capital, its subsidiaries, promoters, and key managerial personnel are subject to ongoing legal proceedings involving claims amounting to Rs 17,941 crore. Any unfavorable rulings could significantly impact the company’s financial performance, operations, and reputation.

Final Thoughts: Should You Subscribe to Tata Capital’s IPO?

  • Tata Capital Ltd brings to the table an 18-year track record of consistent profitability, a well-diversified product mix and strong liquidity, all underpinned by the credibility and financial strength of the Tata Group.
  • On valuations, the IPO is priced at a P/E multiple of 35x on FY25 earnings, which appears reasonable relative to business fundamentals. Additionally, the steep discount to unlisted valuations, coupled with strong anchor investor participation, may support near-term gains.
  • While the recent merger with Tata Motors Finance has added some pressure on asset quality and profitability, this is expected to be balanced by Tata Capital’s ability to leverage the Tata ecosystem to drive significant growth and unlock cross-selling opportunities in the future
  • Another key advantage lies in the company’s funding profile. As a subsidiary of Tata Sons, Tata Capital enjoys one of the lowest borrowing costs among peers. This not only helps preserve margins but also allows a sharper focus on low-risk, high-quality lending.
  • Looking ahead, whether Tata Capital can replicate the trajectory of peers like Bajaj Finance will depend heavily on execution. Nevertheless, its strong parentage, prudent risk management and the market’s clear preference for quality financial services players position it to command a valuation premium.
  • Considering these factors, long-term investors may consider subscribing to the IPO.

For a deep dive into other IPOs, explore: IPO Corner on Liquide