Tata Capital's IPO
- amansp2006
- Dec 3, 2025
- 5 min read
By Oluwafemi Adesuyi, Archie Clarke, James Midgley, Ben Motamed (Durham University); Rakan Aqrouq, Krissa Mou, Terry Zhang, Scarlet Park(University of British Columbia)
Photo: Scott Graham
Summary of IPO
Tata Capital (NSE: TATACAP), a subsidiary of Tata Sons, is one of India’s largest non-banking financial companies (NBFCs), acting as a one-stop financial solutions partner for retail, corporate, and institutional customers. Classified as an Upper Layer NBFC in 2022, the firm was mandated to undergo a public listing within 3 years under RBI(Reserve Bank of India) regulations. NBFCs have been rapidly gaining market share in India and are expected to continue to grow as stress in the microfinance sector eases and disbursements increase. The NBFC has played a crucial role in financing and is gaining market share in key growth sectors, including trade, manufacturing, and services. Overall growth in the sector is expected to be 21% CAGR over FY 26-28.
While the industry is competitive, with market leaders like Bajaj Finance and Shriram Finance, Tata Capital has always had an advantage. As part of India’s largest conglomerate, it benefits from strong corporate governance and is known for its long-term value creation. Alongside its diversified portfolio of over 25 lending products, Tata Capital also has a highly diversified loan book, with no product accounting for over 20% of gross loans.
“The board felt it was more important at this stage to get more retail investors rather than maximise near-term value.” - Rajiv Sabharwal, Managing Director & CEO of Tata Capital
Company and IPO Profile
Tata Capital Limited is the flagship financial services subsidiary of Tata Sons, providing a wide range of financial services. The company’s core operations span retail, SME, and corporate lending, including personal, home, commercial vehicle, and business loans, as well as microfinance and equipment financing. In addition to lending, Tata Capital distributes insurance and wealth solutions and offers consumer finance products such as the Tata credit card. It ranks among India’s largest NBFCs (the third-largest diversified NBFC by loan book) with assets under management of approximately ₹2.33 lakh crore and a customer base of around 7.3 million as of mid-FY2026. In May 2025, the company merged Tata Motors Finance Ltd into its business, significantly expanding its vehicle finance portfolio. Tata Capital has also rapidly digitized its offerings, implementing paperless onboarding, instant approvals for commercial vehicle loans, and AI-based underwriting solutions to enhance efficiency and scalability.
Founded in: 1991
Headquartered in: Mumbai, India
CEO: Rajiv Sabharwal
Number of employees: 29,992
Market Cap: N/A (privately held)
LTM Revenue: ₹28,370 crore
Strategic Rationale
Tata Capital’s IPO serves as a pivotal moment for both regulatory compliance and long-term strategic positioning. After being classified by the RBI as an upper-layer NBFC in 2022, Tata Capital was mandated to list by September 2025, making this IPO not only a route for capital raising but an essential regulatory milestone. The listing thus enhances transparency and governance for a systemically important financial institution, aligning Tata Capital with rising industry and investor expectations for oversight and corporate disclosure.
The proceeds from the fresh issue, amounting to roughly ₹6,800 crore, significantly boost Tata Capital’s Tier-1 capital. This positions the company to scale its loan book beyond the FY25 figure of around ₹2.26 lakh crore, further strengthening its capacity to expand into high-growth segments such as clean energy, infrastructure, SME, and consumer finance. A demonstrated 37% CAGR in loan book growth over the past two years underscores Tata Capital’s momentum and ambition.
From a tax perspective, IPO listing prepares Tata Capital for optimized holding structures and access to broader institutional investors, supporting long-term market competitiveness. Ultimately, Tata Capital capitalizes on India’s surging demand for structured credit, digital finance, and green lending, positioning itself as a robust, diversified market leader with resilience and growth potential.
Strategically backed by the Tata Group, the company leverages its pan-India reach, a diversified financial services portfolio, and strong ecosystem synergies to compete with sector leaders such as Bajaj Finance. Its leadership in green lending and digital transformation further enhances its potential for scalable, sustainable growth in India’s evolving financial landscape.
Market Reaction
Tata Capital’s mega-IPO (India’s largest offering of 2025) was highly anticipated. Initial sentiment was bullish due to the Tata brand and strong fundamentals, but enthusiasm weakened closer to the launch. By the second day of bidding, the issue was only ~60% subscribed, and its grey market premium (the unofficial price investors pay for shares in an IPO before they are officially listed on a stock exchange) stood at a modest 4%, a sign of cautious optimism rather than frenzy. Analysts noted that a concurrent ₹11,600 crore (Indian unit of 10 million) IPO by LG Electronics diverted investor attention, while Tata Capital’s rich valuation (~34x P/E) left little room for short-term upside. Despite the muted buzz, experts highlighted the company’s diversified lending portfolio and Tata Group backing, viewing it as a solid long-term bet instead of a quick listing trade. Notable anchor investors, including LIC and Norway’s sovereign wealth fund, invested early, underscoring strong institutional interest.
On the final day, strong institutional demand pushed the IPO past full subscription (~1.95× overall). QIB investors bid ~3.4x their quota, retail demand barely hit ~1.1×. The stock’s market debut was lukewarm. Tata Capital listed at around ₹330, versus the ₹326 issue price (about a 1% premium), and closed roughly 1.5% above the IPO price at day’s end. This modest listing gain matched subdued grey-market signals that had predicted a flat start. Observers noted that the lack of a ‘pop’ confirmed the IPO was fully priced, yet they remain optimistic about Tata Capital’s long-term prospects given its scale and business strengths.
Potential Risks and Downsides
Tata Capital faces several risks that may constrain post-IPO performance. The company’s asset quality remains a key concern, with unsecured loans accounting for roughly 20-25% of its portfolio. These loans carry higher default risk due to the absence of collateral, while the group’s 26% exposure to SME lending is also vulnerable to economic slowdowns and uneven cash flows. Credit costs have risen from 2.1% to 2.4% over the past year, signalling increasing stress in the loan book and the potential for higher non-performing assets and lower profitability going forward.
As an NBFC, Tata Capital cannot accept public deposits and must rely heavily on borrowed funds. Its leverage of 6.5x equity makes the company particularly sensitive to rising funding costs, which have already increased from 6.6% to 7.8%. Any further rate hikes by the RBI may compress net interest margins, especially as lending rates cannot always be adjusted immediately. Approximately 10-12% of Tata Capital’s borrowings are denominated in foreign currency, exposing the company to currency depreciation and imperfect hedging.
Competitive pressures also pose a challenge. Tata Capital’s profitability metrics lag industry leaders such as Bajaj Finance and HDFC, with a lower ROE and a NIM of around 5.2% versus peer levels near 10%. Despite this, the IPO is priced at a premium valuation of over 38x earnings, leaving limited room for short-term upside.
Finally, regulatory compliance remains an ongoing risk. As a tightly supervised NBFC, past RBI observations relating to KYC and data issues highlight the possibility of penalties or restrictions if further lapses occur.
“Tata Capital's IPO was fairly priced, but the lack of a major valuation discount to its listed peers was one of the key factors for the tepid response.” - Ambareesh Baliga, Independent Market Analyst