The Tata Group’s reputation in capital markets is unmatched — from TCS setting the gold standard for IT companies to the more recent Tata Technologies IPO which saw overwhelming demand.
Continuing this legacy, Tata Group’s financial services arm, Tata Capital, had confidentially filed for its IPO and received SEBI’s approval in July. The company has now filed its Updated Draft Red Herring Prospectus (UDRHP).
Market participants and investors alike are keenly speculating on the Tata Capital IPO size. Based on early indications, the issue size of Tata Capital IPO could be in the range of INR 15,000 crore to INR 17,400 crore. If realized, this would make it India’s fourth-largest IPO to date — behind only LIC, Paytm, and Hyundai Motor India.
The company’s timing is strategic. India’s credit penetration is still low compared to developed economies, but retail credit demand is booming — driven by rising incomes, expanding consumption, and greater comfort with digital borrowing. NBFCs are gaining ground, particularly in retail and SME lending, areas where Tata Capital has built a dominant, diversified, tech-driven franchise.
Layer onto this its AAA domestic credit rating, a strong capital base, and the recent merger with Tata Motors Finance (TMFL), and the IPO begins to look less like a funding exercise and more like a scale-and-dominate move.
2️⃣ Tata Capital IPO Snapshot
The Tata Capital IPO is expected to be a dual-structured fundraising:
- Fresh Issue: Upto 21,00,00,000 equity shares — proceeds to be used for strengthening capital adequacy, expansion of loan book, and technology investments.
- Offer for Sale (OFS): Upto 26,58,24,280 equity shares — partial exit for Tata Sons (Promoter) & International Finance Corporation (Investor).
Likely Pricing: The company recently launched a rights issue at INR 281 per share, raising INR 1,504 crore. Rights issues are typically priced 10–30% lower than fair market value, which implies a likely IPO range of INR 325–INR 365.
Current Unlisted Market Price: Tata Capital unlisted share price is currently at ~INR 825, up ~83% in recent weeks. The rights issue at INR 281/share signals an IPO price range of INR 325–365. For unlisted buyers today, this gap poses a valuation risk — oversubscription alone doesn’t guarantee listing gains.
| Metric | Estimate / Data | Relevance |
|---|---|---|
| Tata Capital IPO Size | INR 15,464–17,367 crore | Fourth-largest IPO in India |
| Fresh Issue size of Tata Capital IPO | INR 6825–7,665 crore | Growth capital |
| OFS | INR 8,639-9,702 crore | Promoter monetisation |
| Rights Issue Price | INR 281 | Anchor for IPO price band |
| Likely IPO Price Band | INR 325–365 per share | Based on rights issue discount norms |
| Pre-IPO Unlisted Price | INR 825 per share | Suggests overheating in private market |
3️⃣ Tata Capital’s Business in a Nutshell
Tata Capital is far from a niche lender. Its INR 1.98 lakh crore loan book (as of 31 March 2025) spans across multiple customer segments and risk profiles, giving it earnings resilience even in volatile market cycles. The NBFC has a network of 1,496 branches and over 70 lakh customers.
Breakdown of Lending Portfolio:
- Retail Finance: INR 1.41 lakh crore (62.3% of total loans) — includes home loans, personal loans, business loans, vehicle finance, and microfinance.
- SME Finance: INR 59,462 crore (26.2%) — includes loans against property, working capital finance, and supply chain finance.
- Corporate Finance: INR 25,975 crore (11.5%) — includes term loans, project finance, and leasing solutions.
Non-Lending Businesses:
- Distribution of insurance & credit cards
- Wealth management services with INR 6,660 crore in AUM
- Private equity fund management (INR 7,000 crore raised across funds)
What stands out is that 88.5% of loans are to retail and SME customers — segments with high yields but also requiring strong credit underwriting and collections infrastructure, both of which Tata Capital has heavily invested in.
4️⃣ The Tata Motor Finance Merger – Doubling Down on Vehicle Finance
In May 2025, Tata Capital absorbed Tata Motors Finance (TMFL) — a significant move to consolidate Tata Group’s financial services under one roof.
Why it matters:
- Scale Boost: Adds INR 3.02 lakh crore in gross loans and 353 branches to Tata Capital’s already vast network.
- Segment Strengthening: Bolsters commercial vehicle and passenger vehicle lending — both new and used.
- Distribution Advantage: Inherits 450+ Tata Motors dealer touchpoints, creating a captive lending opportunity for auto buyers.
But here’s the catch:
TMFL’s asset quality lags Tata Capital’s. As of FY25:
- TMFL GNPA: 7.1% vs Tata Capital’s 1.5%
- TMFL Net NPA: 4.4% vs Tata Capital’s 0.5%
This means while the merger boosts size and reach, it also brings credit risk baggage. Post-merger, cleaning up TMFL’s stressed portfolio will be a key management challenge.
5️⃣ Digital-First DNA
One of Tata Capital’s biggest strengths is its technology-led lending model.
- 97.8% of FY25 customer onboarding was digital.
- 90.7% of March 2025 retail disbursements were via scorecards and business rule engines.
- 98.6% of collections were through digital channels like UPI and e-NACH.
- 2.1 crore+ mobile app downloads.
Advanced tech initiatives include:
- GenAI for Credit Memos: Automates summarisation, risk assessment, and contextual analysis of loan proposals.
- ML-Based Collections Models: Predict repayment likelihood and assign optimal collection channels.
- Geo-Fencing & Location Intelligence: Optimises field collections.
- Conversational AI Assistants: Resolve over 95% of customer queries without human intervention.
This isn’t just digital for the sake of optics — it directly reduces costs, improves speed, and scales efficiently without proportionate headcount expansion.
6. Tata Capital IPO: Financial Performance
| Metric | FY23 | FY24 | FY25 | CAGR (FY23–25) |
|---|---|---|---|---|
| Total Gross Loans | 1,20,196.8 | 1,61,231.0 | 1,98,163.9 | 37.3% |
| PAT | 2,945.77 | 3,326.96 | 3,655.02 | 10.0% |
| ROE | 20.6% | 15.5% | 12.6% | — |
| ROA | 2.9% | 2.3% | 1.8% | — |
| GNPA | 1.7% | 1.5% | 1.5% | — |
| NNPA | 0.4% | 0.4% | 0.5% | — |
| PCR | 77.1% | 74.1% | 65.8% | — |
7. Asset Quality: Strong, but TMFL Integration is the Test
In FY 2025, Tata Capital’s Gross Stage 3 Loans Ratio was 1.5%, and Net Stage 3 Loans Ratio 0.5% — far better than the NBFC industry average of ~3–5%. Provision Coverage Ratio (PCR) stood at 65.8%, a comfortable buffer.
TMFL, however, comes with a very different profile:
- TMFL GNPA: 7.1% (FY 2025) — largely from cyclical commercial vehicle financing.
- TMFL PCR: 39.5% — significantly below Tata Capital’s.
Post‑merger implication: Consolidated GNPA could temporarily rise to ~2.5–3% until TMFL’s collections are brought up to Tata Capital’s standards. The company plans to rely heavily on AI‑driven collections — 30+ ML models and geo‑fencing‑enabled field operations — to speed up this clean‑up.
8. Funding Strength & Treasury Advantage
Tata Capital benefits from AAA/Stable ratings (CRISIL, ICRA, CARE, India Ratings), which translate directly into a lower cost of funds versus peers. FY 2025’s Average Cost of Borrowings was 7.8% — competitive among large NBFCs.
Funding mix:
- Domestic bank loans (public & private sector)
- NCDs & perpetual debt
- External commercial borrowings (ECB)
- Mutual funds, insurance companies, provident & pension funds
- Maiden USD 400 million (~INR 3,512 crore) foreign currency bond in Jan 2025 — diversification into global investors.
ALM profile: 54% fixed‑rate borrowings, 46% floating — providing a natural interest‑rate hedge. No single lender contributes more than 10% of borrowings — minimising concentration risk.
📊 Note: This rating‑led spread advantage is likely to sustain post‑IPO, as the consolidated entity’s size and capital adequacy improve.
9. Digital & AI Leadership: More Than a Buzzword
Tata Capital’s “digital‑first” agenda is more than marketing — it’s execution‑driven. In FY 2025, 97.8% of customer onboarding happened through digital channels. The backbone:
- GenAI underwriting co‑pilot — 90.7% of retail disbursements via scorecards or BREs.
- AI‑driven pre‑delinquency management — predicting bounce probability to intervene early.
- Conversational GenAI bots — multilingual, 99.7% accuracy, CRM‑integrated for automated service.
- Digital sourcing ratio — >80% in retail, ~65% in SME, ~50% in corporate.
💡 Impact example: GenAI‑enabled underwriting reduced home loan approval turnaround from 5 days to 36 hours; AI‑led early‑bucket interventions cut delinquencies by 15–20%.
10. The TMFL Merger: Scale Meets Cyclicality
TMFL adds a INR 30,230 crore loan book and a pan‑India 353‑branch network, giving Tata Capital immediate scale in commercial vehicle financing.
Synergies:
- Tata Motors dealer ecosystem access
- Strong foothold in used‑vehicle financing
- Dealer/vendor corporate lending
Challenges:
- Commercial vehicle lending is cyclical — sensitive to freight demand and rural consumption.
- Higher GNPA levels will need aggressive collections management.
📊 Forecast: Short‑term margin pressure from higher provisioning is likely, but medium‑term growth will benefit from scale and Tata ecosystem integration.
Closing View
Tata Capital IPO is a play on scale, diversification, and digital leadership — but TMFL integration adds a critical execution challenge.
- Strengths: Brand trust, AAA rating, diversified portfolio, AI‑driven efficiency, omni‑channel reach.
- Watch‑points: TMFL asset quality clean‑up, GNPA spike risk, commercial vehicle cycle, IPO‑unlisted price gap.
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