Unlisted shares of Tata Capital, the financial services arm of Tata Sons, have taken a beating. Trading at INR 795 apiece, the stock has already slipped over 20% from its October 2024 peak of INR 1,100. What’s worrying investors more is that analysts now expect a further decline of up to 20%, as pricing concerns and stretched valuations weigh on sentiment.
Tata Capital IPO Price: The Slide
At its current level, the Tata Capital share price is already 27% below last year’s high. This fall has been compounded by weak investor appetite in the grey market, with shares tumbling despite the buzz around its upcoming IPO. Market chatter suggests that the Tata Capital IPO price band may come in far lower than today’s unlisted quote, echoing the experiences of HDB Financial Services and NSDL, both of which listed at steep discounts to their grey market pricing.
Adding pressure, Tata Capital’s July 2025 rights issue was priced at just INR 343 per share—less than half of today’s unlisted valuation and well below even the stock’s previous all-time low of INR 415. This disparity has sparked fears that the Tata Capital IPO price could align closer to the rights issue range, implying more downside for unlisted investors.
Crisil’s Growth Story vs. Market Reality
On paper, Tata Capital remains one of India’s fastest-growing diversified NBFCs:
- Gross loan book stood at INR 2.27 lakh crore as of March 2025.
- Loan growth surged 37.3% CAGR (FY23–FY25), the highest among top-tier NBFCs.
- Branch network expanded at a blistering 66.6% CAGR over the same period.
Yet, despite these positives, investors are fixated on valuation risks and return ratios.
Macquarie’s Stark Warning: High Valuation, Low Returns
Global brokerage Macquarie has sounded the alarm on Tata Capital’s return profile. For FY25:
- Return on Equity (ROE): 12%
- Return on Assets (ROA): 1.7%
By comparison, Bajaj Finance posted a 19.2% ROE and 4.57% ROA. Despite this underperformance, Tata Capital’s price-to-book multiple at INR 775 stood at a staggering 6.4x—well above peers such as Bajaj Finance (5.7x) and HDB Financial (3.4x).
Macquarie cautioned that even if the IPO were priced at a 60% discount (around INR 300 per share) to the Tata Capital unlisted share price, the company would still trade at richer valuations than many established NBFCs.
Peer Comparisons Highlight Overvaluation
Independent analysts echo similar concerns:
- At INR 825 per share, Tata Capital implied a P/E ratio of 88.5x on FY25 earnings, compared to an NBFC industry average of 33.4x.
- Its ROE of 11% trails not just Bajaj Finance (19.2%), but also Aditya Birla Capital (11.5%).
- Debt-to-equity ratio is estimated at 5.8x, higher than most peers.
Fair value estimates peg the Tata Capital IPO price closer to INR 325–375, suggesting the current unlisted valuation is inflated by nearly 2.5x.
Lessons from HDB and Tata Tech
Investor caution stems from recent precedents:
- HDB Financial Services: Traded unlisted at INR 1,275 but listed with a price band of INR 700–740, leaving early grey-market buyers with 40% paper losses.
- Tata Technologies: Grey market priced at INR 1,100 but IPO fixed at INR 500. The stock spiked on debut but has since corrected to around INR 706, down 46% from post-listing highs.
Both cases underscored how grey market euphoria often ignores fundamentals—and how IPO bands tend to reflect institutional sentiment, not dealer-driven pricing.
The Bigger Picture
Tata Capital’s IPO, pegged at INR 17,000 crore (~USD 2 billion), is set to be one of India’s largest financial services listings. The offer includes a fresh issue of 21 crore shares and an OFS of 26.58 crore shares, totalling 47.58 crore shares.
The listing is also regulatory-mandated: RBI requires upper-layer NBFCs like Tata Capital to go public by September 2025. But analysts warn that brand prestige alone won’t justify inflated valuations.
Final Verdict: Wait for Price Discovery
The consensus is clear:
- Short-term investors in the unlisted market face real risks of a sharp markdown.
- Long-term investors may find value in the IPO—but only if pricing is rationalised in the INR 325–400 band.
- Grey market pricing is no benchmark for IPO success, as both institutional demand and broader market sentiment will ultimately determine the listing outcome.
✅ Bottom Line: Tata Capital is a strong NBFC with robust growth, but its unlisted shares are grossly overpriced. With Tata Capital IPO pricing likely far below current grey market quotes, investors would be wise to exercise caution, wait for the official price band, and let the market perform true price discovery.
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