Tata Capital IPO is arguably one of the most awaited financial sector listings of the decade. Backed by the century-old Tata Group, the company has rapidly evolved from a mid-sized lender into India’s third-largest diversified NBFC, with a loan book crossing INR 2.33 lakh crore as of 30 June 2025.
But what makes this IPO so important for investors is not just the Tata brand. It is a chance to participate in a financial services business that has delivered 37.3% CAGR loan book growth between FY23 and FY25, while expanding aggressively into retail, SME, and vehicle finance.
📌 What you will learn from Tata Capital IPO review:
- How Tata Capital’s business model is structured.
- Key revenue streams driving growth.
- Impact of the Tata Motors Finance (TMFL) merger.
- Early insights into financial sustainability and asset quality.
This IPO is not about rescuing a stressed lender—it is about fueling growth with fresh equity, ensuring Tata Capital can compete head-to-head with Bajaj Finance, Shriram Finance, and other large NBFCs in India’s booming credit market.
Table of Contents
Tata Capital at a Glance
- Incorporation: Established in 2007 as the financial services arm of Tata Sons.
- Scale: Loan book of INR 2,33,400 crore (as of June 2025), supported by 1,516 branches across 27 states & UTs.
- Customers & Employees: Serves 73 lakh customers with a workforce of 28,813 employees.
- Disbursements: INR 1,42,301.7 crore in FY25, with a YoY growth of 35.5%. Q1 FY26 alone saw disbursements of INR 34,714.3 crore.
- Market Position: India’s 3rd largest diversified NBFC, competing directly with Bajaj Finance and Shriram Finance.
📌 Merger Boost:
In May 2025, Tata Capital merged with Tata Motors Finance (TMFL), bringing:
- 353 new branches and 6,351 employees.
- A strong foothold in commercial & passenger vehicle finance.
- TMFL now contributes:
- 92.5% of commercial vehicle loans,
- 16.8% of car loans,
- 12.8% of supply chain finance.
This merger transformed Tata Capital from a primarily retail-SME lender into a truly diversified NBFC with dominance in the vehicle financing segment.
How Tata Capital Makes Money?
Tata Capital business model is designed as a multi-pronged financial services engine. It combines traditional lending with fee-based businesses, ensuring revenue diversification and long-term scalability.
A. Lending Businesses – The Core Engine
Lending remains the backbone, contributing over 90% of total revenues. The model is diversified across:
- Retail Lending (~62% of loan book)
- Products: Personal loans, home loans, consumer durable loans, education loans, and credit cards.
- Features: High yield, shorter tenure, digitally-driven disbursals.
- Strategic Importance: Retail growth is aligned with India’s rising middle-class consumption story.
- SME & MSME Lending (~26% of loan book)
- Products: Working capital loans, equipment loans, and supply chain finance.
- Features: Higher risk-adjusted yields compared to corporate lending.
- Strategic Importance: Supports India’s fast-growing SME ecosystem, making Tata Capital a preferred partner for small businesses.
- Corporate Lending (~11% of loan book)
- Products: Structured finance, project finance, term loans, and securitization.
- Features: Lower yields but large ticket sizes ensure scale.
- Strategic Importance: Builds relationships with blue-chip corporates and enhances cross-sell opportunities.
- Vehicle Finance – Post TMFL Merger
- TMFL’s inclusion makes Tata Capital a significant player in commercial and passenger vehicle loans.
- Contribution:
- 92.5% of CV loans
- 16.8% of car loans
- 12.8% of supply chain finance
- Importance: Diversifies risk profile, though this vertical carries higher asset quality risks.
B. Non-Lending Businesses – Fee & Advisory Income
Unlike pure-play NBFCs, Tata Capital earns meaningful non-interest income, adding stability to earnings:
- Insurance Distribution: Acts as a corporate agent for life and general insurance products, earning commissions.
- Wealth Management & Broking: Offers distribution of mutual funds, PMS, AIFs, bonds, and equity broking.
- Private Equity & Infrastructure Funds: Through Tata Capital PE and Tata Capital Growth Fund. These generate management fees and carried interest.
- Advisory & Investment Banking: Loan syndication, M&A advisory, and capital markets advisory for corporates.
📌 Insight: These businesses do not consume heavy capital, unlike lending, and hence improve return on equity.
C. Distribution Strength – Physical + Digital Hybrid Model
- Physical: 1,516 branches across 27 states and UTs.
- Digital: End-to-end online loan origination, underwriting, and servicing.
- Partnerships:
- DSAs (Direct Selling Agents) – drive retail customer acquisition.
- OEM tie-ups – auto loans via Tata Motors and other manufacturers.
- Dealer networks – strong penetration in consumer durable financing.
This hybrid strategy allows Tata Capital to scale rapidly without proportional rise in cost-to-income ratio.
D. Funding Model – How Tata Capital Manages Its Liabilities
- AAA Credit Ratings: Backed by Tata Group parentage, giving access to low-cost borrowing.
- Sources of Funds: Bank borrowings, NCDs, CPs, and securitization.
- Advantage: Tata Capital’s borrowing costs are among the lowest in NBFC space, ensuring competitive lending rates while protecting margins.
E. Risk Management Framework
- Underwriting: Strong analytics-driven credit scoring and digital verification.
- Asset Quality: GNPA at 2.1% (Q1FY26), Net NPA at 1.0%.
- Provisioning: PCR at ~54%, showing adequate coverage despite rapid loan growth.
- Diversification: Retail + SME + corporate + vehicle loans ensure no overdependence on a single asset class.
Tata Capital is not a mono-line lender. Its business model blends retail lending momentum, SME relevance, corporate credibility, and fee-based diversification. Combined with Tata brand equity and cheap funding, it is positioned as a scaled, systemically important NBFC with multiple revenue engines.
Tata Capital IPO Review: Revenue Streams Analysis
The composition of Tata Capital revenue streams reflects the DNA of a diversified financial services platform. While interest income remains the primary driver, non-interest income streams are expanding rapidly, giving the company resilience against interest rate cycles.
A. Interest Income – The Core Driver (91% of revenues)
- FY25: INR 25,719.77 crore vs FY24: INR 16,366.47 crore (57% YoY growth).
- Q1 FY26: INR 6,931.83 crore (up from INR 5,995.16 crore in Q1 FY25).
- Growth fuelled by:
- Loan book CAGR of 37.3% (FY23–FY25).
- Aggressive disbursements – INR 1,42,301.7 crore in FY25 vs INR 74,766.7 crore in FY23.
- Sustainability: Interest income will continue to dominate, given 80% of the loan book is secured, and Tata Capital’s AAA credit rating ensures low cost of funds.
📌 Interest income is scaling fast but is sensitive to NIM compression. Margins fell from ~22% net in FY23 to ~13% in FY25 due to rising borrowing costs. However, scale offsets margin pressure.
B. Fee & Commission Income – High-Growth, Low-Capital Business (~6% of revenues)
- FY23: INR 569.58 crore → FY24: INR 1,045.88 crore → FY25: INR 1,779.75 crore.
- CAGR of ~76%, outpacing loan book growth.
- Sources:
- Insurance Distribution – Commission from cross-selling life & general insurance.
- Wealth Management – Mutual fund, PMS, AIF distribution.
- Advisory & Loan Processing Fees – Fees charged to corporate clients and retail borrowers.
- Strategic Importance: Fee income is non-capital intensive, improves ROE, and provides stable annuity-like earnings even if loan growth slows.
📌 Tata Capital’s fee income is scaling like Bajaj Finance’s, though from a smaller base. Over the next 3–5 years, this vertical could emerge as a 10%+ revenue contributor, de-risking the P&L.
C. Other Income – Opportunistic Boost (~3% of revenues)
- Rental Income: INR 272.25 crore (FY25), reflecting leased assets and infrastructure.
- Net Gains on Financial Instruments: INR 236.47 crore in FY25 (up sharply from INR 33.21 crore in Q1 FY25).
- Dividend Income: INR 24.01 crore.
- Fair Value Gains: Periodic gains on equity/debt investments under FVTOCI.
📌 These streams are volatile and tied to market cycles, but they provide periodic boosts. Unlike Bajaj Finance, Tata Capital has a slightly higher share of these income lines, which can magnify earnings in bullish markets.
D. Revenue Sustainability & Risks
- Sustainability Drivers:
- Loan growth momentum in retail & SME.
- Fee income scale-up (insurance + wealth).
- Strong distribution network ensuring cross-sell.
- Risks:
- Interest income is vulnerable to margin pressure if borrowing costs rise faster than lending rates.
- Fee income linked to capital market cycles (mutual funds, PE fees).
E. Key Takeaways
- Interest Income will remain the dominant engine (90%+), but growth will be margin-sensitive.
- Fee Income is the “dark horse” – fast-growing, non-capital intensive, and will play a bigger role in earnings stability.
- Other Income adds opportunistic gains but should not be relied upon structurally.
- Overall, Tata Capital is evolving from a pure lending NBFC into a hybrid platform, where fee-based and advisory businesses complement lending revenues.
Tata Capital IPO Analysis: Where the Money Flows
Tata Capital’s diversified loan portfolio reflects a multi-segment growth strategy, with each vertical catering to different risk-return profiles.
A. Retail Lending (~62% of Loan Book)
- Products: Personal loans, housing finance, consumer durable loans, education loans.
- Growth Drivers:
- Rising middle-class demand.
- 97%+ retail loans sourced digitally.
- Shorter tenures, higher yields vs corporate loans.
B. SME & MSME Lending (~26% of Loan Book)
- Products: Supply chain finance, equipment loans, working capital lines.
- Growth Drivers: India’s SME sector expansion post-COVID.
- Significance: Offers higher yields but demands robust credit underwriting.
- Asset Quality: Needs monitoring, though currently stable due to diversified exposure.
C. Corporate Lending (~11% of Loan Book)
- Products: Structured finance, infrastructure loans, term loans.
- Features: Lower yields, longer tenures, large ticket sizes.
- Significance: Strengthens relationships with blue-chip corporates and enhances cross-sell opportunities in investment banking, wealth, and advisory.
D. Vehicle Finance (TMFL Integration)
- A critical shift post-May 2025 merger with Tata Motors Finance (TMFL).
- TMFL Contributions:
- 92.5% of commercial vehicle loans.
- 16.8% of car loans.
- 12.8% of supply chain finance.
- Challenge: CV lending is cyclical and asset quality stressed (GNPA ~7.1% at TMFL FY25).
- Positive Spin: Integration strengthens scale and distribution, while Tata Capital’s balance sheet provides stability.
E. Non-Lending Businesses – Stable Add-Ons
- Insurance Distribution: Growing commissions through tie-ups.
- Wealth Management: Expanding AUM with HNI/retail clients.
- Private Equity & Growth Funds: Fee income + long-term potential.
- Advisory Services: Loan syndication, M&A advisory, structured solutions.
Unlike peers overly dependent on one vertical, Tata Capital is a multi-engine NBFC, blending retail growth, SME relevance, corporate credibility, and fee-based businesses.
Tata Capital IPO Analysis: Financial Performance
Tata Capital’s financials show robust revenue growth, healthy profitability, and some margin pressure due to rising funding costs.
| Particulars | FY23 | FY24 | FY25 | Q1 FY26 | Growth Trend |
|---|---|---|---|---|---|
| Revenue from Operations | 13,628.85 | 18,174.82 | 28,312.74 | 7,664.81 | 45% CAGR (FY23–FY25) |
| Net Profit | 294.58 | 3,326.96 | 3,655.02 | 1,040.93 | PAT ↑ 24% in 2 yrs; Q1FY26 +120% YoY |
| Net Margin (%) | 22.2% | 17.3% | 12.9% | 12.9% | Margins compressed due to higher finance costs |
| ROE (%) | 20.6 | 15.5 | 12.6 | 12.5 | Moderating returns, but capital raise to aid |
| ROA (%) | 2.9 | 2.3 | 1.8 | 1.8 | Stable at ~1.8–2% |
| Disbursements | 74,766.7 | 1,04,994.4 | 1,42,301.7 | 34,714.3 | Nearly doubled in 2 yrs |
| Loan Book (Closing) | 1,20,196.9 | – | 2,26,553.0 | 2,33,398.6 | Loan book CAGR ~37% |
| Gross Stage 3 Loans (%) | 1.7 | 1.5 | 1.9 | 2.1 | Rising slightly |
| Provision Coverage Ratio (%) | 77.0 | 74.1 | 58.5 | 53.9 | Lower buffer but adequate |
📌 Key Insights from Financials
- Growth Engine: Revenue nearly doubled in 2 years, backed by aggressive disbursements.
- Profitability: PAT grew, though net margins narrowed from 22% → 13%.
- Asset Quality: GNPA inching up, but within manageable range. PCR has declined, yet strong provisioning continues.
- Return Ratios: ROE & ROA have moderated due to capital expansion, but IPO proceeds will strengthen Tier I capital and aid future leverage-free growth.
Tata Capital IPO Review: Strengths & Challenges
Tata Capital business model brings multiple advantages, but like any financial institution, it also faces sectoral challenges. Here’s a deep dive into Tata Capital’s strengths and risks.
| Strengths | Challenges |
|---|---|
| Strong Parentage: Backed by Tata Sons, with 156 years of brand trust and AAA credit ratings. | Valuation Premium: IPO valued at ~36–38x P/E, higher than many NBFCs. But premium is justified by Tata brand + growth trajectory. |
| Diversified Loan Portfolio: Retail (62%), SME (26%), Corporate (11%), Vehicle Finance (post-TMFL). | Margin Compression: Net margins fell from 22% (FY23) to 13% (FY25). Yet, scale and fee income growth act as cushions. |
| Rapid Growth: Loan book CAGR of 37.3% between FY23–FY25. | Rising NPAs: GNPA at 2.1% (Q1 FY26). However, portfolio remains 80% secured, ensuring risk containment. |
| Digital + Physical Distribution: 1,500+ branches + strong digital channels + 30k+ partnerships. | Subsidiary Stress: TMFL reported GNPA of 7.1% (FY25). But integration into Tata Capital provides stronger capital backing and risk management. |
| Non-Lending Businesses: Insurance distribution, wealth management, PE funds provide fee-based revenues. | Declining Provision Coverage (PCR): Down to ~54% in Q1 FY26. Still adequate and expected to strengthen post IPO capital infusion. |
Unlike many peers, Tata Capital’s challenges are growth-linked, not structural weaknesses. Rising NPAs and margin pressures are typical of rapid scale, but backed by the Tata ecosystem, they are manageable and temporary.
Tata Capital IPO Structure & Use of Funds
A. Offer Details
- IPO Dates: 6 – 8 October 2025.
- Price Band: INR 310 – 326 per share.
- Total Issue Size: 47.58 crore shares (INR 14,750 – 15,511 crore).
- Fresh Issue: 21 crore shares (INR 6,510 – 6,846 crore).
- Offer for Sale (OFS): 26.58 crore shares (INR 8,240 – 8,666 crore).
- Retail Allocation: 35%.
- Listing: NSE & BSE.
Tata Capital IPO Review: Promoter & Shareholding
- Promoter: Tata Sons (pre-IPO holding ~88.6%).
- Other Shareholders: TMF Holdings (4.6%), Tata Investment Corp (2.1%), IFC (1.8%).
- Post-IPO: Tata Sons to remain majority owner, ensuring strategic continuity.
C. Use of Funds – Growth Capital, Not Rescue Capital
- 100% of fresh issue proceeds to augment Tier I capital.
- Objective:
- Strengthen Capital Adequacy Ratio (CAR).
- Support future lending growth without increasing leverage.
- Comply with RBI’s stricter scale-based NBFC norms.
Final Word
The Tata Capital IPO is more than just another NBFC listing – it is a watershed event for India’s financial sector. The company combines:
- The credibility of Tata Group.
- A rapidly scaling loan book with diversified exposure.
- Fee-based businesses that reduce dependency on spreads.
- A capital infusion focused on future growth, not damage control.
Tata Capital IPO analysis also highligts the challenges like: rising NPAs, TMFL stress, and compressed margins. But these are growing pains of scale, not red flags. With strong risk management, AAA borrowing advantage, and fresh equity capital, Tata Capital is well-positioned to expand its retail and SME franchise aggressively.
Overall, Tata Capital IPO is a growth capital story – a bet on India’s credit boom, backed by one of the most trusted business houses. For more details related to IPO GMP, SEBI IPO Approval, and Live Subscription stay tuned to IPO Central.