Tata Capital has announced its Initial Public Offering (IPO). Also company will also raise ₹1,500 crore through a rights issue. Rights issue means company is offering its shares before IPO to institutions.
This is a big move by Tata Sons, which owns 93% of Tata Capital. The IPO will allow the public to invest in this fast-growing NBFC (Non-Banking Financial Company).
Let’s break everything down in simple words.
What is Tata Capital’s IPO?
An IPO (Initial Public Offering) means a company sells its shares to the public for the first time.
Right now, Tata Capital is fully owned by Tata Sons. After the IPO, some shares will be available for retail and institutional investors.
Why is This IPO Important?
✅ Tata Group is Trusted – Investors prefer Tata stocks because of their strong reputation.
✅ NBFCs Are Growing – More Indians are taking loans, and Tata Capital is a major player.
✅ Stock Market at Highs – Companies usually launch IPOs when the market is strong.
What is the ₹1,500 Crore Rights Issue?
A rights issue means existing shareholders get the chance to buy more shares before the IPO.
Tata Capital is raising ₹1,500 crore through this rights issue. This money will help the company:
✔ Expand its loan business
✔ Meet RBI’s capital requirements
✔ Strengthen its position in the NBFC sector
What Does Tata Capital Do?
Tata Capital is a leading NBFC in India. It gives loans to individuals and businesses but does not take deposits like a bank.
Loan Types
✔ Home Loans – Loans for buying houses
✔ Business Loans – Funding for small and big companies
✔ Car & Bike Loans – Finance for purchasing vehicles
✔ Personal Loans – Money for education, travel, or emergencies
Who Are Tata Capital’s Competitors?
It competes with Bajaj Finance, HDFC, and ICICI. The company follows strict lending rules, which keeps its loans safe.
Merger with Tata Motor Finance
Tata Capital is merging with Tata Motor Finance (TMFL).
This is a big deal because TMFL provides loans for Tata Motors’ vehicles. After the merger:
✅ Tata Capital will have a larger market share
✅ It will get more customers from Tata Motors’ network
✅ The business will become more diversified
CRISIL Ratings is monitoring this merger closely.
Tata Capital’s Credit Rating – A Big Strength
CRISIL Ratings has given Tata Capital:
✔ CRISIL AAA – Highest rating for long-term financial stability
✔ CRISIL A1+ – Best rating for short-term borrowing
This means Tata Capital is financially strong and low-risk.
How Tata Capital Housing Finance (TCHFL) is Performing
Tata Capital’s housing finance arm, TCHFL, is a subsidiary company. Its key details:
- Net worth: Rs 6,866 crore (as of June 30, 2024).
- Capital Adequacy Ratio: Tier-1 at 15.8%, total at 18.8%.
- Healthy balance sheet: Gearing ratio at 7.5 times.
- Improved Asset Quality: Gross Stage III (GSIII) loans dropped to 0.8% from 1.0%. Source: Crisil
Tata Capital’s Liquidity Position: Strong and Secure
Liquidity is heart for any financial firms, and Tata Capital has a solid buffer. They have Rs 17,853 crore in cash, ensuring they can meet any required financial obligations. Source: Crisil
Where does their funding come from? Here’s a breakdown:
- 39% from Bonds (NCDs)
- 42% from Term Loans
- 7% from External Commercial Borrowings
- 7% from Commercial Papers
This diversified mix ensures financial stability.
Tata Capital’s Role in the Tata Ecosystem
Tata Capital dont cater needs for its customers only but it also plays a crucial role within the Tata Group. It funds Tata suppliers, vendors, and dealers, making it deeply embedded in the group’s business operations.
Should You Invest in Tata Capital’s IPO?
Before investing, consider the pros and cons.
✅ Reasons to Invest
✔ Strong Tata brand – Trusted by investors
✔ Growing financial sector – NBFCs are expanding fast
✔ Stable credit rating – Low risk, high financial stability
✔ Merger with Tata Motor Finance – Business will grow further
⚠ Risks to Consider
❌ High competition – Other NBFCs and banks are strong players
❌ Stock market risk – IPO price can fluctuate
❌ Loan defaults – If borrowers don’t repay, profits can be affected
Tata Capital’s Financial Performance: Strong & Growing
| Year | Total Assets (Rs Crore) | Net Income (Rs Crore) | Profit After Tax (Rs Crore) | ROA (%) | Gross NPA (%) | Gearing |
|---|---|---|---|---|---|---|
| FY22 | 1,02,376 | 5,422 | 1,801 | 1.9 | 1.9 | 6.7 |
| FY23 | 1,35,562 | 7,036 | 2,946 | 1.9 | 1.7 | 6.2 |
| FY24 | 1,76,694 | 8,630 | 3,327 | 2.1 | 1.5 | 6.3 |
Key Takeaways:
✔ Profitability is improving – PAT grew 13% in FY24 to Rs 3,327 crore.
✔ Lower bad loans – Gross NPA dropped to 1.5% in FY24 from 1.7% in FY23.
✔ Higher returns – Return on Assets (ROA) increased to 2.1%.
✔ Expanding business – Assets grew by 30% in just one year. Source: Crisil
Tata Capital Listing
The Reserve Bank of India (RBI) has classified Non-Banking Financial Companies (NBFCs) into different layers based on their size, systemic importance, and risk exposure. Tata Capital falls under the 'Upper Layer' NBFCs, which means it is considered systemically important and needs to comply with stricter regulations.
What Does the RBI Rule Mean?
- RBI mandates that all NBFCs classified as 'Upper Layer' must go public within three years of being notified.
- This is to ensure greater transparency, accountability, and better corporate governance.
- Tata Capital was notified as an 'Upper Layer' NBFC in 2022, so it must list by 2025 to comply with RBI’s regulation.
Final Thoughts
This IPO will be one of the biggest NBFC listings in India. More updates will come soon. Stay tuned! 🚀
Currently unlisted share price of Tata Capital is around 1200 rs per share.
How to analyze IPO before Investing- Read
