The Tata Capital IPO, opening in October 2025, marks a significant event in the Indian capital markets. With a post-issue market capitalization estimated at ₹1,38,000 crore, it positions itself as one of the largest IPOs in recent years. Backed by the Tata Group, this IPO offers both potential and caution for investors.
📌 Tata Capital IPO Overview
| Detail | Specification |
|---|---|
| IPO Price Band | ₹310 to ₹326 (Upper Band: ₹326) |
| Issue Size | Approx. ₹15,500 crore |
| Offer Structure | OFS: ₹8,600 crore; Fresh Issue: ₹6,800 crore |
| Lot Size | 46 shares |
| Minimum Investment | Approx. ₹1,000 (1 lot) |
| IPO Dates | 6–8 October 2025 |
| Listing Date | 13 October 2025 |
💰 Valuation Insights
-
Significant Discount:
-
IPO price band is offered at ~56% discount to the last traded private market price of ₹736.
-
Compared to its peak price of ₹1,125 (April 2025), the IPO reflects a 71% discount.
-
IPO pricing is 30%–50% lower than the grey market average.
-
Despite these discounts, valuation metrics like P/E (37.9x) and P/B (4.2x) suggest that the IPO is not deeply undervalued relative to performance.
Managment comentry
🏦 Business Model and Operations
🔹 Loan Book & Yield
-
Total AUM: ₹2.26 lakh crore
-
Retail-Focused: Over 99% of loans are under ₹1 crore
-
Secured Portfolio:
-
Housing loans, auto loans, and loans against property form the bulk
-
Results in a conservative risk profile
-
-
Yield: 12.6% (lower than peers like Bajaj Finance – 16.7%)
🔹 Cost of Funds & Margins
-
Low Cost of Funds: 7.8%, among the best due to Tata brand strength
-
Net Interest Margin (NIM): 5% (versus Bajaj Finance’s 9%)
-
Stable NIM Trend: 5.1%–5.2% over FY23–FY25
🌐 Distribution & Synergies
-
Branch Network: ~1,500 branches + 300 DSAs + 8,000+ dealers
-
Digital Leadership:
-
98–99% digital onboarding
-
99%+ collections are digital
-
-
Group Synergies: Access to customer base from Tata Motors, Titan, Croma, Tata Housing, etc.
These cross-sell opportunities uniquely position Tata Capital within a diversified ecosystem.
🔄 Merger Impact: Tata Motors Finance Ltd (TMFL)
✅ Positives
-
Adds ₹3,000 crore to auto loan book
-
Brings 70 lakh+ customer leads
-
Enhances branch and geographic presence
⚠️ Negatives
-
TMFL had high GNPA (~7%) and posted a loss of ₹180 crore (FY25)
-
Merger may depress NIMs and increase asset quality risks short-term
📊 Financial Performance (FY23–FY25)
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Net Interest Income (NII) | ₹5,300 Cr | — | ₹10,169 Cr |
| Other Income | ₹1,700 Cr | — | ₹2,600 Cr |
| Net Profit (PAT) | ₹3,000 Cr | ₹3,456 Cr | ₹3,600 Cr |
| ROA | 3.0% | — | 1.8% |
| ROE | 20.6% | — | 12.6% |
-
Profit growth has slowed despite strong volume growth.
-
Decline in profitability ratios reflects pressure from lower NIMs and merger impact.
⚖️ Valuation Comparison With Peers
| Company | ROA | ROE | NIM | P/E | P/B |
|---|---|---|---|---|---|
| Tata Capital | 1.8% | 12.6% | 5% | 37.9x | 4.2x |
| Bajaj Finance | ~3.5% | ~22% | 9% | Lower P/E | Higher P/B |
| Cholamandalam Inv. | Higher | Higher | Higher | Lower | Higher |
Tata Capital trades at a premium without matching profitability, making its current valuation more reflective of brand strength than earnings power.
✅ Key Strengths
-
Strong Tata Group backing
-
Low cost of capital
-
Digitally enabled operations
-
Rapid growth in loan book and branches
-
Strong synergies from group companies
-
Improving credit cycle aiding growth
⚠️ Key Risks
-
Merger-led NPA pressure from TMFL
-
Lower NIMs compared to peers
-
Slowing profit growth despite rising revenue
-
Future dilution risk: Promoter stake post-IPO remains ~85%; SEBI rules require reducing it to 75%—could lead to future share selling pressure
-
Not deeply undervalued: Valuation doesn’t scream “bargain”, despite the IPO price discount
📅 IPO Timeline
| Event | Date |
|---|---|
| IPO Opens | 6th October 2025 |
| IPO Closes | 8th October 2025 |
| Allotment Date | 9th October 2025 |
| Refunds/ Demat Credit | 10th October 2025 |
| Listing Date | 13th October 2025 |
🎯 Final Recommendation: Should You Invest in Tata Capital IPO?
The Tata Capital IPO offers a strong brand, growing book size, and low cost of funds, but comes with risks around profitability, asset quality, and valuations.
🟢 Apply for Listing Gains (Cautiously)
-
Likely listing gains possible due to Tata brand and demand
-
But size of issue (₹15,500 crore) may absorb excess demand
-
Avoid expecting a ‘bumper listing’ — gains could be moderate