Brokers see the Tata Capital initial public offering (IPO) as a structural compounder that may gradually increase profitability as financing costs decrease and the synergies from the TMFL merger become apparent. It is a long-distance financial franchise that is in line with the credit demand that is outpacing the supply.
With many brokerages characterizing it as a stable long-term compounding story rooted on the Tata group’s reputation, AAA credit status, and diverse retail-lending franchise, Tata Capital’s Rs 15,500-crore IPO has attracted significant institutional interest. It is not considered a short-term value play, but rather a structural participant in India’s growing credit cycle.
Taking advantage of India’s credit expansion
The size that Tata Capital has gradually developed is at the heart of this tale. With 87.5 percent of its assets in retail and SME lending, its loan book of Rs 2.33 lakh crore as of June 2025 ranks it among India’s most diverse NBFCs. The organization gains both systemic relevance and granularity from this equilibrium.
According to analysts at Aditya Birla Money and Deven Choksey Research, further formalization of household and SME borrowing would propel India’s NBFC lending to rise by 15–17% a year between FY25 and FY28. “Deven Choksey Research predicts that the continuous recovery in consumption trends will also significantly contribute to the credit momentum in FY26.”
Tata Capital is in a good position to profit from this development. According to Aditya Birla Money, “NBFCs have continuously surpassed banks in loan growth.” “It is anticipated that their proportion of systemic credit would increase from 21% in FY25 to 22% by FY28, supported by their capacity to provide underserved markets and use technology to provide quicker, more specialized lending solutions.”
For investors, headroom is just as important as performance when defining the opportunity. The most lucrative benchmark in the industry, Bajaj Finance, with assets of around Rs 4.15 lakh crore and a return on equity of about 19 percent. There is potential for development with Tata Capital’s RoE of 12–13 percent. Its mostly secured book and about 5% NIM point to a more stable, low-risk growth approach that aims to compound wealth.
According to brokers like ICICI Direct, Aditya Birla Money, and Deven Choksey Research, Tata Capital is well-positioned to maintain growth and profitability over time thanks to its solid parentage, diverse loan portfolio, and governance standards.
Strong institutional confidence and financing profile
The company’s self-funding practices also reflect this conservatism. “Tata Capital holds the highest local credit ratings (AAA/Stable, A1+) and international ratings of BBB- (S&P, Fitch),” according to ICICI Direct. In order to provide a sensible maturity profile and lower concentration risk, the company’s borrowings are well-diversified across bank loans, NCDs, subordinated and perpetual debt, CPs, and a $400 million maiden bond offering in January 2025, the statement said.
With the help of the Tata Group, this level of capital reduces the risk of refinancing and provides cost stability for the business. Its capital strength and financing diversification, according to analysts, support its standing as a systemically significant NBFC and may influence investor interest in upcoming large-scale NBFC offers and bond issues.
The anchor award of Rs 4,642 crore on October 3rd further confirmed that trust. Along with 18 significant domestic mutual funds including ICICI Prudential, HDFC AMC, DSP, and WhiteOak Capital, LIC headed the investor roster. Morgan Stanley, Goldman Sachs, Citigroup, Nomura, Amansa Holdings, WCM Investment Management, and the Government Pension Global Fund were also part of the group. Even at full price, the market’s confidence in Tata Capital’s governance and balance-sheet integrity was evident from the wide range of participation, which included sovereign, institutional, and retail fund managers.
Pressures in the short term and possibilities in the long term
Profitability is still under pressure in the near term, however. SBI Securities blamed Tata Motors Finance Ltd.’s (TMFL) post-merger losses for the decline in RoE and RoA in FY25 and 1QFY26, but it anticipates a recovery in profitability as that company improves. According to ICICI Direct, the provision-coverage ratio dropped to 58.5 percent and the borrowing cost increased to 7.8 percent (from 6.6 percent in FY23), both of which are anticipated to keep margins tight in the foreseeable future. “Asset quality measures remain good,” it said. According to Aditya Birla Money, a well-diversified retail and SME portfolio can handle 2.1 percent of total Stage-3 loans and 20 percent of unsecured risk.
Takeaway for investors
Taken together, these evaluations clarify why analysts have opted for moderation rather than ebullience. Anand Rathi and Aditya Birla Money have made “Subscribe – Long Term” recommendations. In India’s credit ecosystem, the majority of brokerages see Tata Capital as a structural compounder that has the potential to gradually increase profitability as financing costs decrease and the synergies from the TMFL merger materialize.
Tata Capital is not a sprint stock for investors. Since credit demand continues to exceed supply, it is a long-distance financial franchise.