Tata Capital IPO: D-Street investors are set to witness another major listing from the Tata Group, as its flagship non-banking financial company (NBFC), Tata Capital, has filed its Draft Red Herring Prospectus (DRHP) with the capital markets regulator, the Securities and Exchange Board of India (Sebi), for its initial public offering (IPO). This will mark the first IPO from the Tata Group in nearly two years, following the public debut of Tata Technologies in November 2023.
Third-largest diversified NBFC in India: Tata Capital is the third-largest diversified NBFC in India by total gross loans and offers the most comprehensive lending product suite among its peers. With over 25 lending products, its portfolio is well-balanced across customer types, geographies, and sectors, reducing concentration risk.
Robust omni-channel distribution network: The company operates a pan-India physical presence through 1,496 branches in 1,102 locations, enabling deep regional outreach. This is complemented by over 30,000 DSAs, 400 OEMs, 8,000 dealers, and 60+ digital partners, forming a ‘phygital’ distribution strategy.
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Strong risk culture and asset quality: Tata Capital has one of the lowest Gross Stage 3 and Net Stage 3 loan ratios among large NBFCs, reflecting its robust risk framework. Its proactive, data-driven risk management practices help maintain stable asset quality and mitigate risks across economic cycles.
Digital and analytics-driven operations: The company integrates digital and analytics across the entire customer lifecycle to improve the experience and drive operational efficiency. This approach boosts revenue generation, enhances cross-selling capabilities, and reduces operating and credit costs.
Highest credit ratings and diverse funding base: Tata Capital enjoys AAA/stable ratings from all major domestic agencies and holds international ratings on par with India’s sovereign rating. These ratings allow access to a broad pool of domestic and global lenders, including banks, financial institutions, and pension funds, at competitive rates.
Proven track record of profitability: Since the start of its lending operations in 2007, Tata Capital has maintained consistent profitability through various economic cycles. Its strong financial performance is driven by a diversified loan book, efficient operations, and prudent risk practices.
Key Risks for Tata Capital
Risk of rising non-performing assets (NPAs): Tata Capital’s Gross Stage 3 Loans comprised 1.9 per cent, 1.5 per cent, and 1.7 per cent of Total Gross Loans as of March 31, 2025, 2024, and 2023, respectively. Non-payment or default by customers may adversely impact the company’s business operations, cash flows, and financial condition.
Inadequate provisioning coverage: The company’s provision coverage ratio declined to 58.5 per cent in FY25 from 77.1 per cent in FY23. An inability to maintain adequate provisioning for non-performing assets could negatively affect Tata Capital’s financial stability and risk preparedness.
High exposure to unsecured loans: Unsecured Gross Loans represented 21.0 per cent, 24.5 per cent, and 23.1 per cent of Tata Capital’s Total Gross Loans in FY25, FY24, and FY23, respectively. Failure to recover these receivables in a timely manner, or at all, could materially impact the company’s financial results.
Risk in recovery of secured assets: Secured Gross Loans accounted for 79.0 per cent, 75.5 per cent, and 76.9 per cent of the company’s Total Gross Loans over the last three fiscal years. Tata Capital remains exposed to risks related to the enforcement and recovery of security or collateral.
Concentration in retail finance:Retail Finance comprised 62.3 per cent, 58.9 per cent, and 56.7 per cent of Total Gross Loans as of March 31, 2025, 2024, and 2023, respectively. Any downturn in retail loan demand or a rise in default rates could negatively affect the company’s performance and outlook.
Interest rate mismatch risk: Fixed-rate loans made up 38.6 per cent of Tata Capital’s loan book, while fixed-rate borrowings constituted 54.0 per cent of total borrowings in FY25. Adverse interest rate movements could impact the company’s Net Interest Margin and reduce profitability.
Cost of borrowings and funding constraints: Tata Capital’s average cost of borrowings increased to 7.8 per cent in FY25 from 6.6 per cent in FY23. Any inability to raise funds on favourable terms—especially due to a downgrade in credit ratings—could materially affect the company’s liquidity and financial performance.
About Tata Capital
Tata Capital is the flagship financial services company of the Tata Group and a subsidiary of Tata Sons Private Limited, the holding company of the Tata Group and the promoter of the company. According to the CRISIL Report, with a legacy spanning over 150 years, the Tata Group is one of India’s most distinguished business groups, comprising companies across 10 verticals such as automotive, technology, steel, financial services, aerospace and defence, and consumer and retail. The 'Tata Group' brand was recognised as the most valuable brand in India as per the Brand Finance India 100, 2025 report.
Tata Capital is the third-largest diversified NBFC in India by total gross loans. According to the Reserve Bank of India (RBI) regulations for upper-layer NBFCs, Tata Capital is required to complete its public offering by September 2025.
The public issue comprises a fresh issue of up to 210 million equity shares, along with an Offer for Sale (OFS) component. Promoter Tata Sons will divest up to 230 million equity shares, while International Finance Corporation (IFC) will offload up to 35.8 million shares, according to the DRHP.
The company will not receive any proceeds from the OFS; these will be transferred to the selling shareholders. However, Tata Capital will utilise the proceeds from the fresh issue to augment the company’s Tier-I capital base, helping meet future capital requirements, including onward lending.
As the IPO process moves forward, here’s a snapshot of the key strengths and risks highlighted in Tata Capital’s DRHP:
Key Strengths of Tata Capital
Flagship financial services arm of the Tata Group: Tata Capital is the flagship financial services company of the Tata Group, one of India’s most prestigious conglomerates, with a legacy of over 150 years. Backed by promoter Tata Sons, the group spans 10 business verticals and has a global presence in over 100 countries, employing more than a million people.