Tata Capital shares will make their debut on D-Street on Monday. This is what you can expect

Tata Capital’s initial public offering (IPO) worth Rs 15,512 crore, one of the most anticipated listings of the year, will debut on the stock exchanges on Monday, October 13. Despite the hype, gray market signals indicate a subdued start with GMP slipping to zero, suggesting the stock could open around the issue price of Rs 326 per share.

Solid subscription, lukewarm GMP

The IPO of Tata Group’s flagship non-banking financial company (NBFC) was subscribed 1.95 times, driven by strong institutional participation. Qualified institutional buyers (QIBs) oversubscribed their quota by 3.42 times, while the share of non-institutional investors (NIIs) was booked 1.98 times. Private investors were more cautious and subscribed 1.10 times.

The issue was priced between Rs 310 and Rs 326 per share and was offered at a 56% discount to Tata Capital’s unlisted market value. With the latest gray market premium (GMP) having fallen to Rs 0 from Rs 8 earlier this week as of Sunday morning, analysts say the quotation is likely to be flat.

Strong demand for anchor led by LIC

Ahead of the IPO, Tata Capital raised Rs 4,642 crore from major investors, attracting interest from major domestic and global institutions. The Life Insurance Corporation of India (LIC) was the biggest anchor, acquiring 2.15 crore shares worth nearly Rs 700 crore. Other key domestic participants included ICICI Prudential, HDFC Mutual Fund, Aditya Birla Sun Life, DSP, Axis, Kotak and Nippon Life AMC.

Globally, investors such as Morgan Stanley, Goldman Sachs, Nomura and Norway’s Government Pension Fund Global made significant investments, reflecting strong confidence in the Tata Group’s financial arm.

The financial strengths

Tata Capital, a wholly owned subsidiary of Tata Sons, is the group’s premier financial services arm, offering retail, SME and corporate lending, along with wealth management and investment banking. With total assets of Rs 2.52 lakh crore and a loan book of Rs 2.33 lakh crore as of June 2025, it ranks as India’s third-largest diversified NBFC, behind only Bajaj Finance and Shriram Finance.

The company’s gross non-performing asset (NPA) ratio of 2.1% is among the lowest in the industry, backed by an 80% secured book and a wide network of 1,516 branches across 27 states and union territories. Between FY23 and FY25, Tata Capital’s revenues rose 56%, while profit after tax rose 10% to Rs 3,655 crore.

“Our ambition is to strengthen our position as a leading player in the financial services sector. We see significant opportunities to expand our loan portfolio and leverage our investments in technology,” said Rajiv Sabharwal, CEO of Tata Capital. He added: “Our strategy has been to build a portfolio of multiple hero products rather than relying on a single offering.”

Valuation: Fairly priced, analysts say

At the top end of the price range, Tata Capital is valued at 4.1 times FY25 book value and 33 times earnings, slightly below the industry average. Analysts believe this offers a fair entry point.

“Given the current market sentiment, Tata Capital management has wisely priced the IPO below the industry average, leaving room for healthy stock market gains,” said Prashanth Tapse, Senior VP (Research) at Mehta Equities.

Brokers including Aditya Birla Money, Anand Rathi and Canara Bank Securities have recommended a ‘Subscribe – Long Term’ rating.

Antique Stock Broking noted that “normalization of credit costs in the auto finance portfolio, along with realizing business synergies, would be key to achieving higher return ratios of around 15% RoEs – comparable to peers such as HDB Financial, which currently trades at 3.5x June 2025 BVPS.”

Credit quality and risk indications

According to ICICI Direct Research, Tata Capital’s assets under management (AUM) rose to Rs 2,33,363 crore in FY25, reflecting a CAGR of 37.3% over FY23-25. The brokerage noted that while the company’s risk management framework remains strong, declining provisioning buffers are a concern, with the provisioning coverage ratio (PCR) falling to 58.5% in FY25.

The brokerage also highlighted the rising share of unsecured loans (~20%) and new credit customers (~3.5%), which could lead to more volatile performance.

Canara Bank Securities noted that Tata Capital has a domestic AAA and international BBB rating, with credit costs below 1% and net NPAs close to 0.5%. “Daily return on equity and operating metrics are approximately 250 basis points higher than year-end figures,” the broker said.

Anand Rathi Research valued Tata Capital at a post-issue market cap of Rs 1,38,382.7 crore, terming the IPO fully priced but maintaining a positive long-term view.

Also read | Explained: Reliance Industries is India’s most valuable company, but why isn’t it number 1 in Nifty50 weight?

Yield and prospects

The funds raised will be used to strengthen Tata Capital’s Tier-I capital and meet regulatory requirements, while supporting retail lending, digital initiatives and infrastructure financing.

Antique Stock Broking noted that the company benefits from the highest credit ratings from CRISIL, ICRA, CARE and India Ratings, with an average financing cost of 7.8%. The debt mix is ​​evenly split between floating (45%) and fixed rate (55%) instruments, mainly from banks and non-convertible bonds.

As the company gears up for its market debut, all eyes will be on whether Tata Capital can match Tata Technologies’ blockbuster listing last year, or whether a flat gray market is an early signal that investors are keeping expectations in check.

Also read | Tata Motors demerger: Will it deliver value or more volatility for investors next week?

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)