Tata Capital IPO / Will Tata Capital be able to repeat its previous IPO feat?

Tata Capital IPO: Tata Capital, the Tata Group's flagship financial services company, is set to launch its ₹15,512 crore (₹15,512 crore) IPO on October 6, 2025. This is the Tata Group's second IPO in nearly two decades, generating both excitement and caution among investors. Given the strong performance of Tata Group stocks, investors may find it attractive to invest in this IPO. However, the experience of Tata Technologies' 2023 IPO demonstrated that a blockbuster listing doesn't always guarantee lasting gains. Let's take a look at various aspects of this IPO.

Lessons from Tata Technologies

In November 2023, Tata Technologies' IPO hit the market, marking the Tata Group's first public offering in two decades. It listed at a 140% premium over its issue price, generating tremendous enthusiasm among investors. But this rally did not last long. Two years later, Tata Tech is trading approximately 43% below its listing price. This indicates that even big names face the risk of post-listing corrections. Against this backdrop, investors are approaching Tata Capital's IPO with a mix of caution and optimism.

Tata Capital IPO: Key Details

Tata Capital's IPO will open on October 6, 2025, with an issue price of ₹15,512 crore at a price band of ₹310-326 crore. This includes a fresh issue of ₹6,846 crore and an offer for sale (OFS) of ₹8,666 crore by Tata Sons and International Financial Corporation (IFC). This IPO is part of the Tata Group's strategy to further strengthen its financial services arm.

Tata Capital: A Financial Powerhouse

Tata Capital is India's third-largest non-banking financial company (NBFC), with a gross loan book of ₹2.33 lakh crore as of June 2025. The company's loan portfolio is focused on retail and small and medium enterprises (SMEs), which account for over 87% of its total loan book.

Extensive Network: The company has 1,516 branches, 30,000 Direct Selling Agents (DSAs), tie-ups with 400 Original Equipment Manufacturers (OEMs), and 60 digital partners.

Diverse Loan Products: Tata Capital offers over 25 loan solutions, including personal loans, home loans, auto loans, SME loans, and infrastructure loans.

Merger Impact: The recent merger with Tata Motors Finance has further strengthened the company's reach in the auto finance segment.

Financial Performance and Strengths

Tata Capital is supported by the strength and credibility of the Tata brand. The company has received an 'AAA/Stable' credit rating from leading rating agencies, reflecting its financial stability.

Income Growth: In FY2025, the company generated interest income of ₹25,720 crore, significantly higher than the previous year's ₹16,366 crore.

• Net Profit: Net profit increased from ₹3,327 crore (FY2024) to ₹3,655 crore (FY2025).
• Net Interest Margin: It increased to 5.6%, reflecting the company's profitability.
• Return Ratios: Return on Equity (ROE) declined after the merger, but it still remains at a healthy 12.6%.

Challenges and Risks

Although Tata Capital is in a strong position, it faces several challenges:

• Strong Competition: Tata Capital faces stiff competition from giants like Bajaj Finance (19.2% ROE) and Shriram Finance. Its 12.6% ROE lags behind its competitors.
• Risks: 20% of the company's loan book consists of unsecured loans, which can be high-risk. Furthermore, interest rate fluctuations and asset-liability mismatches are also concerns.
• Post-Merger Integration: Integrating the auto finance segment and maintaining profitability after the merger with Tata Motors Finance is a challenge.

Investor Considerations

Analysts believe that Tata Capital's IPO could be attractive for long-term investment. According to SBI Securities, the company's strong parentage, diversified portfolio, and omni-channel distribution make it stable and reliable. However, investors should consider the following:

• Brand Trust: The Tata brand name attracts investors, but caution is needed given the experience with Tata Technologies.
• Long-Term Outlook: Tata Capital's scale, brand trust, and strong fundamentals make it suitable for long-term investment.
• Risk Management: Considering risks like unsecured loans and competition, investors should consider diversifying their portfolio.