Tata Capital's IPO saw a muted debut on the stock exchanges on Monday, October 13, 2025, listing at ₹330 on both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), a mere 1.23% premium over its issue price of ₹326. Despite the tepid listing, the financial services arm of the Tata Group has garnered 'Add' ratings from domestic brokerage firms, with JM Financial projecting a potential 9% upside.
Subdued Listing and Market Response
The IPO, with a total size of ₹15,511.87 crore, comprises a fresh issue of ₹6,846 crore and an offer for sale (OFS) of ₹8,665.87 crore. The IPO was subscribed 1.95 times overall. Qualified institutional buyers (QIBs) subscribed 3.42 times their allocated portion, while non-institutional investors (NIIs) subscribed 1.98 times, and retail investors subscribed 1.10 times. The lukewarm response translated into a marginal listing gain, with shares subsequently dipping to ₹328 on the NSE. This performance aligns with earlier assessments that the IPO was fairly priced, potentially limiting substantial listing gains.
JM Financial's 'Add' Rating
Despite the muted listing, JM Financial initiated coverage on Tata Capital with an 'Add' rating and a target price of ₹360, suggesting an approximate 9% upside from the IPO price. This valuation is based on 2.9x FY27E price to book value (P/BV). The brokerage firm cites several factors underpinning their positive outlook, including the company's Tata Group backing, a highly diversified portfolio, strong AUM growth, and potential benefits from the Tata Motors Finance (TMFL) merger.
Tata Capital benefits from its parentage within the Tata Group, gaining credibility and access to capital. The company holds the highest credit rating of AAA/Stable from agencies like CRISIL, ICRA, CARE, and India Ratings, enabling low-cost funding. Its portfolio is diversified, offering over 25 lending products to individuals, SMEs, and corporations. Approximately 80% of its loan book is focused on secured segments.
Growth Prospects and Challenges
Tata Capital has demonstrated strong AUM growth in the past, with a CAGR of around 31% from FY22 to FY24. While the TMFL merger affected FY25 performance, JM Financial anticipates a recovery, projecting an AUM/PAT CAGR of 20%/34% over FY25-27, with average RoA/RoE of 1.9%/13% during FY26/27.
However, the merger with Tata Motors Finance (TMFL) added operational complexity and temporarily depressed profitability, with FY25 RoA falling to 1.6%. The brokerage also noted that Tata Capital's implied valuation of 2.7 times FY27E P/BV offers limited upside, considering its likely AUM CAGR and average RoE over FY25-27.
Strategic Considerations
Analysts suggest that investors already allotted shares may consider holding for the long term, given the company's structural strengths and growth potential. For those who did not receive allotment, a "wait and watch" approach is advised, monitoring the stock post-listing and considering accumulation on any meaningful dip.
Overall, Tata Capital's IPO listing was muted, but analysts remain cautiously optimistic about the company's long-term prospects, citing the strength of the Tata Group, improving financials, and diversified lending portfolio as key drivers.
