Tata Capital IPO: A $2 Billion Opportunity & Tata Group’s Second IPO in 20 Years

The Tata Group, one of India’s most trusted business conglomerates, is gearing up for a landmark IPO. Tata Capital, its financial services arm, is set to go public by September 2025, marking the group’s second public listing in two decades. This move, driven by both growth ambitions and regulatory compliance, is expected to be one of the most closely watched IPOs of the year. Here’s what investors need to know.

Getting Ready for IPO

Tata Capital is eyeing its IPO launch by September 2025. This will be the group’s second public listing in recent years following the successful debut of Tata Technologies in November 2023. The IPO includes a fresh issue of up to 230 million equity shares and an offer-for-sale (OFS) by existing shareholders.

So, what’s driving the IPO decision?

Tata Capital’s decision to go public aligns with the Reserve Bank of India’s (RBI) mandate for Upper Layer Non-Banking Financial Companies (NBFCs). Under RBI’s Scale-Based Regulation (SBR) framework, NBFCs are classified into four categories—Base Layer, Middle Layer, Upper Layer, and Top Layer—based on size, systemic importance, and risk perception.

In September 2022 , Tata Capital was identified as an Upper Layer NBFC, a category that includes large, systemically important firms that require stricter regulatory oversight.

As per RBI guidelines, Upper Layer NBFCs must be listed on the stock exchange within three years of being classified. This means Tata Capital has until September 2025 to comply, making the IPO not just a strategic move but also a regulatory necessity.

The capital raised through the IPO is expected to support Tata Capital’s financial foundation by fuelling its expansion and improving its lending capacity, especially in infrastructure and clean-energy space. Here’s what you need to know about Tata Capital’s financials.

Share Price Surge Driven by Speculation:

Amid IPO speculations, the demand for unlisted Tata Capital shares has soared, with prices rising from ₹800-825 to ₹1,000-1,050 per share. However, experts believe that the current valuations are unjustified and expect the IPO to be set at around ₹400 per share. The company has also approved a rights issue worth ₹1,504 crore for existing shareholders, establishing the benchmark price for the IPO.

Tata Capital: Financial Overview

• Total assets of Tata Capital stood at ₹1,76,693.98 crore as of March 31, 2024. The figures show a significant increase from the previous year’s assets of ₹1,35,626.10 crore. The financial services company’s financial assets include cash and cash equivalents, loans and investments.

• Tata Capital’s loan book recorded ₹1.57 trillion as on March 31, 2024, positioning the company as the 7th largest NBFC in India in terms of the size of the loan book.

• Tata Capital reported a total income of ₹18,198.38 crore as of March 31, 2024, up from ₹13,637.49 crore the previous year. Interest income, fees, commissions and net gains drive revenue from operations on fair value changes. The company’s net profit for the same period was ₹4,403.60 crore.

• The company maintained a strong capital adequacy ratio of 18.5%, well above the reserve bank’s minimum requirement. This ratio suggests that the company can absorb potential losses, maintain stability and protect depositors to prevent insolvency and financial crisis.

Let’s take a look at the comprehensive SWOT analysis of Tata Capital, exploring its strengths and weaknesses.

Tata Capital SWOT Analysis

Strengths:

• Diverse Offerings: Whether you’re looking to borrow for a home purchase, expand your business or need a personal loan, the company has it all. That means Tata Capital offers a comprehensive range of financial solutions, including investment products such as fixed deposits, mutual funds and various types of insurance.

• Brand Trust: Tata brand is synonymous with integrity and accountability. Many customers express trust in Tata Capital due to these values, translating into customer loyalty.

• Digital Innovation: Tata Capital has been investing heavily in digital transformation initiatives. Over the years, the company has launched a mobile app, online loan applications and AI-driven chatbots. With these innovations, Tata Capital aims to improve the overall customer experience.

• Experienced Management Team: The leadership team at Tata Capital comprises professionals who have extensive experience in finance and banking. This expertise helps in strategic decision-making that is both informed and impactful.

Weakness:

• Limited Global Presence: Tata Capital operates primarily in India, lacking a substantial international footprint.

• Dependence on Tata Sons: The company’s strength is closely tied to Tata Sons’ reputation. Any negative developments or financial downturn at the parent level can negatively impact Tata Capital’s market position.

• Bureaucratic Challenges: Tata Capital faces operational challenges due to its position within the Tata Group. There might be delays in the decision-making processes making it challenging for the company to respond or adapt to market changes.

• Smaller Market Share: As of March 2023, Tata Capital’s market share in the overall non-banking financial company (NBFC) segment was merely 2.6% compared to larger players like HDFC and ICICI, which dominate the market.

Tata Capital Peer Comparison

After its listing on the exchange, Tata Capital will compete with many established NBFCs. Here are the details of its competitors and their price performance.

Conclusion

Tata Capital’s IPO is more than just another market event. It is a rare opportunity to invest in one of India’s most trusted financial institutions. With strong fundamentals, a booming financial services sector and the credibility of the Tata brand, the $2-billion IPO could be a game-changer for investors. If history is any indicator, Tata IPOs have a track record of rewarding investors handsomely, and this one could be no different.