Tata Capital to float -bn IPO in Sep; eyes  bn valuation


Non-banking financial company (NBFC) Tata Capital is set to launch its much-anticipated $2 billion (Rs 17,200 crore) initial public offering (IPO) in the week beginning September 22, market sources familiar with the matter said on Sunday.

IPO

Illustration: Dominic Xavier/Rediff

The issue is expected to value the company around $11 billion, they added. Tata Capital is likely to make its stock market debut by September 30.

The proposed IPO of 47.58 crore shares comprises a fresh issue of 21 crore equity shares and an offer for sale (OFS) of 26.58 crore shares, according to the updated draft red herring prospectus (DRHP) filed in August.

 

Under the OFS component, Tata Sons will offload 23 crore shares, while the International Finance Corporation (IFC) will divest 3.58 crore shares.

Currently, Tata Sons holds an 88.6 per cent stake in Tata Capital, while IFC owns 1.8 per cent holding.

Proceeds from the IPO will be used to strengthen the company’s Tier-1 capital base, supporting future capital requirements, including onward lending.

If successful, this IPO will become the largest public issue in India’s financial sector. It will also mark the Tata Group’s second public listing in recent years, following the debut of Tata Technologies in November 2023.

The IPO is being undertaken in line with the Reserve Bank of India’s (RBI) listing mandate for upper-layer NBFCs, which requires them to be listed within three years of classification.

Tata Capital was designated as an upper-layer NBFC in September 2022.

In a similar move, HDB Financial Services — the non-banking arm of HDFC Bank — went public in June with a Rs 12,500 crore issue.

Bajaj Housing Finance, another upper-layer NBFC, made a blockbuster market debut in September 2024, closing its first day of trade with a 135 per cent premium over the issue price.

For IPO investors, market experts  suggested that the combination of high domestic ratings, a growing and diversified loan book, stable asset quality, and experienced leadership provides confidence in Tata Capital’s ability to sustain performance.

The performance of Tata Capital has been consistent with total gross loans of Rs 2.26 lakh crore as of March 2025, reflecting a compound annual growth rate of 37 per cent between FY23 and FY25.

Its profit after tax stood at Rs 3,646.6 crore in FY25, up from Rs 3,029.2 crore in FY23, translating into a CAGR of 10 per cent.

Despite this rapid growth, asset quality has held firm — consolidated gross bad loans stood at 1.9 per cent and net bad loans at 0.8 per cent at the end of FY25, supported by a provision coverage ratio of 58.5 per cent.

Its net interest margin stood at 5.2 per cent in FY25, reflecting healthy spreads across its lending businesses.

The positive trend continued into the current fiscal in Q1 FY26 with Tata Capital reporting consolidated net profit of Rs 1,041 crore, more than double of the Rs 472 crore earned in the same quarter last year, with total income rising to Rs 7,692 crore from Rs 6,557 crore for quarter ended June 2024.

Since commencing lending operations in 2007, Tata Capital has served over 7 million customers as of March 31, 2025.

In addition to lending, Tata Capital also distributes third-party products such as insurance and credit cards, offers wealth management services, and acts as a sponsor and investment manager to private equity funds.



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