IPO-bound Tata Capital bets big on retail and SMEs; aims to extend formal credit to wider markets

IPO-bound Tata Capital bets big on retail and SMEs; aims to extend formal credit to wider markets

Retail and SME credit have been outpacing corporate lending in India for several years, driven by rising consumption, GST-led formalisation of businesses, and the rapid pace of digitalisation. For NBFCs, this has meant rethinking growth strategies. IPO-bound Tata Capital, which is seeking to raise Rs 17,000 crore, according to its UDRHP, filed with the regulator is no exception and has tilted its portfolio towards retail and SME lending. Together these portfolios account for nearly 89 percent of its loan book.

According to report by rating agency CRISIL, NBFCs’ share in systemic credit has expanded from 13 percent in FY14 to 21 percent in FY25, underscoring the structural shift towards this segment. Other large NBFCs have shown how scale combined with disciplined risk management can deliver sustainable growth, and Tata Capital appears to be following a similar trajectory.

Meanwhile, a report published by Macquarie Capital indicates that Tata Capital’s valuations may be implying a 6.4x FY25 price to book multiple if the stock should be ascribed a price of Rs 775 a share. "At these valuations are even higher than the best-performing NBFCs in India. even as the ROA/ROE trajectory is much lower than these NBFCs," the note added. To be sure, Tata Capital stock is currently valued at Rs 835 per share in the unlisted market. The last round of rights issue which concluded in July was priced at Rs 343 a share.

That said, the  Macquarie report cautioned that the unlisted price cannot be taken as a benchmark for the listing price (to be announced). “Even if one assumes a ~60 percent discount to the unlisted market price for Tata Capital (implying a multiple of 3.1x FY25 P/B and IPO price of Rs 300) it could imply upward re-rating other listed NBFCs, in our view," the report noted.

Fundamentals are also in favour of a re-rating. The company’s loan book rose from Rs 1.2 lakh crore in 2023 to Rs 2.26 lakh crore in 2025, reflecting an 88 percent. Within this hefty loan book, retail makes up about 63 percent of the portfolio, of which housing finance accounts for 17 percent, loans against property contributing 12 percent, personal loans at around 7 percent, and vehicle finance—including car and two-wheeler loans—making up about 5.4 percent. SME lending forms another 26 percent of the total book, of which cleantech and infrastructure finance contributes 8 percent, supply chain finance 7.3 percent, and other business loans at 10 percent.

As of FY25, secured loans accounted for nearly 79 percent of the portfolio, providing earnings stability and asset quality protection. The company reported a capital adequacy ratio of 16.9 percent and has been investing in technology to enhance efficiency and customer access. Around 98 percent of its 7 million customer onboardings were fully digital as of March 2025, while 99 percent of collections were also executed digitally.

Risk management has been a central part of its strategy. With more than 99 percent of its loan accounts below Rs 1 crore, the company’s exposure is highly granular, reducing reliance on large-ticket corporate loans that have historically tripped up NBFCs. This approach aligns with CRISIL’s outlook, which projects NBFC credit to grow at 15–17 percent annually through FY28, led by retail and MSME segments.

As it moves towards its IPO, Tata Capital’s focus remains on scaling retail and SME verticals. In doing so, it will compete more directly with large diversified peers such as Bajaj Finance, Cholamandalam Finance, and HDB Financial, while drawing on the governance credibility of the Tata Group.