MC EXCLUSIVE This year, priority is smooth merger integration, before we accelerate loan growth again: Tata Capital's Rajiv Sabharwal

Rajiv Sabharwal MD and CEO Tata Capital Limited

Tata Capital is focused more on getting the integration of the Tata Motor Finance right rather than focusing on the loan book growth, said managing director and chief executive officer, Rajiv Sabharwal, in an exclusive interview with Moneycontrol on September 29.

“I think this year we are more focused on getting the integration right rather than focusing on growth in that book,” Sabharwal said.

Sabharwal added that Tata Motors Finance merged with Tata Capital on March 31 this year, when the approvals came through.

“Excluding motor finance, our Q1 growth was still 23 percent. This year, our priority is smooth integration of people, systems, and technology, before accelerating growth again,” Sabharwal added.

Edited excerpts:

After this IPO, will the company no longer depend on the promoter for capital and be able to propel on its own?

We should first acknowledge the benefit we draw from the Tata brand. It is not only about the name, but also about governance standards, ethics, and sustainability, all of which stem from the group’s philosophies. We also gain from the experience of other Tata group companies, and we regularly engage in strategy with our group chairman, N. Chandrasekaran, as well as Saurabh, chairman at Tata Capital.

As far as capital is concerned, Tata Sons has always supported us. Going forward, the board will decide the best way to raise money, be it through rights issues or other routes. Currently, we are raising funds through a combination of fresh issue and OFS. Capital has never been a concern for us, given the strong backing of Tata Sons.

How much will Tata Sons’ shareholding reduce post-IPO?

The promoter group currently holds 95.6 percent. After the IPO, this will reduce to 85.4%. As per regulations, we have 5 years to bring it down to 75 percent. SEBI has proposed a slightly longer timeline, but as things stand, we have around 5 years.

On the broader economic context, GST rate cuts have just come into effect and tariffs are also in play. What is the impact on loan growth and the lending book?

The GST rate cut is significant, not just minor tinkering. So, there will be sectors which will see an immediate impact and some sectors where the benefits will take some time to trickle down.

Sectors which will see an immediate impact which is clearly visible is the auto sector whether it is private vehicles, commercial vehicles, or two wheelers. All of these sectors have seen an immediate impact happening and we are clearly seeing the growth happening on that side both in terms of final retail customer sales as well as dealers asking for more money.

There are some industries which will have some amount of trickle-down impact. For instance, real estate, if cement prices come down it will take some time for that to translate into cost of construction.

If in certain areas raw material prices are coming down for the final product to take will take some time for the benefit to become visible. Clearly, I personally feel that it is a very big milestone, and it has come at the right time to boost the economy and boost the consumption. And especially just before the festive season. Q3 is a big festive season. S,o just before tha,t I think it will be a big boost to the growth.

Loan growth was 34 percent in FY23 but slowed to 17 percent, with GST cuts and the listing. What is the roadmap?

Over the last 3 years, our average growth has been 25 percent plus. Ratios sometimes look uneven because of base effects. In Q1FY26, we focused on integrating Tata Motor Finance after the merger in May 2025, which temporarily affected growth. Excluding motor finance, our Q1 growth was still 23 percent. This year, our priority is smooth integration of people, systems, technology, before accelerating growth again.

You mentioned integrating Gen AI in operations. How is that helping on cost-to-income and growth?

Our tech focus is on real business results. For example, SME loan credit processing, which earlier took 2 weeks, can now be done in 10 minutes with AI. This makes us volume-agnostic and improves productivity.

In customer service, Gen AI helps automate email handling, reading queries, pulling data from core systems, drafting replies, cutting response times from days to minutes. These initiatives reduce costs, enhance productivity, and support scalable growth.

Your borrowings show 53% from banks and 36% from NCDs. Given capital market rates are better, is there an overdependence on banks?

The banks’ bucket also includes SIDBI, NHB, ECBs, dollar bond issuances, and funding from green investors. We always optimize for the lowest cost of funds. Bank borrowings are floating-rate while NCDs are fixed-rate, both have pros and cons. We aim for the right mix.

Broadly, the borrowing mix will remain same. The mix may move up or down by 2 percent depending on which option offers better cost efficiency at any point.