HDFC Securities initiates coverage on Tata Capital with 'Add' rating; check price target

tata capital

HDFC Securities has initiated coverage on Tata Capital Ltd with an add rating, assigning a target price of Rs 344 a share, implying an upside of around 6 percent from current levels.

Tata Capital, one of India’s largest diversified NBFCs, manages an AUM of Rs 2.4 lakh crore as of September 2025, spanning a balanced mix of retail—both secured and unsecured—SME, and corporate lending. The company’s strong Tata Group parentage, AAA credit rating, and a well-diversified borrowing profile have helped it maintain one of the lowest funding costs in the industry, giving it a substantial competitive edge. Its conservative underwriting approach has ensured pristine asset quality across cycles, excluding the TMFL portfolio.

According to HDFC Securities, after completing the merger with TMFL and earlier amalgamations of TCFSL and TCCL, Tata Capital is positioned for stable operating performance through FY26–FY28, supported by a trusted brand, expanding distribution, and improving operating efficiencies. The brokerage notes that Tata Capital now stands among a group of corporate-sponsored NBFCs that have engineered a successful turnaround driven by refreshed leadership and revised strategic direction.

Tata Capital’s portfolio mix remains well-balanced, with retail accounting for 62 percent, SME 26 percent, and corporate 11 percent as of March 2025. Its risk-calibrated strategy, backed by a robust underwriting engine and a focus on low-risk segments, has contributed to healthy asset quality and steady credit costs (excluding TMFL). While portfolio yields are relatively modest at around 12 percent owing to the asset mix, the company’s strong operating efficiencies and low cost of funds are expected to support RoA of 2–2.2 percent and RoE of about 15 percent.

HDFC Securities added that the integration of TCFSL and TCCL in FY24, followed by the merger of TMFL in FY25, has largely removed structural distractions. The profitability drag from TMFL’s elevated credit costs is likely to diminish as the company shifts focus toward non-captive and used-vehicle segments. The brokerage highlighted that management’s FY28 aspirations—centred on higher efficiencies, normalised credit costs, and strong loan growth despite intensifying competition—will be a key monitorable in the coming years.