Tata Capital IPO: Company aims to double loan book in 3 years, cut credit costs to sub-1% soon

The fresh capital raised in the initial public offering (IPO) will suffice for over two and a half years, its chief executive and managing director, Rajiv Sabharwal, told reporters after the market debut, news agency PTI reported.

Shares of the Tata Group company on Monday listed over 1% higher against the issue price of ₹326.

Speaking to reporters, Sabharwal said, "If our growth rate of our country sustains as we hope it does, then our book can double in the next three years."

The company's loan book stands at ₹2.3 lakh crore at present, and it took just one year to add ₹50,000 crore to the assets under management (AUM), compared to the ten years it took to reach ₹50,000 crore initially.

Sabharwal said the credit costs -- primarily booked because of loan calls going awry -- have touched 1.4% after the merger of Tata Motors Finance into it was executed in May this year.

The credit costs for Tata Capital had always been under 1%, and the company is "supremely confident" of getting it below 1% "very soon", Sabharwal said.

Amid concerns about asset quality from the micro, small, and medium enterprise loans at the industry level, Sabharwal asserted that the company is confident the portfolio, comprising over 26% of the assets under management (AUM), will hold up well, with lending to small businesses emerging as a high-growth segment.

"We do believe that with the credit quality holding strong, we should be able to grow at a very healthy pace in the SME sector," Sabharwal added.

The company originates nearly the entire volume of the loans it extends without depending on co-lending arrangements, Sabharwal said, adding that he expects the same to continue going forward as well.

The company also feels that any adverse movements in interest rates will not impact its net interest margins due to a well-distributed loan portfolio. However, aspects like reliance on digital technologies can help expand the key metric going forward.

Speaking at the listing ceremony, which was also attended by parent Tata Sons' chairman N Chandrasekaran, the company's chairman Saurabh Agrawal said the overall credit outstanding in the economy is set to double to ₹500 lakh crore over the next five years, and Tata Capital is well positioned to seize the opportunity.

"Amidst uncertainty in the global economy, India's growth story continues to gain strength and momentum," Agrawal, who is also the group chief financial officer for the salt-to-software conglomerate, said.

The GST rationalisation, relief on income tax, and RBI's interest rate cuts have given a strong stimulus to domestic demand, Agrawal said.

Tata Capital listing

Shares of Tata Capital Ltd on Monday, October 13, listed over 1% higher against the issue price of ₹326.

The stock started trading at ₹330, up 1.22% from the issue price on both the BSE and NSE.

Later, it climbed 1.84% to ₹332 on the BSE.

The company's market valuation stood at ₹1,38,658.65 crore during the morning trade.

Eventually, the stock ended at ₹331.10 on the NSE.

The IPO of Tata Capital Ltd was fully subscribed on the final day of bidding last Wednesday.

The company's ₹15,512 crore share sale received 1.95 times subscription.

Tata Capital's IPO was the largest issue of this year.

The price range for the offer was ₹310-₹326 per share.

The IPO had a total of 47.58 crore shares, including a fresh issue of 21 crore equity shares and an offer for sale (OFS) of 26.58 crore shares.

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

This marked Tata Group's second public listing in recent years, following the debut of Tata Technologies in November 2023.