Tata Capital Shares Trade Below IPO Price; Brokerages See Upside
Tata Capital’s stock is trading slightly below its ₹326 IPO price mainly because the issue came at a “fully priced” valuation and listed in a muted fashion, but most brokerages still see healthy upside backed by strong growth, high asset quality, and Tata Group backing. Coverage initiations from Emkay, JM Financial, Kotak and others largely carry ‘Add’/‘Overweight’ calls with a common target zone around ₹360, implying high single‑ to low double‑digit upside from current levels and potential long‑term compounding if execution holds.
Listing, Price Action and Valuation
Tata Capital’s IPO, India’s largest in 2025, had a price band of ₹310–₹326 per share and listed at about ₹330, delivering only a ~1.2% listing gain before slipping back below the issue price in subsequent sessions. Recent reports show the stock around ₹320–323, down roughly 1–3% versus the IPO level and modestly negative year‑to‑date, reflecting digestion of a very large supply of shares and profit‑booking after even small early gains.
Pre‑IPO discussions had hinted at richer valuations (up to 8.5–11x price‑to‑book), but the final band and muted GMP signalled that the issue was already “fair but fully priced”, leaving limited room for a big speculative pop and shifting focus to earnings‑driven re‑rating. At ₹326, implied valuation was about 2.7–3.5x forward book value and low‑30s P/E on FY25–27 earnings, placing Tata Capital at a premium to many NBFCs but below the most expensive high‑growth franchises.
Why Brokerages Still See Upside
Several large brokerages have initiated coverage with constructive views despite the soft post‑listing performance:
Kotak Institutional Equities has an ‘Add’ rating and a ₹360 target, implying roughly 11–12% upside from recent levels, citing Tata Capital as India’s third‑largest NBFC with a ₹2.44 lakh‑crore loan book in Q2 FY26 and strong earnings growth visibility.
Emkay Global and JM Financial also rate the stock ‘Add’ with similar ₹360 targets, seeing about 9–10% upside over the issue price on the back of diversified growth, AAA rating, and Tata Group support.
A recent note from JPMorgan reportedly initiated with ‘Overweight’, again highlighting the attractive long‑term franchise despite near‑term valuation and sentiment headwinds.
Brokerages broadly forecast around 21% CAGR in gross loans and nearly 29–30% CAGR in EPS over FY25–28, driven by retail‑led growth, productivity gains across a 1,400+ branch network, and operating leverage from scale. Return on equity is projected to rise from roughly 12.5–12.6% in FY25 to about 15–16% by FY28, which, if achieved, can justify the current premium valuation and support compounding beyond today’s modest upside targets.
Core Strengths Supporting the Bullish Thesis
Tata Capital’s investment case rests on a combination of franchise quality, growth, and risk profile:
Scale and diversification: With a loan book of about ₹2.44 lakh crore and retail lending forming around 61% of the portfolio, the company is positioned as a broad‑based retail and SME lender rather than a narrowly focused NBFC.
AAA credit rating and funding advantage: Backed by the Tata Group and holding the highest AAA/Stable rating, Tata Capital enjoys access to relatively low‑cost funding, helping it compete effectively even with banks.
Improving profitability: FY25 total income rose roughly 56% year‑on‑year to about ₹28,370 crore with PAT over ₹3,650 crore, giving ROE around 12.6% and ROA near 1.8%, already in a healthy zone for a newly listed NBFC of this scale.
Macro and sector tailwinds: Commentators point to a supportive macro backdrop for NBFCs—benign liquidity, rate cuts and policy support that can boost auto, consumer and SME credit demand, which are key segments for Tata Capital.
The recent merger of Tata Motors Finance into Tata Capital is another lever: Kotak expects the turnaround of that previously loss‑making business and better leverage to boost EPS, while management guidance suggests 30–34% EPS growth over the next three years.
Why the Stock Trades Below IPO Price
Despite this, several factors explain why Tata Capital has slipped under its issue price:
Fully valued at IPO: Analysts frequently described the IPO valuation as “fair but fully priced”, meaning a lot of the near‑term growth was already in the price, leaving limited room for re‑rating without strong quarters post‑listing.
Muted listing and soft sentiment: The GMP cooled sharply in the last days before listing, predicting only 2–3% gains—which is roughly what happened—after which broader market volatility and NBFC‑sector corrections dragged the stock below issue levels.
Competitive pressure and NIM risk: Emkay notes that a higher share of secured loans and stiff competition from banks keep net interest margins at about 5–5.5%, lower than some peers, so the market is cautious about paying too rich a multiple.
High expectations bar: Being a Tata Group name with the biggest IPO of 2025, expectations and pre‑IPO hype were elevated; when the deal finally came at a moderate GMP and delivered only marginal listing gains, short‑term traders exited, putting pressure on the price.
Snapshot: Valuation vs. Broker Views
For an article, this sets up a clear narrative arc: a “big but fully priced” IPO that listed flat and slipped below issue price, contrasted with a strong long‑term franchise where brokerages still pencil in double‑digit upside and 25–30% compounding potential if Tata Capital delivers on growth, ROE expansion, and the TMFL integration
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