Tata Capital Analyzed

Key Points

• Emkay Global rates Tata Capital ‘Add’, target price ₹360.
• Tata Group’s strength, diversified products, and efficiency drive growth.
• AAA rating and low-cost debt boost Tata Capital’s lending power.
• AUM expected to nearly double to ₹4.3 trillion by FY28.
• Net interest margin projected to expand by 60-70 basis points.
• Moderate return ratios expected, driven by book value compounding.

Emkay Global Financial Services has started watching Tata Capital, a company owned by the Tata Group. They think the stock is a good investment and gave it a “Add” rating, meaning they believe the price will likely go up. This comes after Tata Capital launched its initial public offering (IPO) – one of the biggest in the financial industry recently.

The IPO was for ₹15,511 crore, and Emkay’s analysts are targeting a price of ₹360 per share. This is a 10% increase from the price set during the IPO, which was ₹326.

What makes Emkay think Tata Capital is a good investment? The company has a strong parentage from the Tata Group, offers a wide variety of financial products, and runs things efficiently. This is expected to lead to continued profits for the company.

Tata Capital has a really good credit rating (AAA), which means they can borrow money cheaply. This makes them able to lend money to others. Their diverse range of products and their presence in almost every state of India help them avoid problems if one area isn’t doing well.

The company currently operates in 27 states through about 1,500 branches. A few branches are very important – one accounts for 14% of all branches and another for 17% of all the money they manage. But because they’re spread out so much, Tata Capital has grown its total assets by four times over the past eight years, even during tough times like demonetization and the COVID-19 pandemic.

Emkay expects Tata Capital’s earnings to grow by more than 30% between 2025 and 2028. This growth will be driven by improvements in the car financing business and more loans given to smaller businesses. They also predict the company’s net interest margin – how much money they make on loans – will increase by 60-70 basis points (a small percentage) by 2028.

Overall, Emkay believes Tata Capital’s total assets will almost double to ₹4.3 trillion by 2028. They also say the cost of borrowing money will go down and that loan defaults will decrease, helping the company stay profitable.

However, Emkay warns that things could go wrong. If car loans don’t become cheaper as quickly as expected, or if the economy gets worse, it could slow down Tata Capital’s growth or lead to more loan defaults.

“Given the moderate return profile, the scope for re-rating in the near to medium term appears limited.”