TATA CAPITAL IPO - Positives and negatives

If you ask investors which IPO they’re most eagerly awaiting in 2025, the answer will likely be Tata Capital’s IPO. The excitement is not just about the sheer size of the issue or the unmatched brand value of the Tata Group. What truly adds to the buzz is the surprise factor in pricing—the offer price is significantly lower than what the market had earlier anticipated, making it an even more attractive proposition for investors.

 The IPO is opening for subscription from October 6 to October 8, 2025, with a price band of ₹310 to ₹326 per equity share.

Here is a summary of the positives and negatives, along with a perspective on whether you should subscribe.

Positives of Tata Capital IPO

Strong Parentage and Brand Trust:  Nor surprising, the TATAs have a great trust in the market, which will be booster for the IPO. The company benefits from immense brand equity, trust, and a strong corporate governance track record, which enhances investor and customer confidence.

Diversified Portfolio: It is no nonsense company which have diversified their portfolio of assets in to most secured areas of NBFC operations. Tata Capital is the third-largest diversified NBFC in India, with a gross loan size (assets) of over ₹2.3 lakh crore (as of June 2025). It offers over 26 lending solutions across retail (personal, home, vehicle loans), SME, and corporate finance, providing resilience across different economic cycles. 

High Credit Rating and Low Borrowing Cost: The company enjoys top-level credit ratings ('AAA/Stable' from leading credit rating agencies), which translates into a competitive advantage with lower borrowing costs compared to many peers.

Strong Asset Quality and Financials: It has maintained strong asset quality, with Gross Non Performing Assets at a prudent level (2.1% as of June 2025). The company has a consistent track record of growth, with Net Profit rising to ₹3,655 crore in FY25.

Investor friendly IPO Pricing: The IPO price band is significantly lower (around 55% discount) compared to the prices its unlisted shares were trading at earlier in the market, which many analysts view as a strategic move to leave potential gains on the table for new investors and ensure a strong listing.

Negatives and Risks of Tata Capital IPO

When we are looking for fundamentals of a company to decide whether to invest or not, we need to consider the negative side also and not just the positives.

Intensity of competition: Tata Capital operates in a highly competitive NBFC space, facing stiff competition from established giants like Bajaj Finance, HDB Financial Services, and Shriram Finance, as well as new-age fintechs. Most of the leading players are aggressive and always looking for chance to grow. Local players also can create market penetration which can be a task for TATA finance. Survingn in this scenario can be a tough and may be possible for a trusted brand like TATA,

Moderate Return on equity :  ROE shows the efficiency of  a company to use the capital to create divisible profit. TATA capital’s return on equity (RoE at ∼12.6%) is lower compared to some of its leading peers like Bajaj Finance (RoE at ∼19.2%). This suggests a slightly less efficient use of equity capital compared to the market leaders.

Valuation of the IPO: While the IPO pricing may look attractive when compared to Tata Capital’s unlisted market valuations, the picture changes once we dig deeper. Post-issue, the company is valued at nearly 3.4 times its book value, which isn’t exactly a bargain when set against the industry average. In simple terms, a large part of Tata Capital’s future growth story already seems to be built into the price.

Exposure to unsecured loans: A notable portion of its loan book (around 20%) is in unsecured loans, which carry a higher inherent risk if the economy slows down or credit cycles turn. At present the rates are down and spending is high, downside is comparitively less, but in the long run, if the scenario changes, the picture can be different.

Regulatory Sensitivity: As an Upper Layer NBFC, the company is subject to stricter compliance and regulatory scrutiny from the RBI, which could increase operational costs and risks.

Views on subscription

Most market analysts are positive on the IPO, viewing it as a strong long-term investment opportunity:

For Long-Term Investors: 

The Tata Capital IPO offers investors a strong entry point into India’s fast-growing financial services sector. With the trust of the Tata brand, a diversified business model, and a reputation for robust governance, the company brings a solid foundation to the table. Most analysts lean towards a “Subscribe for the Long Term” view, highlighting the potential for steady wealth creation through scale, digital innovation, and rising market share over the years.

For Listing Gains: Given the pricing is substantially lower than the unlisted market price, there is an expectation for a modest-to-healthy listing gain, though possibly not the blockbuster debut seen with Tata Technologies. The listing pop will heavily depend on the subscription demand from Qualified Institutional Buyers (QIBs) and Non-Institutional Investors (NIIs).

Disclaimer: This is general information based on current market reports and analysis. Stock market investments, including IPOs, are subject to market risks. You should conduct your own due diligence or consult with a qualified financial advisor before making any investment decision.