Tata Capital Limited is a big non-deposit-taking NBFC and parent investment company owned by the Tata group (the parent corporation is 92.8 per cent as a majority shareholder) and was established in 2007. It provides consumer finance, SME lending, mortgage financing, wealth management and investment banking facilities with a network of presence spread across 720-plus branches within India and effective digital platforms
During FY24, Tata Capital registered consolidated revenues of 18,198 crore, a PAT of 3,327 crore (13 % YoY) and an advanced loan book of 1.57 lakh crore. It possessed solid asset quality with its gross NPA at only ~1.47% (net NPA ~0.38%). The book value / share was Rs 16.3 and the EPS was roughly 8.98
Investor enthusiasm was expressed in unlisted grey-market trades: 600 per share in mid-2023, and 9001,100 towards the end of 2024 and early 2025. There were a lot of investors who purchased approximately 1,020-1,055 shares before the IPO news. But analysts increasingly raised the red flag on the over-valuation against listed peer NBFCs, with the P/E ratio pegged at more than 100(times) when peers were trading around 25-30 times P/E (in terms of the earnings per share ~ 9.9)
Other important corporate events include a rights issue of ₹ 1,500 crore to be issued in early 2025 at a price of ₹ 281 per share, to raise funds as per RBI guidelines for upper-layer entities in NBFCs. The company also filed a DRHP of about 17,200 crore and got some confidential approval by SEBI and can have a full-scale IPO wherein promoters (Tata Sons) will sell about 23 crore shares and IFC another 3.6 crores. The mood towards the grey market has since been tapered in recent wastes. Tata Capital shares fell 5-18 per cent to the peak stage as investors became wary after pricing HDB financial services IPO modestly and across-the-board revaluation of pre-IPO valuations
The IPO would be priced in the range of 325 365 per share, depending on the rights issue pricing and peer comparables of about 30 per cent less than recent market prices of unlisted shares of 1000 and above. Thus gain listing could be negligible or even negative in the case of buyers of IPOs who acquired shares at high grey-market prices prior to IPO. There should also be a regulatory lock-in of six months after listing so that the sale cannot take place earlier than that time.
On a positive side, Tata Capital has a good franchise with a reputed Tata brand, good asset quality, retail/SMEs diversification and institutional support. The liquidity and exposure, which would be achieved by the subsequent IPO, would provide an exit route to the initial investors. There is embedded value in material, and listing is almost inevitable as per RBI, which is scheduled by September 2025
On the pessimistic note, the unlisted market is liquid and transparent, yet the prices in the grey market can be more often subject to intangible factors than to fundamentals. Strange multiples of the P/E and proximity to the IPO band entail vehement downside risk. The investors also have to factor in the cases of platform risk, governance visibility, and capital lock-ins before and even after listing. The essence of Tata Capitals unlisted share is that it is a pre-IPO investment in a high-quality financial services business, but with pricing and risk that needs to be looked at carefully.