Tata Capital IPO: The initial public offering of Tata Group’s flagship financial services arm Tata Capital got a big thumbsup from brkokerages, with several positive reviews. Yet, the Grey Market Premium (GMP) has crashed to just 3%. The GMP is usually seen as an indicator of the expected listing gains.Tata Capital stands amongst India’s prominent non-banking finance companies (NBFCs). The IPO offers shares at Rs 310 to Rs 326, comprising a fresh issue of Rs 6,846 crore alongside an offer for sale (OFS) of Rs 8,666 crore by Tata Sons, the promoter. The subscription period concludes on October 8, with the anticipated listing on October 13.The company’s robust fundamentals, varied business portfolio, and reliable parent organisation have garnered widespread appreciation from analysts, according to an ET report.Brokerages including Canara Bank Securities, Anand Rathi, BP Wealth, and Mehta Equities have endorsed it as a worthwhile long-term investment. They highlight Tata Capital’s established retail and SME operations, sound asset management, and digital lending initiatives as advantageous factors in India’s expanding credit sector.
Tata Capital IPO: Why has GMP crashed?
The conservative GMP indicates investor wariness regarding immediate returns. Market specialists point out three fundamental factors contributing to this restrained sentiment, the ET report said.Initially, the offering’s valuation structure provides minimal scope for immediate appreciation. With a post-issue book value multiple of 4.2 to 4.3 times at the higher price range, Tata Capital’s valuation aligns with industry counterparts such as Bajaj Finance and HDB Financial. Industry watchers note that positive aspects, including robust financial health and consistent earnings, are already reflected in the pricing.Arihant Capital Markets’ Chief Strategy Officer, Shruti Jain, attributes the modest grey market premium to appropriate pricing.“At 4.2–4.3x post-money, the IPO valuations don’t leave much on the table for listing gains. While the fundamentals are strong, the current market is cautious, with several growth companies facing valuation pressures. That’s why the GMP hasn’t picked up despite Tata Capital’s sound business model,” she explained.Additionally, the recent consolidation with Tata Motor Finance Ltd. (TMFL) has generated uncertainties regarding portfolio quality and earnings potential.Abhinav Tiwari, Research Analyst at Bonanza, pointed out that despite the merger enhancing Tata Capital’s vehicle finance operations, it has temporarily elevated its gross non-performing assets (NPA) to approximately 1% from 0.5%.“The merger led to a short-term rise in NPAs and reduced the return on equity (ROE) to 12.6% in FY25 from 14.2% in FY24,” he said.The IPO landscape has become considerably congested. The simultaneous occurrence of major issues alongside competition from LG Electronics has stretched investor funds. This situation has constrained speculative activities in the grey market, which operates based on short-term trading sentiment.According to Prashanth Tapse, Senior Vice President at Mehta Equities, investors must now be more discriminating. “In the current IPO frenzy, where investor capital is limited, careful selection becomes crucial to maximize return. While Tata Capital’s IPO has attracted attention, other high-growth offerings like LG Electronics may be drawing part of the focus,” he said.
Tata Capital: Long-Term Outlook
Analysts widely agree that Tata Capital offers steady growth potential over the long run. The company plans to utilise fresh capital from its public offering to strengthen its Tier-I position, enabling expansion of its lending operations. The organisation’s balanced lending portfolio, spread across consumer, small business and corporate sectors, stands to gain from India’s robust credit requirements in the coming years.Whilst current unofficial market sentiment appears subdued, Tata Capital’s core business metrics and established brand value position it as a stable investment avenue for extended periods rather than immediate listing gains, the ET report said.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
