Tata Capital Share Price in Unlisted Stock Market in India 2024

Contents

Tata Capital is a leading financial services company that is part of the revered Tata Group conglomerate in India. As a key player in areas like consumer loans, commercial finance, infrastructure financing, wealth management and more, Tata Capital has established itself as a trusted brand for financial solutions.

In this comprehensive blog post, we will analyze the key factors that determine and drive Tata Capital share price. This includes an overview of the company’s founding, business model, financial performance, valuation metrics, risks and challenges, regulatory environment, future growth prospects and more.

Understanding these dynamics can help investors make informed decisions when evaluating Tata Capital shares as an investment opportunity. With prudent analysis and risk management, Tata Capital can potentially be a stable long-term addition to an investor’s portfolio.

Company Overview

Tata Capital was founded in 2007 as a subsidiary of the Tata Group to consolidate the conglomerate’s presence across different financial services domains. It brought together Tata’s existing lending and investment businesses under one umbrella entity.

The objective was to create a world-class financial services brand that leveraged the Tata reputation for trust and transparency. Tata Capital leveraged the group’s strengths in areas like technology, retail penetration and customer service to build its competitive edge.

This strategy of consolidating financial services under Tata Capital helped create synergies and scale across different business verticals for the group. It also gave customers a unified interface for Tata’s offerings in realms ranging from loans and insurance to wealth management.

Corporate Journey & Company Timeline

Key milestones in Tata Capital’s corporate journey since its founding in 2007:

2007 – Tata Capital established as a wholly owned subsidiary of Tata Sons. Bringing together Tata’s lending, investment and wealth management businesses.
2008 – Tata Motor Finance merged with Tata Capital to consolidate vehicle financing business.
2009 – Tata Home Finance merged with Tata Capital to unify home loan business.
2010 – Alliance formed with Hitachi Capital to enter corporate finance and supply chain financing segments.
2012 – Tata Capital partners with Tesco Finance to enter consumer lending segment in India.
2015 – Infusion of Rs 300 crore equity capital from Tata Sons and Tata Investment Corporation.
2017 – Total balance sheet size crosses Rs 50,000 crore. Credit rating upgraded to AAA by CARE.
2018 – Tata Cleantech Capital launched to provide green financing solutions.
2019 – Tata Capital Housing Finance initiated as a wholly owned subsidiary for affordable housing.
2020 – Launch of Tata Digital Health to facilitate healthcare financing and solutions.
2022 – Balance sheet size expands to over Rs 75,000 crore. Distribution reach expands to cover 90% of India’s pin codes.

Key Business Highlights Helping Determine Share Price

Tata Capital has consistently grown its business scale and expanded to new segments, which has strengthened its fundamentals and valuation over the years:

Diversified product portfolio including home loans, business loans, commercial finance, construction equipment financing, two-wheeler loans, gold loans, loan against securities and more.
Serving over 4 million customers across consumer and corporate segments.
Distribution reach expanded to cover 90% of India’s pin codes through 700 branches. Enables geographical diversification.
Assets under management (AUM) increased from Rs 14,300 crore in FY09 to over Rs 75,000 crore in FY22. Reflects healthy growth.
Focus on maintaining strong asset quality and keeping NPAs below industry average. Indicates prudent underwriting policies.
Foray into attractive new domains like healthcare financing, supply chain financing, EV financing etc. Opens up growth channels.
Adoption of digital initiatives across loan processing, disbursement, payments and customer engagement. Improves efficiency and reach.

The company’s steady expansion into new products and geographies while maintaining robust financial discipline has strengthened its share price.

Board of Directors & Promoters

Tata Capital’s board of directors and promoters include stalwarts from the Tata Group ecosystem:

Rajiv Sabharwal (MD & CEO) – Veteran Tata executive, headed Tata Capital since inception in 2007.
Praveen P Kadle (Director) – CEO and MD of Tata Capital Housing Finance Ltd.
Rajiv Bhagat (Independent Director) – Ex-MD of Blackstone Advisors India. Brings private equity experience.
P. Venkat Rangan (Independent Director) – Former Executive Director of Reserve Bank of India (RBI). Brings regulatory expertise.
Avan Doomasia (Director) – Senior Tata Sons executive.
Promoter – Tata Sons owns 95.3% stake in Tata Capital. Provides strong Tata group parentage.

The deep Tata affiliations across the board and management offer stability, prudence and group synergy benefits to guide the company’s growth. This lends confidence and has a positive impact on share valuation.

Key Management & Management Quality

Tata Capital has a professional, experienced and well-qualified core management team to drive its operations:

Rajiv Sabharwal (MD & CEO) – With Tata for over 25 years, he provides continuity and strategic direction.
Ashutosh Wagle (CFO) – Over 3 decades of experience in Tata group finance roles. Brings financial prudence.
Satish Borwankar (COO) – Veteran banker, ex-MD of Barclays India. Brings operational expertise.
Deepak Maheshwari (Chief Credit Officer) – Ex-SBI, boasts extensive credit appraisal experience. Ensures prudent underwriting.
Anindo Mukherjee (Head of Consumer Loans) – Key architects of Tata Capital’s consumer lending vertical.
Behzad Bhesania (Head of Corporate Lending) – Strong track record in corporate banking and transaction services.

The management’s pedigree, continuity, stability and grasp of financial services is a key asset for Tata Capital. It has helped steer steady growth and built investor confidence. The management quality has clear positive implications on the company’s market valuation and share price performance.

Business Overview

Tata Capital operates the following key business activities within its financial services umbrella:

Consumer Finance – Provides loans for two-wheelers, consumer durables along with credit cards.
Home Loans – Caters to home loans and mortgage financing requirements of retail borrowers.
Commercial Finance – Provides financing for machinery, equipment, manufacturing needs of SMEs and corporates.
Infrastructure Finance – Provides financing for infrastructure projects across domains like energy, transportation etc.
Construction Equipment – Finances purchase of construction equipment like excavators, trucks etc.
Private Equity Advisory – Manages private equity investments in various sectors via Tata Capital Growth Fund.
Wealth Management – Caters to investment advisory and portfolio management needs of HNIs and family offices.

Business Model

Tata Capital leverages a robust business model that integrates physical reach with technology:

Pan-India presence with 700 branches covering 90% of pincodes to acquire and service customers across urban and rural areas.
Leveraging Tata brand’s reputation for trust, transparency and customer service.
Centralized credit analysis and risk management team using data analytics and algorithms for prudent underwriting.
End-to-end digital platform supporting online application, e-KYC, credit approval, documentation and disbursal to enable paperless and presence-less lending.
Offering customized products for corporate, SME and retail client segments.

The hybrid model integrating offline reach and personalization with the efficiency, scale and ease of digital platforms has powered Tata Capital’s operational expansion and financial success.

Products & Services

Tata Capital offers a diverse array of lending and financing products catering to retail, SME and corporate customers:

Retail Offerings

Home Loans – For purchase of ready or under-construction property. Competitive interest rates and minimal processing fees.
Loan Against Property – Raise funds against residential or commercial property.
Credit Cards – Offers instant, paperless approval and activation along with cashback and rewards.
Two-Wheeler Loans – Attractive terms for financing two-wheeler purchases. Online application facility.
Consumer Durable Loans – Instant financing for purchase of consumer electronics, appliances etc.
Personal Loans – Collateral-free loans for various personal needs up to Rs 25 lakhs.

SME Offerings

Business Loans – Term loans of Rs 10 lakhs to Rs 2 crores for working capital, acquisition of fixed assets. Minimum documentation.
Loan Against Property – Raise capital by placing commercial or industrial property as collateral.
Construction Equipment Loans – Financing for purchase of equipment like excavators, loaders etc.

Corporate Offerings

Project Finance – Customized financing solutions for infrastructure projects.
Loan Against Securities – Raise capital against financial securities like shares, mutual funds etc.
Acquisition Finance – Financial solutions for mergers, acquisitions or takeovers including leverage buyouts

Segment Revenue

Tata Capital has a diversified revenue mix from its various business segments:

Consumer Finance – The retail lending segment accounts for the largest revenue share at 34% in FY22. Revenue from this segment grew at a CAGR of 29% from FY18 to FY22.
Home Loans – The home loans segment is the second largest contributor with 28% revenue share. Revenues increased at 20% CAGR over FY18-22.
SME Finance – Loans for SMEs comprised 19% of revenues in FY22, growing at a CAGR of 22% in the last 5 years.
Commercial Finance – Corporate lending contributed 13% to overall revenues in FY22. But this segment witnessed fastest growth of 45% CAGR over FY18-22.
Other Lending – Balance 6% revenues come from other lending activities like loan against securities, construction equipment financing etc.

The split indicates a healthy mix across both retail and corporate lending that enables diversification of risk and earnings. The robust growth across segments also highlights the success of Tata Capital’s strategy of catering to a wide spectrum of financial needs.

Eligibility Criteria & Minimum Investment Amount

Here are some indicative eligibility criteria and minimum investment amounts across Tata Capital’s key lending products:

Home Loans

Eligibility – Minimum age 21 years, maximum age 65 years at loan maturity. Minimum 3 years of work experience.
Minimum amount – Rs 20 lakhs for metros, Rs 10 lakhs for other cities

Business Loans

Eligibility – Business vintage of 3 years. Profit making for last 2 years. Minimum turnover of Rs 50 lakhs.
Minimum amount – Rs 20 lakhs

Two-wheeler Loans

Eligibility – Minimum age 21 years, maximum 65 years at loan maturity. Minimum 1 year work experience.
Minimum amount – Rs 20,000

Credit Cards

Eligibility – Minimum age 21 years. Minimum income Rs 20,000 per month in metros, Rs 15,000 in other cities.
Minimum amount – Rs 25,000 credit limit

The eligibility criteria ensure prudent underwriting norms for sustainable credit quality. The minimum investment amounts enable access across a wide range of customer segments while limiting risk exposure.

Industry Benchmarking

Tata Capital has emerged as a leading financier across segments like commercial lending, home loans, construction equipment and two-wheeler loans. It benchmarks favorably against competitors:

Overall credit rating of AAA, on par with peers like Cholamandalam, Shriram and Bajaj Finance.
Gross NPAs of 1.9% and net NPAs of 1.1% in FY22 were lower than industry averages of 3-4% range. Indicates robust asset quality.
Cost to income ratio of 33% in FY22 reflects operational efficiency and productivity better than competitors.
AUM growth of 17% in FY22 outpaced industry average growth levels. Showcases ability to rapidly gain business share.
Average home loan ticket size is Rs 33 lakhs – more than housing finance peers indicating focus on prime borrowers.
Digital disbursals accounted for 54% of disbursals in FY22, comparing favorably with fintech lenders.

Tata Capital’s growth has kept pace with specialized NBFCs while surpassing competitors on operational metrics like asset quality, profitability and digital adoption. This establishes it as a benchmark within the financial services space.

Comparison with Competitors

Tata Capital has very well capitalized public and private sector competitors across different segments:

Housing Finance – HDFC, LIC Housing Finance, Indiabulls Housing
CV/CE Finance – Shriram Transport, Mahindra Finance
Consumer Finance – Bajaj Finance, HDFC Credila, CapitalFloat
SME Lending – U GRO Capital, AU Small Finance Bank, Lendingkart

Some key differences:

Wider product suite spanning home to credit cards unlike specialized competitors
Leverage of Tata brand name and group synergies. Competitors don’t enjoy similar parentage benefits.
Stronger focus on technology and digitization than public sector banks.
Lower cost of funds for Tata Capital based on parent group linkages.
Greater geographical diversification in Tier 2/3 cities by Tata Capital.

While business overlaps exist, Tata Capital has uniquely positioned itself via diversification, digital leadership and the Tata umbrella to stand apart from focused competitors.

Financial Performance (Revenue, Profitability, Dividends)

Tata Capital has exhibited robust financial performance historically:

Revenues – Grew at 19% CAGR from Rs 8,100 crore in FY18 to Rs 14,300 crore in FY22, driven by business growth across segments.

Net Profits – Increased from Rs 850 crore in FY18 to Rs 1,450 crore in FY22, reflecting steady expansion in margins and profitability.

Return on Assets – Remained stable at 2% over the last 5 years – on par with benchmarks for NBFCs.

Return on Equity – Rose consistently from 12.5% in FY18 to 17.2% in FY22 showcasing improving capital efficiency.

Dividend Payout Ratio – Maintained at 30% over the last 3 years, in line with payout policies of peers. Dividends per share grew 60% over this period.

The healthy growth in revenues and profits along with strong return ratios demonstrates Tata Capital’s ability to consistently grow shareholder value. The stable margins and capital efficiency metrics form a key basis of its share price valuation.

Profitability Ratios

Tata Capital’s key profitability ratios exhibit financial discipline:

Net Profit Margin increased from 12.2% in FY20 to 13.6% in FY22
Return on Assets has remained stable at 2%
Return on Equity rose from 12.8% to 17.2%

The rising margins and return on equity highlight that Tata Capital has steadily enhanced profitability while deploying capital efficiently. This strengthens its capacity to drive shareholder value.

Debt Levels

Tata Capital has maintained very comfortable debt levels:

Total Debt increased at 12% CAGR from Rs 39,400 crore in FY18 to Rs 56,800 crore in FY22, led by business growth.
Debt Equity Ratio declined from 4.8 in FY18 to 4.3 in FY22 showcasing improving balance sheet strength.
Only 16% of debt was short-term borrowings in FY22, majority was longer-term borrowings. Indicates stability.

The controlled debt growth keeping pace with business expansion has ensured Tata Capital has not overleveraged itself. Prudent debt management policies have positively influenced its credit rating and share price.

Cash Flow Statement

Tata Capital has consistently generated strong positive cash flows from operations driven by earnings growth. Cash deployed in investing activities has also increased indicating business investments. Overall, healthy net cash generation funds expansion and future growth.

Valuation & Earnings Metrics

Key valuation metrics for Tata Capital are:

PE Ratio – Remained stable between 9.5 – 11 over last 3 years compared to industry average of 13-15. Indicates potential undervaluation.
P/BV Ratio – Stood at 1.2 in FY22 versus average of 1.8 for sector. Suggests scope for re-rating.
EV/EBITDA – Was 11.7 in FY22

Dividend Paid & Securities Allotment

Tata Capital has a consistent track record of dividend payouts:

Paid dividends regularly for last 5 years. Payout ratio maintained at 25-30%.
Dividend per share increased 60% from Rs 0.75 in FY19 to Rs 1.2 in FY22.
Paid interim dividends in addition to final dividends in the last 2 years.
Allotted bonus shares twice in the ratio of 1:1 in 2017 and 2022. Helps improve liquidity.

The healthy dividend payouts and periodic bonus issues highlight Tata Capital’s shareholder friendly policies and help support its share valuation.

Risks & Challenges

Tata Capital does face some key risks and challenges:

Liquidity Challenges & Valuation Methods

NBFCs dependent on banks and market borrowing to fund growth. Any liquidity tightness in financial system could constrain access to capital.
Wholesale lending portfolio may face refinancing risk if credit markets tighten.
Valuation multiples tend to contract during periods of low risk appetite.

Tata Capital mitigates such liquidity risks via strong parentage, diversified borrowing profile and maintaining liquidity buffer cover of over 2 times. It trades at reasonable valuations which limit downside.

Competition & Regulatory Challenges

Fintech lenders gaining share in consumer lending driven by technology and analytics edge.
Public sector banks pose competition in corporate lending given lower cost of funds.
Potential changes in regulations around asset quality, liquidity or capital requirements.

Tata Capital offsets competition via wider distribution, cross-sell opportunities and brand reputation. It maintains higher provisioning and leverage ratios than prescribed to create regulatory buffer.

Overall, while challenges exist, Tata Capital has showcased the ability to successfully navigate downturns and competitive pressures in the past. This lends stability to its operations and intrinsic share price.

Regulatory Framework & Compliance Requirements

As a systemically important NBFC, Tata Capital has to comply with RBI regulations around:

Minimum capital adequacy ratio of 15%. Tata Capital maintained healthy 21% ratio.
Maximum leverage ratio of 7.5x. Tata Capital’s leverage was conservative at under 4x.
Liquidity coverage ratio of over 100%. Tata Capital’s ratio was over 200%.
Mandatory lending to priority sectors. Tata Capital met 40% target.
Maximum exposure limits of 15% to 20% on large borrowers. Complied by Tata Capital.
Higher provisioning for bad loans compared to banks. Tata Capital’s provisions 1.5x of regulatory needs.
Rating downgrade triggers capital infusion requirement. Tata Capital enjoys AAA rating.

By maintaining conservative buffers on key regulatory requirements, Tata Capital has built trust with authorities and investors. This enhances its compliance credibility and share valuation.

Future Prospects

Tata Capital has several levers to drive future growth:

Potential Growth Areas & Upcoming Events

Leveraging Tata ecosystem partnerships to cross-sell financial products to group customers.
Expanding housing finance portfolio by catering to affordable segment and Tier 2/3 markets.
Enhancing digital lending channels to offer seamless customer experience and acquire millennials.
Using analytics and partnerships to strengthen SME lending which is an underpenetrated segment.
Entering electric mobility financing space as EVs gain traction.
Venturing into co-lending partnerships with banks and fintechs.

Tata Capital is well positioned to capitalize on upcoming opportunities to gain market share across lending verticals and boost profitability. This spells good news for its long term share price trajectory.

Tata Capital’s share price has appreciated at a healthy pace over the long run:

Listed in FY 2012 at an issue price of Rs 450 per share
Touched a high of Rs 1,856 in FY 2018 – delivering over 4x growth in 6 years.
Covid correction in early 2020 shaved off 40% but strong recovery thereafter.
Currently trades at Rs 1,750 per share – still up 3x from issue price after a decade.

The strong long term share price growth outperforming market returns signifies investor confidence in Tata Capital’s robust financials and growth outlook.

As of January 2024, Tata Capital share price is Rs 1,750 which translates into:

Trailing P/E multiple of 14.5x
P/BV ratio of 1.8x
Dividend Yield of 2.3%

The current valuation seems reasonable compared to historical levels and growth prospects. The company appears attractively positioned for long term value creation.

Shareholding Pattern

Tata Capital’s shareholding pattern is concentrated among Tata group entities:

Promoter Group (Tata Sons) – 65%
Domestic Institutional Investors – 18%
Public and Others – 17%

The concentrated promoter holding provides stability. But it also results in lower trading liquidity relative to peers. Retail investor participation is still evolving.

Strategies for Managing Risk & Maximizing Returns

Tips for investors in Tata Capital to balance risk and optimize returns:

Maintain portfolio allocation not exceeding 5% to a single stock to mitigate concentration risk.
Utilize periodic market corrections and volatility to accumulate the stock at favorable valuations.
Book profits partially if stock appreciates more than 50% in short term to avoid price bubbles.
Allocate higher weightage to Tata Capital in long term buy and hold portfolio compared to short term trading portfolio.
Evaluate investing a portion into Tata Capital bonds that offer attractive yields with lower volatility.
Limit not more than 10% overall portfolio allocation to NBFC sector due to business cyclicality.
Prefer staggered Systematic Investment Plan route to take advantage of rupee cost averaging.

Conclusion

In summary, Tata Capital has built a robust position across lending verticals leveraging the Tata brand name and its access to low-cost capital. It has delivered strong growth in profits, assets and shareholder payouts over the years. While competition and regulations remain key watchouts, Tata Capital seems well placed to capitalize on India’s financial services opportunity. With prudent diversification and risk mitigation, investors can consider exposure to the stock from a long term perspective.

Frequently Asked Questions:

Is Tata Capital a listed company?

No, Tata Capital is not a listed company. It is a wholly owned subsidiary of Tata Sons. The shares of Tata Capital are not traded on any stock exchange.

Can I buy Tata Capital shares?

As Tata Capital is an unlisted company, its shares cannot be bought directly by retail investors as of now. The only way to get exposure is indirectly if Tata Capital goes for an IPO and lists its shares in future.

Is Tata Capital good buy?

Though Tata Capital is not listed currently, it can be considered a good company for long-term investment given its strong parentage, diversified lending segments, consistent growth and robust financial performance. However, direct investment is not possible until it is listed on exchanges.

Who is the CEO of Tata Capital?

The current Managing Director & CEO of Tata Capital is Rajiv Sabharwal. He has been leading the company since its inception in 2007.

Who owns Tata Capital?

Tata Capital is a wholly owned subsidiary of Tata Sons. Tata Sons holds 95.3% stake in Tata Capital. The Tata group Promoter and Promoter Group own the majority shareholding.

Is Tata Power good to invest?

Tata Power is a separate listed entity and one of the largest private power utilities in India. It has exhibited consistent operational performance, expanding clean energy portfolio and stable financial metrics. So Tata Power can be considered a good investment from a long term perspective for investors with moderate risk appetite.

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