Kolkata: The shares of Tata Capital listed on Monday, October 13 at Rs 330 on both BSE and NSE. This means the shares are available close to the issue price. It also means that those who bid for the shares of this company but did not get allotment, did not have much to lose. But the lackluster GMP and subscription record indicated tepid investor enthusiasm. Is it advisable to buy Tata Capital shares?
It should be noted that brokerage firm Emkay Global Financial Services has analysed the company, its business, future and financials and has assigned ‘ADD’ rating to the stock. The brokerage believes that the Tata group company is capable of robust growth in the coming years which can offer investors an opportunity for good returns.
The Tata brand
Emkay Global has highlighted that the Tata brand is the biggest source of strength of Tata Capital. It has led to the company securing a AAA credit, which in turn, gives the company access to debt from the market at low interest rates and the process is also smooth. Among the potential customers — from lower-middle class individuals to big corporates — the Tata brand generates trust and confidence.
The footprint of Tata Capital is spread in as many as 27 states. The firm has about 1,500 branches. The product portfolio is broad and the business comes almost evenly from different geographies and is not skewed towards any particular region or state. This also accounts for the fact that its AUM rose by four times in the past eight years.
The brokerage has also said that Tata Capital’s net interest margin could rise by about 60-70 basis points to reach about 5.8% between 2025 and 2028. In the next three years, the AUM of Tata Capital could rise by 100% AUM could nearly double to ₹4.3 lakh crore over the next three years. Emkay thinks RoA (return on assets) could reach about 2.2% as borrowing costs go down.
Long-term player, know target price
Emkay has assigned an ‘ADD’ rating to Tata Capital. It has also set a target price of Rs 360, representing a 10% upside. As risk factors it has mentioned that in case that credit costs in vehicle finance business are delayed or if macroeconomic conditions worsen, the company could face growth problems.
The brokerage thinks the business model of the company is stable and diversified. Thus it is fit for long-term investment. The estimated CAGR of AUM is about 24% and that of EPS CAGR is 30% in the 2025–2028 period.
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