Tata Capital Unveiled: Strategies, Success, and Future Prospects

Summary

Tata Capital Limited, a subsidiary of Tata Sons Pvt Ltd, is a financial services company that operates in commercial finance, wealth services, consumer finance, and Tata Cards. Additionally, it has a business in distribution and marketing. This company offers personal loans, home loans, business loans, used car loans, consumer durable loans and credit card loans against property and securities, investment banking, and life insurance. Tata Capital also provides working capital to businesses through long-term and short-term loans. It serves retail, corporate, and institutional customers.

Company Overview

Tata Capital Limited, a subsidiary of Tata Sons Pvt Ltd, is a financial services company that operates in commercial finance, wealth services, consumer finance, and Tata Cards. Additionally, it has a business in distribution and marketing. This company offers personal loans, home loans, business loans, used car loans, consumer durable loans and credit card loans against property and securities, investment banking, and life insurance. Tata Capital also provides working capital to businesses through long-term and short-term loans. It serves retail, corporate, and institutional customers.

Tata Capital Subsidiary Companies

Tata Cleantech Capital Limited ("TCCL") -  Tata Cleantech Capital Limited is a joint venture between TCL and International Finance Corporation TCCL is a company that finances and offers consultancy services for projects related to energy efficiency, waste management, water management, renewable energy, and cash flow-based infrastructure financing. 

Tata Capital Housing Finance Limited ("TCHFL") - Affordable housing finance loans and domestic loans are the principal merchandise supplied with the aid of Tata Capital Housing Finance Limited ("TCHFL"). Additionally, it gives loans to builders for the development of residential and business structures as nicely as loans secured by property.

Tata Capital Financial Services Limited ("TCFSL") - The one-stop monetary offerings issuer for retail, corporate, and institutional consumers throughout industries is Tata Capital Financial Services Limited ("TCFSL").

Business Model

Tata Capital has a broad business plan that includes various financial services, including commercial financing.

• Tata Capital offers businesses operating capital, term loans, financing for building, financing for equipment, and leasing options.

• Loans for consumers: This organisation provides credit cards, consumer durable loans, home loans, used automobile loans, credit cards, and loans secured by real estate and securities.

• Wealth services: Tata Capital provides its clients with investment banking, life insurance, mutual funds, wealth management, microfinance, and private equity options.

• Distribution and marketing of Tata Cards: The business offers its credit cards and other financial products.

Segments

In these many business domains, Tata Capital provides direct or indirect services to retail, corporate, and institutional clients through its subsidiaries. The company's portfolio is well-diversified, with expanding SME, corporate, and retail franchise lending operations.

Industry Research

One of the Fintech markets with the fastest global growth rates is India. The market size of India's FinTech industry is projected to reach ~$150 billion by 2025, from $50 billion in 2021. Total Addressable Market for the Indian Fintech sector is projected to reach $1.3 trillion by 2025, while Assets Under Management and Revenue are projected to reach $1 trillion and $200 billion by 2030, respectively. India's Fintech industry has received money, making over 14% of global funding. India comes in second for deal volume. By 2030, the Fintech Market Opportunity is projected to reach $2.1 trillion. In 2022, Indian fintechs ranked as the country's second most-funded startup industry. In 2022, fintech startups in India raised $5.65 billion. Between 2021 and 2022, the overall number of unique institutional investors in Indian fintech increased from 535 to 1019, nearly doubling. In India, where banks dominate the financial landscape, commercial banks hold over 64% of all assets held by the financial system. A number of reforms have been introduced by the government to regulate, liberalize, and enhance this industry. As part of the Reserve Bank of India's efforts to enable easy access to micro, small and medium-sized enterprises, the Reserve Bank has launched a new MSME credit guarantee fund. This surge in wealth is anticipated to propel India to the position of the fourth-largest private wealth market worldwide by 2028. Furthermore, India's insurance market is set to hit US$ 250 billion by 2025, creating an opportunity for an extra US$ 78 billion in life insurance premiums between 2020 and 2030.

Source - PWC

Within the distinct goal groups, savings managers are looking ahead to the most demand increase for non-public loans and SME enterprise loans in the retail lending landscape. Additionally, 29% are constructive about the excessive boom in agricultural/equipment loans, whilst 31% are confident about the boom in the MFI mortgage segment, chiefly owing to the confined impact of the pandemic in rural areas in contrast to city centres. In line with the above findings, around 57% of credit score managers have highlighted small enterprise proprietors and SME customers as key focal point segments. Further, 19% are searching to centre of attention on rural customers, whilst around 18% are focusing on salaried customers.

The sentiment has been echoed in the launch of contextual choices of each enterprise as properly as non-public loans through lenders. In the non-public mortgage segment, merchandise like immediate zero pastime loans of unique quantities and condo credit loans were introduced, whilst, for small businesses, emergency credit score strains have been delivered via more than one lender. However, while lenders are revisiting their products, it is integral to complement the equal with a quarter and geographical centre of attention to achieve the most returns. The gross non-performing property (GNPA) peaked in FY18 at 11.2% earlier than falling to 9.1% in FY19 and further declining to 8.2% in FY20, properly earlier than the onset of the pandemic’s first wave.10 However, the ratio of GNPA got here down to 7.5% in September FY21 in spite of the pandemic and its monetary impact. This is due to the RBI’s six-month moratorium introduced for the duration of the first wave to cushion the monetary effect on retail borrowers. The 2d wave of COVID led to in addition decline in the capability of retail lenders to repay the loans. As a result, the NPAs of scheduled industrial banks (SCBs) in India are anticipated to upward jostle to the tune of 9.8% through March 2022 as in opposition to 7.5% in March 2021.11 The reimbursement ability of lenders is predicted to get better from the 0.33 quarter onward with the resumption of monetary activities.

Since the final decade, Indian banks have been confronted with the problem of non-performing belongings (NPA). To tackle this NPA crisis, the government inspired banks to exchange their lending behaviour. Consequently, banks shifted from company lending to the non-public mortgage category, the place where the hazard of default was once reduced. In other words, a giant variety of small private loans had been favoured over a few huge loans to corporates. This has been seen in the shrinking share of financial institution credit scores to the enterprise whilst retail savings witnessed an upward trend. This markedly extended the NPA state of affairs whilst the corporates gravitated towards the debt market for their deposit requirements.

Even though India’s client spending is making a robust comeback, earnings cuts for the duration of the pandemic and rising expenses due to inflation necessitated the financing of private consumption through loans. Additionally, expenditure for the duration of the festive seasons generally leads to hovering demand for private loans, with banks and NBFCs supplying cashback offers, pre-approved loans, no-cost EMI offers, and desirable activity rates. The customer lending market is set to amplify even extra with new digital lending structures and online savings options. Partnerships between digital lenders and e-commerce systems are additionally a rising fashion in the sector.

Fintech Revolution

Digital lenders have utilised innovative strategies in order to overcome these barriers. Indian digital lending has been driven by three major shifts in the last few years, increased access to smartphones; demonetisation and the subsequent push to digital payments, and the Government-driven initiative of India Stack along with growing API-based data availability, which has led to fundamental transformations across the credit value chain.

Source - Statista

Promoters of the company

Peer Comparison

Funding Analysis of Tata Capital’s Competitors

Financials of Tata Capitals (INR in crore)

Conclusion

Tata Capital plans to bring its IPO at a rate ranging from 475 to 500 rupees. The price of their unlisted shares is 1025 rupees, according to sources. As per sources, the lot size for an application will be 30 shares. The minimum investable amount for retail investors will be 15000 rupees. The minimum lot size for SNII will be 14 lots, each comprising 420 shares. With the Tata name associated, trust in this company is already established, and its market segment is quite extensive, making it both a safe and worthy investment. Tata Capital has not only maintained balanced financial statements but also generated revenue, indicating that it is poised to deliver good returns after its IPO.