Why IPO-bound Tata Capital shifts its focus to used vehicle loans

Copyright © HT Digital Streams Limit all rights reserved. The IPO-bound Tata Capital plans to increase part of the used vehicle loans. Here is why Shayan Ghosh has been read 4 min was read 23 Sept 2025, 05:30 am The Mumbai Bank of the National Company Law Tribunal approved the merger of Tata Motors Finance in Tata Capital in May. In summary Tata Motors Finance, about four months ago, Tata Capital merged to simplify matters, facilitate conversion and exploit synergies. But everything didn’t go as planned. It urged Tata Capital to re -align its portfolio. Here’s what this change has encouraged … Mumbai. While preparing to be revealed next month, Tata Capital Ltd is planning to reduce its dependence on new vehicles financing and increase the share for used cars to soften the higher cost of bad loans he has inherited from Tata Motors Finance Ltd. The non-banking financing has a plan to improve the quality of the car financing business and believe it would not be the next two years, saying, said, said, said, said, said, said, said, a person said. Want to be quoted on business plans in front of the IPO. “The idea is to increase used vehicle financing to 50% of the book, from currently off,” said the person quoted earlier. “Financing of used vehicles will lead to better margins, lower loan-to-value (LTV) and better loan yields.” The Mumbai Bank of the National Company Law Tribunal approved the merger of Tata Motors Finance in May in Tata Capital. Prior to the merger, Tata Motors provided Finance loans to buy new and preceding vehicles and financed carriers and dealers. As of March, Tata Motors Finance had a £ 30,227.2 crore and Tata Capital (pre-merging) loan book at £ 1.98 billion, according to the revelations in the draft prospectus. However, the consolidated numbers after the merger setting show that the credit cost ratio of Tata Capital rose from 0.4% in FY24 to 1.4% in FY25. In absolute terms, it jumped from £ 592 to £ 2,827 crore. Credit costs are the sum of terms and write -offs expressed as a percentage of the assets. Tata Capital does even better than some of its peers. For example, Bajaj Finance Ltd’s credit cost ratio was at 2.2% and L&T Finance Ltd’s 2.5% of FY25, according to the initial filing of Tata Capital (IPO). Inquiries by e -mail to Tata Capital remained unanswered. Tata Capital, the subsidiary of Non-Banking Financial Company (NBFC) of Tata Sons Pvt. Ltd., has submitted its prospectus for draft share in August and reportedly expected in October. The company wants to raise $ 2 billion, while promoter Tata Sons are trying to sell up to 230m shares, and International Finance Corporation wants to download up to 35.8 million shares. The IPO also contains a new 210 million shares issue. The listing comes as the deadline of the Reserve Bank of India (RBI) for certain large non-banking financiers to end in public on September 30. RBI regulations classify NBFCs in four layers based on their size, activity and perceived risks. The top layer consists of other prominent names such as Tata Sons, Lic Housing Finance and Shriram Finance. This is subject to greater regulatory investigation than their smaller counterparts. The news agency PTI reported on September 12 that Tata Capital is likely to start its share sale in the first half of October after the RBI has given an extension. Tata Motors Finance’s merger with Tata Capital was intended to consolidate and simplify, scale and synergize the businesses. However, the quality of the Book of Tata Motors Finance was not equal to that of Tata Capital, which revived the need for the portfolio of the combined entity. Tata Capital’s gross stage three loans – repayments delayed by more than 90 days from the expiration date – stood at 1.5% of the total loans in FY25 without accounting for the merger. If the then Tata Motors financing numbers were included, the ratio was weakened to 1.9%. In comparison, the gross stage of Bajaj Finance was three loans at 1% in FY25, while L&T Finance reported a 3.3% ratio. “The changes to the loan book composition cannot be done in a hurry, but the plan should start to show results within the next 24-30 months,” said the person quoted earlier. “Once implemented, the credit cost of that business will align with that of Tata Capital.” The person said it was difficult to compete with major banks in the private sector when it comes to financing new vehicles. These banks can offer much better rates than financiers who do not bank. According to the person, such competition would erode, something that Tata Capital wants to avoid. However, Suresh Ganapathy, managing director and head of financial services research at Macquarie Capital, expects Tata Capital’s IPO to increase competition over different housing, car and small businesses. “The growth rate of the company was strong and the listing will make more demands to keep maintaining higher growth rates,” Ganapathy told clients on August 21. “This is the third largest diversified NBFC, and that implies greater competition in space.” However, he warns that the listing of Tata Capital may affect the valuations of unlisted NBFCs. “From late, the list of some NBFCs took place at a significant discount on their unlisted market price,” Ganapathy said. “If a large NBFC like Tata Capital is at a significant discount on the unlisted price, it will have consequences for the valuations of the unlisted NBFC universe.” Catch all the corporate news and updates on live currency. Download the Mint News app to get daily market updates and live business news. 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