Tata Capital share price in focus: Brokerage firm Emkay Global has reiterated its constructive stance on Tata Capital after a recent interaction with the company’s senior leadership, expressing confidence in the lender’s growth trajectory and profitability outlook despite a mixed macro backdrop.
Following a meeting with Tata Capital’s management, including its managing director, Emkay maintained its “Add” rating on the stock with a target price of Rs 390, indicating upside from current levels. The brokerage said the company’s long-term outlook remains anchored by steady execution and consistent guidance across key performance metrics.
Created with AI. Errors are possibleAccording to Emkay, “the management reiterated its FY28 guidance of 23–25 per cent AUM CAGR, credit cost of 1 per cent, and RoA of 2.5–2.7 per cent,” signalling continuity in strategy even as external uncertainties persist.
Growth Plans Stay on Track
Emkay noted that “business trends are stable despite the macro uncertainty, though the management remains watchful in select MSME and CV segments.” This measured approach reflects a balancing act between growth ambitions and asset quality considerations.
Future growth is expected to be driven by higher-yielding segments. The company is sharpening its focus on products such as affordable housing loans, micro loans against property, gold loans, and unsecured lending offerings like personal and business loans. Expansion into deeper geographies and an increase in branch presence are also expected to aid growth.
In addition, the management highlighted a renewed push toward expanding product offerings within existing branches, alongside a continued focus on middle-income borrowers, a segment it sees as offering attractive risk-adjusted returns.
Profitability Outlook Improves
Emkay underscored that Tata Capital’s profitability profile is set to strengthen over the next few years. The brokerage pointed to multiple levers supporting this outlook, including a moderation in credit costs, improved operating efficiency, and margin expansion.
“The management expects overall profitability to improve, with RoA expanding to 2.5–2.7 per cent by FY28,” Emkay said, adding that the improvement will be driven by a decline in credit costs to around 1%, alongside efficiency gains.
The company is also leveraging technology to enhance productivity. Increased use of digital tools and AI across operations is expected to help reduce operating expenses relative to assets, further boosting returns.
Net interest margins (NIMs) are likely to benefit from a higher mix of high-yield products and more granular risk-based pricing, particularly in mass-market lending segments.
Funding Costs and Asset Quality Trends
On the funding side, Tata Capital acknowledged that the incremental cost of funds has risen compared to earlier levels this year, though it expects this pressure to stabilise or ease going forward. This could provide some relief to margins if interest rate conditions soften.
Asset quality trends also appear under control. While the company remains cautious in select segments, early indicators suggest some improvement in repayment behaviour. The management noted that bounce rates in June have moderated compared to April, when collection trends had shown improvement over March.
Additionally, parts of the portfolio that had previously weighed on performance, such as the motor finance book, are expected to begin contributing to growth again from the second quarter of FY27.
Valuations Seen as Supported
Emkay believes Tata Capital’s current valuation is justified, supported by its diversified business model, execution track record, and improving return profile. “We believe Tata Capital’s valuation is well supported by its strong execution, diversified franchise, and rising profitability,” the brokerage said, adding that the stock’s target price implies a price-to-book multiple of about 2.6 times FY28 estimated value.
The brokerage also highlighted that the company’s decision to exit certain low-yield or higher-risk segments in the past—such as consumer durable financing and select agri-linked loans—reflects a disciplined approach to capital allocation.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
