JPMorgan has maintained its 'overweight' rating on Tata Capital Ltd. with a price target of ₹395, implying an upside of 12.54% from the current market price of ₹351.95. According to reports from JPMorgan, the brokerage's positive stance is driven by the company's net interest margin (NIM) growth prospects and management's strategic focus on margin expansion in the second half of fiscal 2027.
JPMorgan highlighted that net interest margin remains a key driver of Return on Assets (RoA) ramp-up, with management specifically targeting margin expansion in the second half of fiscal 2027. The brokerage noted that while asset quality and early delinquency trends remain benign, it is closely monitoring certain segments in the SME portfolio that are more exposed to macro and crude price fluctuations. JPMorgan emphasized that asset quality and early delinquency trends remain benign, though monitoring certain segments in SME closely, which are more exposed to macro and crude prices.
The company's growth guidance remains intact at 23-25%, with management aiming to deliver at the upper end of this range. According to JPMorgan, this growth target is supported by retail, SME, and corporate demand, along with diversification levers that the company is leveraging to expand its business portfolio.
The impact of Foreign Currency Non-Resident (FCNR) rate revisions has been nuanced, with TCAP experiencing limited pass-through benefits primarily in short-duration (30-60 day) money, while 3-year funding costs continue to rise. JPMorgan noted that there has been discussion regarding potential regulatory restrictions on the Flexi-product, where TCAP has put the net exposure below 5% of the loan book and is hopeful of relaxation given clarifications submitted and genuine customer needs. The brokerage added that there was a lot of discussion on the potential impact of any regulatory restrictions on the Flexi-product, where TCAP put the net exposure below 5% of the loan book and is hopeful of relaxation vs. the draft circular, given the clarifications submitted as well as a genuine customer need.
For a potential re-rating of Tata Capital, JPMorgan identified three key factors: visible NIM inflection, credit costs trending below 1%, and growth acceleration. These metrics would be crucial indicators for the company to achieve the desired market valuation and maintain its positive brokerage outlook.
