According to Motilal Oswal's research report dated June 29, 2026, the brokerage has assigned a Neutral rating to Tata Capital with a target price of ₹390 per share, up from the previous ₹364 target. The target price is based on 2.7x March 2028E P/BV valuation multiple. As reported by Motilal Oswal, a meaningful re-rating would likely require sustained improvement in Return on Assets (RoA) and Return on Equity (RoE) and continued expansion in higher-yielding retail lending segments. Current market price stands at ₹361, implying an 8% upside to the target price. Despite the strong fundamentals, the brokerage believes that current valuations already factor in the growth outlook and improving profitability, limiting upside potential from current levels.
Tata Capital operates as one of India's leading diversified NBFCs with an Assets Under Management (AUM) of ₹2.77 trillion as of March 2026. According to Motilal Oswal's analysis, the company has delivered a robust ~29% AUM CAGR (excluding Motor Finance) over FY23-26, demonstrating the strength of its franchise, diversified business model, and consistent execution capabilities. The company's loan portfolio maintains a highly granular structure with ~98% of accounts carrying ticket sizes below ₹1 crore. The brokerage expects Tata Capital to benefit from the large retail and SME credit opportunity, supported by its expanding distribution network, digital capabilities, strong liability franchise, and increasing focus on granular, higher-yielding segments. Housing is likely to remain the key growth driver, followed by retail, SME, and emerging/mid-corporate businesses. The company's diversified approach across multiple lending segments provides resilience and reduces concentration risk, with no single product contributing more than 20% of total loans.
According to Motilal Oswal's latest report, Tata Capital follows a 'phygital' distribution model that combines physical branches with digital platforms and partner networks, allowing the company to reach customers across both urban and rural markets while improving customer experience. The company has significantly expanded its physical presence, growing its branch network from 539 branches in FY23 to 1,477 branches in FY26. While this temporarily increased operating expenses, the brokerage expects these branches to become more productive over time. The realization of merger synergies, improved productivity of newly added branches, and increased adoption of technology, AI, and digital tools are expected to drive operating leverage and enhance employee productivity. This strategic approach positions Tata Capital to better serve its diversified customer base while maintaining operational efficiency.
According to Motilal Oswal's outlook, Tata Capital is well-positioned to sustain a healthy AUM CAGR of around 23% over FY26-28E. The company is expected to continue its calibrated shift toward higher-yielding segments while maintaining investments in digital capabilities. As reported by the brokerage, this growth trajectory is supported by the company's diversified business model, consistent execution capabilities, and the strong Tata brand backing. The company benefits from a strong liability franchise, supported by the Tata Group parentage and an AAA credit rating, enabling access to funding at competitive costs. Net interest margins (NIMs) are expected to improve to 5.4% in FY27E and 5.5% in FY28E, from 5.2% in FY26, as the portfolio mix shifts further toward retail and unsecured lending segments. The company's NIM moderated in FY26 due to slower growth in unsecured lending and the continued runoff of the motor finance portfolio, but improving disbursement trends in unsecured segments and the turnaround of the motor finance business are expected to support margin recovery from FY27.
As reported by Motilal Oswal, Tata Capital's asset quality is supported by a predominantly secured lending book with ~80% secured exposure. The portfolio demonstrates strong diversification with no single product contributing more than 20% of total loans. Credit costs increased following the TMFL merger due to stress in the Motors Finance and select unsecured portfolios, though they are now steadily improving. Asset quality trends have improved meaningfully, with Motors Finance returning to profitability in 4QFY26, and credit costs are expected to normalize further and moderate to 1.1% of AUM over FY27E-FY28E. The company maintains operational efficiency with cost-to-income ratio estimated at 35%/33% and opex-to-average assets at 2.1%/2.0% in FY27/FY28. This operational efficiency supports the company's ability to sustain its growth trajectory while maintaining strong risk management practices, with GS3 of 2% and NS3 of 0.9%, which is among the best within the large, diversified NBFC peer set as of March 2026.
