Tata Capital shares surged over 6% following the strong Q1FY27 results, with the stock trading at ₹363.25, up 2.34% from the previous close as of 11:36 am. The counter witnessed strong investor interest, with over 5 million shares changing hands within the first 20 minutes of trading. Motilal Oswal Financial Services (MOFSL) has retained its 'Neutral' rating with a target price of ₹390, implying an upside of around 10% from the previous closing price of ₹354.95, according to the latest reports. According to the brokerage, while the outlook remains favorable, current valuations adequately reflect the company's near-term growth and earnings potential.
Tata Capital delivered robust financial results for the first quarter of FY27, with consolidated net profit growing 56% YoY to ₹1,547 crores, compared with ₹990 crores in the corresponding period last year. The growth was driven by higher core income and lower provisioning as the company's asset quality improved. The Net Interest Income (NII) increased 25% YoY to ₹3,571 crore, helped by strong growth in its lending business. Assets under management (AUM) expanded 22% to ₹2.9 lakh crore during the quarter. The retail lending business remained the key growth engine, with retail AUM, excluding the motor finance portfolio, rising to ₹1.43 lakh crore compared with ₹1.36 lakh crore in the March quarter and ₹1.18 lakh crore a year ago. However, the motor finance business continued to decline, with AUM standing at ₹24,445 crore, down from ₹25,390 crore in the previous quarter and ₹30,374 crore in the year-ago period.
Other income demonstrated strong growth of approximately 16% YoY to ₹8.8 billion, which was 25% above Motilal Oswal's estimates, primarily driven by higher rental income and investment income. According to the research report, operating expenses grew 21% YoY to ₹16.2 billion, remaining in line with expectations. The cost-to-income ratio declined 40 basis points YoY to 36.4%, compared to 36.8% in the previous year and 38.3% in the previous quarter. Net interest margins (NIMs) declined by 15 basis points sequentially due to higher borrowing costs, though management expects margins to improve by around 10 basis points during FY27, supported by a larger share of higher-yielding loan products.
Asset quality remained a bright spot with gross Stage 3 ratio declining to 1.9%, compared with 2% in the March quarter and 2.1% in the June quarter last year, indicating lower stress in the loan book. Credit costs declined 26% YoY, helped by continued improvement in the unsecured retail portfolio. The company maintained its capital adequacy at 18.5%, above regulatory requirements, with debt-to-equity ratio at 5.3x, unchanged from March 2026. Total liquidity buffer stands at about ₹29,000 crores. Management remains confident of staying within the 1% credit cost guidance and expects much of the improvement in return on assets to come from margin expansion.
Tata Capital announced a proposed acquisition of Yog Loans to expand into gold loans, with the transaction valued at a pre-money equity valuation of up to ₹318 crores and envisaging a ₹93 crores primary capital infusion. The company expects the business to be consolidated under the Tata Capital brand after regulatory approval, with plans to add about 500 branches over 2.5 to 3 years and grow the gold-loan portfolio to more than ₹4,000 crores. As of March 2026, the gold loan portfolio stood at ₹708 crore. Management sees the segment as one of the growth drivers over the medium term as it expands into higher-yielding lending products. The company reiterated its FY2027 AUM growth guidance at 23% to 25% and expects margins to improve by about 10 basis points during the year.
