IPO-bound Tata Capital bets on multi-OEM, cross-sell strategy to lift asset quality
Merger positions Tata Capital as a larger and competitive player in vehicle finance, giving it a consolidated loan book across commercial and passenger vehicles
- Aug 20, 2025,
- Updated Aug 20, 2025 3:29 PM IST
IPO-bound Tata Capital is prioritising lower borrowing costs and improved asset quality as it integrates Tata Motors Finance (TMFL) into its operations. To cut TMFL’s borrowing costs, the company will tap its credit ratings and wide funding base, alongside tighter risk controls and collections to reinforce the combined portfolio.
In June 2025, Tata Capital and TMFL approved the merger through an NCLT scheme of arrangement. The merger positions Tata Capital as a larger and competitive player in vehicle finance, giving it a consolidated loan book across commercial and passenger vehicles.
The management believes that by bringing TMFL’s borrowings under Tata Capital’s superior credit umbrella, interest costs can be reduced over time, thereby boosting profitability, as per their commentary in the UDRHP.
Rajiv Sabharwal, MD and CEO, Tata Capital, said, “The successful completion of the merger of Tata Motors Finance with Tata Capital through the NCLT-approved scheme of arrangement is expected to strengthen further our presence in the commercial vehicle and passenger car financing markets. It will position Tata Capital as a leading full-stack vehicle financier. It shall also enable us to serve a broader customer base through an expanded distribution network.”
TMFL was a commercial and passenger vehicle loan providers in India, with a pan-India presence of 353 branches spanning 27 states and union territories. The merger consolidated the lending businesses of Tata Capital and TMFL.
As on March 31, 2025, following the merger, TMFL contributed 92.5% of the gross loans in commercial vehicle loans, 16.8% in car loans and 12.8% in supply chain finance.
With TMFL, Tata Capital has expanded from a single OEM to a multi-OEM model spanning pan-India to diversify the acquired vehicle finance business. Tata Capital’s strategy for this business includes optimising the portfolio mix by increasing the share of used and small and light commercial vehicles, thereby improving the overall yield of the portfolio.
Tata Capital intends to leverage TMFL’s customer base for more cross-sell opportunities. It aims to gradually reduce the borrowing cost of TMFL debt, leveraging a superior credit rating and a broad suite of liability instruments. Additionally, Tata Capital will seek to improve overall asset quality by strengthening risk management practices and collection infrastructure.
“We will also consolidate branches and further leverage digitisation, technology and analytics with an aim to reduce cost to income ratio. We believe such initiatives shall help us in improving the return on assets of the acquired vehicle finance business,” said Sabharwal in the UDRHP management commentary.
The emphasis on efficiencies and portfolio strengthening comes at a crucial time for Tata Capital. In the June 2025 quarter, the company’s consolidated net profit more than doubled year-on-year to Rs 1,040.93 crore, with total income rising to Rs 7,691.65 crore. The robust performance has set the stage for its IPO, which will be the largest in India’s financial services sector. According to primedatabase.com, Tata Capital is expected to raise more than Rs 17,000 crore from the IPO.
The company’s ongoing IPO, combining a fresh issue of shares with an offer for sale by Tata Sons and the International Finance Corporation, will augment the company’s Tier-I capital base and support future lending growth.
Tata Capital has already commenced roadshows with global and domestic investors, where the TMFL integration and its synergies are being positioned as a critical part of the growth story.
By focusing first on lowering borrowing costs and improving asset quality, while simultaneously building a broader multi-OEM platform with cross-sell potential, Tata Capital is looking to strengthen both the resilience and scalability of its vehicle finance business.
IPO-bound Tata Capital is prioritising lower borrowing costs and improved asset quality as it integrates Tata Motors Finance (TMFL) into its operations. To cut TMFL’s borrowing costs, the company will tap its credit ratings and wide funding base, alongside tighter risk controls and collections to reinforce the combined portfolio.
In June 2025, Tata Capital and TMFL approved the merger through an NCLT scheme of arrangement. The merger positions Tata Capital as a larger and competitive player in vehicle finance, giving it a consolidated loan book across commercial and passenger vehicles.
The management believes that by bringing TMFL’s borrowings under Tata Capital’s superior credit umbrella, interest costs can be reduced over time, thereby boosting profitability, as per their commentary in the UDRHP.
Rajiv Sabharwal, MD and CEO, Tata Capital, said, “The successful completion of the merger of Tata Motors Finance with Tata Capital through the NCLT-approved scheme of arrangement is expected to strengthen further our presence in the commercial vehicle and passenger car financing markets. It will position Tata Capital as a leading full-stack vehicle financier. It shall also enable us to serve a broader customer base through an expanded distribution network.”
TMFL was a commercial and passenger vehicle loan providers in India, with a pan-India presence of 353 branches spanning 27 states and union territories. The merger consolidated the lending businesses of Tata Capital and TMFL.
As on March 31, 2025, following the merger, TMFL contributed 92.5% of the gross loans in commercial vehicle loans, 16.8% in car loans and 12.8% in supply chain finance.
With TMFL, Tata Capital has expanded from a single OEM to a multi-OEM model spanning pan-India to diversify the acquired vehicle finance business. Tata Capital’s strategy for this business includes optimising the portfolio mix by increasing the share of used and small and light commercial vehicles, thereby improving the overall yield of the portfolio.
Tata Capital intends to leverage TMFL’s customer base for more cross-sell opportunities. It aims to gradually reduce the borrowing cost of TMFL debt, leveraging a superior credit rating and a broad suite of liability instruments. Additionally, Tata Capital will seek to improve overall asset quality by strengthening risk management practices and collection infrastructure.
“We will also consolidate branches and further leverage digitisation, technology and analytics with an aim to reduce cost to income ratio. We believe such initiatives shall help us in improving the return on assets of the acquired vehicle finance business,” said Sabharwal in the UDRHP management commentary.
The emphasis on efficiencies and portfolio strengthening comes at a crucial time for Tata Capital. In the June 2025 quarter, the company’s consolidated net profit more than doubled year-on-year to Rs 1,040.93 crore, with total income rising to Rs 7,691.65 crore. The robust performance has set the stage for its IPO, which will be the largest in India’s financial services sector. According to primedatabase.com, Tata Capital is expected to raise more than Rs 17,000 crore from the IPO.
The company’s ongoing IPO, combining a fresh issue of shares with an offer for sale by Tata Sons and the International Finance Corporation, will augment the company’s Tier-I capital base and support future lending growth.
Tata Capital has already commenced roadshows with global and domestic investors, where the TMFL integration and its synergies are being positioned as a critical part of the growth story.
By focusing first on lowering borrowing costs and improving asset quality, while simultaneously building a broader multi-OEM platform with cross-sell potential, Tata Capital is looking to strengthen both the resilience and scalability of its vehicle finance business.