Tata Capital stock: Citi expects 33% upside in NBFC, says this

Shares of Tata Group firm Tata Capital Ltd are set for a 33% upside, said brokerage Citi, assigning a price target of Rs 450 to the NBFC stock. However, the stock price did not reflect the brokerage's positive stance today. The NBFC stock slipped 3% to Rs 327.05 in the current session against the previous close of Rs 339.15. Market cap of the firm slipped to Rs 1.39 lakh crore.

The weakness in the Tata Capital stock came amid a crash in the broader market due to negative global cues. Meanwhile, the brokerage said strong growth momentum seen in the first quarter has continued across the retail, housing, SME and corporate loan segments, with the management expressing confidence in achieving its stated guidance. Asset quality also remains stable, with no significant signs of stress so far despite the geopolitical uncertainties and volatility in commodity prices highlighted by Citi.

The management expects return on assets (RoA) to remain within its guided range of 2.5% to 2.7% in FY28, maintaining its confidence in the profitability outlook.

Growth momentum from the first quarter has been sustained across retail, housing, SME and corporate segments, with management confident of meeting its guidance. Credit quality is described as benign, with no visible stress despite what Citi terms geopolitical and commodity crosscurrents.

Management remains confident of return on assets in FY28 landing within the guided band of 2.5% to 2.7%.

Two regulatory overhangs

The first is the RBI's revolving-credit framework. The second is IRDAI's insurance commission proposals, the same draft that has moved targets across insurance distribution over the past week.

Neither has been quantified in the note, which is itself informative: the brokerage is flagging them as unresolved rather than modelling an impact. For a diversified lender, the insurance exposure runs through cross-sell fee income rather than through the core spread, which limits the scale of any hit relative to a pure distributor.

For a newly listed lender, the first few quarterly results carry more weight than usual, because there is no long public record to set expectations against.

Quarterly RoA against the 2.5-2.7% band and any clarity on the two regulatory items, are what move this from guidance to record.