Neutral Tata Capital; target of Rs 340: Motilal Oswal

Moneycontrol • 4 days ago

Original source

Key Investment Pillars

  • Diversified growth: Tata Capital's (TATACAP) consolidated 2QFY27 PAT grew 51% YoY, driven by strong AUM growth across retail, SME, and housing finance.
  • Improving operating leverage: Cost-to-income declined 438bp YoY to 35.3%, with employee strength growing only 6% YoY against 26% AUM growth, reflecting improved productivity.
  • Asset quality stability: Consolidated GNPA/NNPA remained stable QoQ at 1.9%/0.8%, with slippages remaining benign across secured and unsecured retail, housing, SME, and corporate segments.
  • NIM expansion: Management expects NIM plus fee to remain stable or improve marginally in 3Q, with a more meaningful improvement in 4QFY27, driven by pricing actions and a favorable asset-liability mix.

Thesis Validation Checklist

  • AUM growth: Monitor TATACAP's ability to sustain 23-25% AUM growth, driven by diversified lending and strong disbursement momentum.
  • NIM expansion: Track the company's ability to improve NIMs, driven by pricing actions, yield-enhancement initiatives, and a favorable asset-liability mix.
  • Asset quality: Monitor the stability of asset quality, with a focus on slippages, provision coverage ratio, and credit costs.
  • Operating leverage: Watch for continued improvement in operating leverage, driven by cost discipline and productivity enhancements.