IPO-bound Tata Capital's impairment surges 310% to Rs 3,072 crore

Rise in stress impacts non-banking finance firm's standalone profit growth

Tata Capital, the upper-layer non-banking financial company (NBFC) that is planning an initial public offering (IPO) to meet the regulatory deadline, saw its impairment on financial instruments surging to ₹3,072 crore in 2024-25 from just ₹748 crore in the previous financial year.

 

The rise in stress has affected the NBFC’s growth in standalone profit, which increased 4 per cent to ₹2,594 crore in FY25 despite a 67 per cent rise in interest income to ₹19,203 crore and a 64.5 per cent expansion in revenue from operations to ₹21,866 crore.

 

The gross non-performing asset (NPA) ratio increased to 2.33 per cent as of March 31, 2025, from 1.71 per cent. The net NPA ratio increased to 0.98 per cent from 0.38 per cent. 

 

An email sent to Tata Capital on the reason for the rise in impairment remained unanswered till the time of going to press.

 

Last month, Tata Capital filed the draft red herring prospectus (DRHP) before the Securities and Exchange Board of India (Sebi) through the confidential filing route for a $2 billion IPO.

 

It needs to come up with the IPO before September. 

 

In a report in February this year, rating agency Fitch said it expected the credit cost from unsecured loans to stay higher over the next few quarters amid industrywide weaknesses in these segments, but the overall credit cost should remain contained.

 

It also said Tata Capital’s credit cost rose slightly to 0.7 per cent of gross loans (annualised) in the first half of 2024-25 as against the 0.5 per cent average in FY23-FY24.

 

“This was driven by higher delinquencies in unsecured loan portfolios, but remained low relative to that of most peers,” Fitch had said.

 

A Crisil report in January said  as on September 30, 2024, Tata Sons directly owned 92.83 per cent in Tata Capital and while most of the remaining stake was held by other Tata group companies and trusts.

 

Tata Sons has infused ₹6,097 crore into Tata Capital. Of that, ₹2,500 crore was infused in 2018-19, ₹1,000 crore in 2019-20, ₹594 crore in 2022-23, and ₹2,003 crore in 2023-24, indicating the intent of the group to step up its focus on the lending business, Crisil had said.

 

As of September 30, 2024, Tata Capital’s loan books amounted to ₹1.77 trillion. Of that, 64 per cent was to retail borrowers, 24 per cent to small and medium enterprises, and 12 per cent to corporate borrowers.

 

In the retail portfolio, 31 per cent was home loans and 20 per cent loans against property.

 

In the loan books, 13 per cent was personal loans and 77 per cent secured loans.