Tata Capital's unlisted shares plunge 30% from April peak

Tata Capital unlisted shares fall 30% on valuation, sector concerns.

Expert Analysis:

• Unlisted Share Decline: Tata Capital’s shares dropped nearly 30%, from Rs 1,125 in April to Rs 785, amid weak sentiment, valuation concerns, and unlisted market challenges, despite buzz around its Rs 17,200 crore IPO.

• HDB Financial IPO Performance: HDB Financial Services’ Rs 12,500 crore IPO, launched in June, listed at a 13% premium over the Rs 740 issue price, peaked at Rs 891.90, and currently trades at Rs 781, around 6% above issue price.

• Impact on Tata Capital:  Analysts say HDB Financial’s subdued performance has applied downward pressure on Tata Capital’s pre-IPO valuations, influencing expectations of a potentially lower official IPO price.

• High P/B Valuation: Tata Capital’s unlisted shares trade at a steep 8.5X P/B with an estimated AUM of Rs 2.30 lakh crore as of June 2025, significantly higher than peers.

• Peer Comparison: Bajaj Finance, with AUM over Rs 4 lakh crore as of March 31, 2025, trades at 6X P/B, while Shriram Finance, with AUM ~Rs 2.63 lakh crore, trades at 2X P/B, highlighting Tata Capital’s premium valuation.

• Fair Value Considerations: Analysts note the drop from Rs 1,125 partially corrects overvaluation, but low liquidity and institutional book-building will ultimately determine fair IPO pricing.

• Rights Issue Influence: Tata Capital’s rights issue, priced at Rs 343 per share—well below unlisted valuations—has anchored investor expectations toward a lower price range.

• Financial Sector Weakness: Over the past three months, financials have struggled, with Nifty Financial Services down 4% and banks nearly 5%. Muted Q1 earnings and a rise in gross NPAs to 2.33% have raised asset quality and credit cost concerns.

• Tata Capital FY25 Performance: Despite sector challenges, Tata Capital reported FY25 revenue of Rs 28,313 crore, up 56% from Rs 18,175 crore YoY, and net profit of Rs 3,665 crore, up 16% from Rs 3,150 crore.