- Net profit jumped 39.3% YoY to ₹1,285 cr, beating guidance.
- AUM rose 26% to ₹2.34 tr, driven by retail and SME loans.
- Credit cost fell to 1.0%, GNPA steady at 1.6%.
- Pre‑provision operating profit up 42% YoY, signaling robust earnings quality.
- Stock trades ~10.5% above its IPO price, offering a potential upside.
You missed the biggest profit surge in Indian NBFCs. Tata Capital just proved its growth engine is far from stalled.
Why Tata Capital's Profit Surge Beats Sector Expectations
The December quarter results show a consolidated net profit of ₹1,285 cr, a 39.3% year‑on‑year jump that aligns perfectly with the company’s 39% guidance. Net interest income (NII) climbed 26% YoY to ₹2,936 cr, confirming that the earnings uplift is not a one‑off accounting event but a result of genuine loan book expansion.
From a valuation standpoint, the earnings‑multiple expansion is still modest because the stock is only 10.5% above its IPO price of ₹330. This leaves room for multiple re‑rating if the momentum sustains, especially as the NBFC sector is still underpriced relative to banks on a price‑to‑book basis.
How the NBFC Landscape Is Shifting: Tata Capital vs. Peers
When we compare Tata Capital’s performance to peers like Bajaj Finance, Mahindra & Mahindra Finance, and Aditya Birla Capital, a clear divergence emerges. While many NBFCs saw credit cost creep up to 1.3‑1.5% amid slowing consumer demand, Tata Capital trimmed its annualised credit cost to 1.0% and kept GNPA flat at 1.6%.
Competitor AUM growth rates in Q3 FY26 were roughly 15‑18%, whereas Tata Capital posted 26% growth, largely fueled by a 60% retail share—home and personal loans—within its total AUM. The SME segment, at ₹70,549 cr, also expanded, suggesting the firm is capitalising on the underserved small‑business credit demand that larger banks often miss.
Strategically, Tata Capital’s push on digital and GenAI capabilities is echoing a broader industry shift. Peer firms are racing to digitise loan origination, but Tata Capital’s early adoption has already translated into lower cost‑to‑serve ratios and higher loan‑to‑deposit efficiency.
Historical Parallel: What 2018 NBFC Gains Teach Us
Back in FY18, a handful of NBFCs—including a predecessor of Tata Capital’s own consumer finance arm—experienced double‑digit profit growth after a regulatory easing on capital adequacy norms. Those firms subsequently rode a wave of credit expansion, delivering 2‑3‑year total shareholder returns exceeding 80%.
The key lesson was timing: early entrants that strengthened balance‑sheet quality while scaling loan book captured disproportionate market share. Tata Capital appears to be repeating that playbook, now with an added technology edge that was unavailable a decade ago.
Technical Definitions You Need to Know
Net Interest Income (NII): The difference between interest earned on loans and interest paid on deposits and borrowings. A primary driver of NBFC profitability.
Gross Non‑Performing Assets (GNPA): Total loans classified as non‑performing before provisioning. A GNPA of 1.6% is low for the sector, indicating sound underwriting.
Net Non‑Performing Assets (NNPA): GNPA less provisions already made. At 0.6%, Tata Capital’s NNPA signals that most credit risk has already been accounted for.
Pre‑Provision Operating Profit (PPOP): Earnings before credit loss provisions, a clean measure of operating efficiency. A 42% YoY rise to ₹2,311 cr highlights margin expansion.
Investor Playbook: Bull and Bear Cases for Tata Capital
Bull Case: Continued retail loan growth, especially in home financing, pushes AUM beyond ₹2.5 tr by FY28. Digital/GenAI rollout further cuts cost‑to‑serve, improving ROE. Credit quality stays resilient, allowing the firm to lower risk‑weighted assets and unlock capital for higher‑yield lending. Stock re‑ratings to 12‑13× P/E could drive price to ₹450‑₹500.
Bear Case: A macro‑slowdown curtails consumer credit demand, leading to higher delinquencies. If GNPA spikes above 2% and credit cost rises, provisioning could erode margins. Competitive pressure from larger banks entering the retail space might compress spreads, limiting NII growth. In that scenario, the stock could revert to its IPO‑price vicinity.
Bottom line: Tata Capital’s Q3 FY26 numbers are not just a headline‑grabber—they’re a signal that the firm’s strategic bets on retail focus, digital efficiency, and disciplined credit underwriting are paying off. Investors who align their exposure with the bullish narrative can capture upside, while a cautious stance should monitor macro credit risk and peer competitive moves.