Is Tata Capital the Next Bajaj Finance?

No other NBFC in the country has charted the kind of loan growth and profits that Bajaj Finance has, over the past decade.

This is because, unlike the other NBFCs, Bajaj Finance is also partially a tech company. It's the largest user of Salesforce in the world. It employs more technocrats and data scientists than most other fintech companies in India.

The company potentially has a bigger data repository on lawyers, doctors, engineers and other professionals than any other lending business.

Bajaj Finance has managed to leverage lending data and credit demand across customer profiles and geographies. Going forward it's well poised to grow its AUM from a healthy mix of digital and physical loan distribution sources.

Over the past decade, the company has added many new offerings such as e-commerce consumer finance, e-commerce seller finance, and warehousing receipt finance. It recently listed its housing finance subsidiary, Bajaj Housing Finance, to unlock value for shareholders.

Bajaj Finance's data driven lending has allowed the firm to not only lend to the most credit worthy borrowers but also bring the borrowers who were neglected by banks into the formal credit ecosystem.

This is evident in the fact that despite healthy growth in loan book over past two decades, the share of new customers in Bajaj Finance's customer base has always remained around 40%.

The Tata Capital IPO is expected to garner investor interest on the premise that it could also leverage its group's network and reputation to become a compounding machine like Bajaj Finance.

But before drawing such conclusions, investors would do well to recognise certain key differences between the two NBFCs.

In May 2025, Tata Capital merged with Tata Motor Finance becoming the sole finance entity in the Tata group. The merger allowed Tata Motors to exit its non-core finance arm and offered Tata Capital exposure to its vehicle finance portfolio.

But mind you, vehicle finance does not always add value. Sure, it adds to the loan book size and revenue, but Tata Motors Finance chips away at Tata Capital's profits and drags its asset quality lower.

Excluding the vehicle financier, Tata Capital's profit for the year ended March 2025 was about Rs 3,71 bn. Including it, it fell to Rs 3,67 bn, simply because Tata Motors Finance incurred a loss.

By itself, Tata Capital's non-performing assets (NPA) ratio in FY25 were well-contained at 0.5% of its total loans. Add Tata Motors Finance to the mix, and the number increased to 0.8%. That's because by itself, the latter's NPA during the year was as high as 4.4%.

Tata Capital's standalone return on equity (RoE) was 14.2%. But Tata Motors Finance dragged it down to 12.6%. Therefore, swallowing the bitter pill of vehicle finance will be time consuming for Tata Capital.

Meanwhile, there are few differences in the core business too.

Bajaj Finance's key competitive edge and bulk of its business is in Consumer Finance, particularly through its massive EMI network for consumer durables, electronics, and lifestyle products.

This highly specialised, quick-disbursal model has been its engine for rapid growth and high profitability.

In FY25, Bajaj Finance took initiatives in the areas of digital platforms, GenAI, CDP, cyber security, and more.

It invested in Bajaj Pay which it is transforming into a substantial payments infrastructure. It also invested in other platforms to build social commerce. Its Rewards platform went live in April 2024 and Consumer platform in June 2024.

Tata Capital operates as a more broad-based, one-stop financial solutions provider. While it has a large retail and SME book, it also has a significant presence in Corporate, Institutional, and Commercial Finance (e.g., equipment finance, construction finance, structured products).

Tata Capital offers a fuller spectrum of financial services that includes Wealth Management and Investment Banking services for both retail and corporate clients, in addition to its lending products.

Bajaj Finance primarily focuses on lending (retail, SME, commercial, rural), deposits, and related financial products (like insurance distribution) with its core strength being its massive consumer base and distribution network.

Tata Capital benefits directly from the Tata group brand, which often translates into lower borrowing costs and customer acquisition benefits.

There is also a key difference in terms of the cost to be incurred for using the brand reputation.

As per the IPO DRHP, under the Tata Brand Agreement, Tata Capital is required to pay an annual subscription fee of 0.25% of its annual net revenue to Tata Sons. In terms of the said agreement, Tata Sons Private Ltd has the right to review and revise the subscription fee from time to time.

Bajaj Finance makes no such payments to Bajaj Finserv.

Bajaj Finance leverages the strong financial brand of Bajaj Finserv, but its success is largely attributed to its operational agility, digital prowess, and customer-centric product innovation, allowing it to scale rapidly and maintain superior profitability.

The IPO proceeds of Tata Capital are expected to go towards strengthening tier-I capital for lending growth and meeting the capital adequacy norms.

While the IPO valuations of Tata Capital (in terms of price to adjusted book value) are not exactly cheap, they are relatively lower than that of Bajaj Finance currently.

Nevertheless, investors would do well to evaluate the longer term prospects of the NBFC rather than assuming the creation of yet another Bajaj Finance.

Happy investing.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)