In the dynamic world of finance, NBFCs play a crucial role in providing financial services to a broad spectrum of customers. Two prominent players in this sector are Tata Capital Limited and Bajaj Finance Limited (BFL). Both companies have demonstrated strong business fundamentals and impressive growth trajectories. However, a closer look at their valuation metrics reveals a significant disparity, raising questions about whether Tata Capital’s high valuation is justified.
About Tata Capital Limited
Tata Capital Limited (“TCL”), the flagship financial services company of the Tata Group, is a subsidiary of Tata Sons Private Limited and carries on business as a non-banking financial company.
Tata Capital and its subsidiaries are engaged in providing a wide array of services and products in the financial services sector. They operate across various areas of business, including commercial finance, consumer loans, wealth services, and the distribution and marketing of Tata Cards.
Introduction to Bajaj Finance Limited
Bajaj Finance Limited (BFL) is a leading non-banking financial company headquartered in Pune, India. Established as a subsidiary of Bajaj FinServ Ltd., BFL has emerged as a key player in India’s financial sector. With a vast customer base of 83.64 million and assets under management amounting to ₹330,615 crore (US$40 billion) as of March 2024, BFL offers a wide range of financial products and services.
Similarities
- Both Tata Capital and Bajaj Finance exhibit similar growth in their loan book sizes.
- They offer comparable products.
- Both are supported by well-known brands, Tata and Bajaj.
Financial Performance of Bajaj Finance
₹ in crores
| Particulars | FY24 | FY23 | Y-o-Y Growth |
| Total Income | 54990 | 41398 | 33% |
| PAT | 14451 | 11508 | 25% |
| AUM | 3,30,400 | 2,47,379 | 34% |
Financial Performance of Tata Capital
₹ in crores
| Particulars | FY24 | FY23 | Y-o-Y Growth |
| Total Income | 18198 | 13637 | 33% |
| PAT | 3326 | 2945 | 13% |
| Loan Book | 1,57,761 | 1,16,789 | 35% |
Key Ratios
| Particulars | Tata Capital | Bajaj Finance |
| Current Market Price (04/03/2025) | ₹1022 | ₹8550 |
| P/B Ratio | 20 | 6.1 |
| P/E Ratio | 122.96 | 33.1 |
| Market Cap | 3,87,338 Crs. | 5,29,999 Crs. |
Tata Capital has a P/E ratio of 122.96, which is significantly higher than Bajaj Finance’s 33.1. These valuation metrics indicate that Tata Capital is trading at a much higher premium relative to its earnings than Bajaj Finance.
This disparity in valuation metrics raises questions about whether Tata Capital’s high valuation is justified. If there are changes in market conditions, its stock price could face significant downward pressure. Conversely, Bajaj Finance, with its relatively lower P/E and P/B ratios, appears more reasonably valued, potentially offering a better risk-reward profile for investors.
In summary, while both Tata Capital and Bajaj Finance exhibit strong business fundamentals and growth trajectories, Tata Capital’s high valuation metrics warrant a more cautious approach. Investors should be mindful of the potential risks associated with high valuations and closely monitor the companies’ performance to make well-informed investment decisions.
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Tata Capital’s Rights Issue and IPO: Strengthening Financial Position Before Market Debut
Tata Capital Ltd. has announced a ₹1,504 crore rights issue to bolster its financial position ahead of its highly anticipated IPO. The rights issue is being offered in a 1:70 ratio, meaning eligible existing shareholders can subscribe to 1 new equity share for every 70 shares held.
No. of shares in Right Issue: 5,35,20,102 (Conversion Ration: 1:70)
5,35,20,102/70= 7,64,573
Outstanding Shares as of Feb 2025: 3746407148
Add: Right Issues: 0.07 crores
Total number of outstanding shares: 379 Crores
The shares will have a face value of ₹10 each, providing an opportunity for existing investors to increase their stake before the company’s public listing. This move aligns with Tata Capital’s strategy to optimize capital efficiency and reinforce investor confidence as it prepares for a major market debut.
Simultaneously, Tata Capital is set to launch its IPO, targeting a valuation of up to $11 billion, making it India’s largest IPO of the year. The offering aims to raise $2 billion through a combination of fresh equity issuance and an offer for sale by existing shareholders. With the Reserve Bank of India mandating its listing by September 2025, Tata Capital is set to become the 17th Tata Group company to be publicly traded, marking a significant milestone in the group’s financial services expansion.
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