Skip to content

    Tata Capital Q2 FY26 earnings call

    TATACAPNeutral
    Financial Services·28 Oct 2025
    Management Summary

    Tata Capital's first post-listing earnings call showcased solid fundamentals with strong AUM growth across segments, meaningful credit cost improvements, and continued strength in Housing Finance. The company benefited from GST cuts in the latter part of Q2, with momentum expected to continue. Motor Finance integration is progressing with stabilization expected by Q4.

    Highlights

    6

    • First earnings call post-listing with 22% Y-o-Y AUM growth to 2.16 lakh crores

    • Profit after tax grew 33% Y-o-Y to 1,128 crores (excluding non-recurring items)

    • Credit costs improved 30 bps to 1.1% (ex Motor Finance), showing broad-based decline

    • Housing Finance subsidiary maintained strong performance with 30% AUM growth

    • Motor Finance business transformation progressing, expected to break even in Q4

    • Strong digital capabilities with 97% digital customer onboarding and AI implementation

    What Changed4

    vs Q3 FY26

    Tone shiftConfident and strategic → confident and strategicGuidance items4 → 14 (+10)Risks discussed3 → 5 (+2)Q&A highlights4 → 6 (+2)

    Key financials

    Single quarter

    05 metrics
    1. 01AUM (excluding Motor Finance)₹2.16L Cr+22%YoY
    2. 02Profit After Tax₹1,128 Cr+33%YoY
    3. 03Total AUM (including Motor Finance)₹2.44L Cr
    4. 04Housing Finance AUM₹75,636 Cr+30%YoY
    5. 05Motor Finance AUM₹23,698 Cr

    Guidance & targets

    14
    CategoryTargetPriority
    AUM Growth
    Annual AUM Growth (excluding Motor Finance)
    22%-25%
    		High
    AUM Growth
    Consolidated AUM Growth
    18%-20%
    		High
    Credit Quality
    Credit Cost (excluding Motor Finance)
    1.0%-1.1%
    		High
    Credit Quality
    Consolidated Credit Cost
    Close to 1.2%
    		High
    Credit Quality
    3-Year Credit Cost Target
    Below 1%
    		High
    Cost Efficiency
    Cost-to-Income Ratio
    39%
    		High
    Cost Efficiency
    3-Year Cost-to-Income Target
    33%-34%
    		High
    Profitability
    Consolidated PAT Growth
    Around 35%
    		High
    Profitability
    Exit ROA Q4 FY'26
    2.3%-2.4%
    		High
    Profitability
    3-Year ROA Target
    2.5%-2.7%
    		High
    Medium-term Growth
    3-Year AUM Growth
    23%-25%
    		High
    Motor Finance
    Motor Finance Breakeven
    Breakeven
    		High
    Motor Finance
    Motor Finance ROA Target
    2% plus
    		High
    Housing Finance
    Housing Finance AUM Target
    1 lakh crores
    		High

    Risks & concerns

    5
    RiskSeverity

    Unsecured Retail Asset Quality

    Credit costs in unsecured retail had peaked in Q1 but are now moderating, with slippages showing improvement — Other acknowledged

    medium

    Motor Finance Integration Complexity

    Motor Finance business undergoing transformation with book degrowth, integration costs of around 100 crores expected — Other acknowledged

    medium

    Competitive Pressure in Affordable Housing

    Industry chasing affordable housing but company leveraging low cost of funds and digital capabilities for competitive advantage — Other acknowledged

    medium

    Corporate Lending Demand Uncertainty

    Corporate balance sheet deleveraging continues, timing of corporate lending pickup uncertain — Other acknowledged

    low

    Interest Rate Environment

    Company passing benefits of rate cuts to customers, maintaining stable NIMs amid competitive environment — Other acknowledged

    low

    Q&A highlights

    6

    “The biggest contribution is going to come from NIM plus fee, which is going to be the largest contributor... about 25 to 35 basis points will come from NIM plus fee, about 10 to 15 basis points will come from operating leverage, and about 15 to 20 basis points will come from credit cost”

    Provides detailed roadmap for ROA expansion with specific contributions from each lever

    asked by Kunal Shah from Citigroup

    1 min read6 chapters

    Detailed Narrative

    01

    Post-Listing Performance

    Tata Capital's first earnings call post-listing demonstrated strong fundamentals with 22% Y-o-Y AUM growth and 33% PAT growth (excluding one-time items📎). The company welcomed over 22 lakh new shareholders and emphasized commitment to all stakeholders. Strong digital capabilities with 97% digital onboarding and AI implementation across functions.

    02

    Credit Quality Improvement

    Significant improvement in credit costs with 30 bps reduction across all products, from 1.4% to 1.1% (ex Motor Finance). Management emphasized that Q1 represented peak credit costs, with unsecured retail stress moderating meaningfully. Provision coverage ratios remain healthy at industry-leading levels.

    03

    GST Impact and Momentum

    GST rate cuts in late Q2 provided significant boost, with two-wheeler growth of 30-50%, strong passenger vehicle demand, and positive impact on commercial vehicles (especially small/medium CV). Consumer durables also showed positive trends. Management expects momentum to continue through H2.

    04

    Housing Finance Leadership

    Housing subsidiary maintained exceptional performance with 30% AUM growth, best-in-class asset quality (0.1% credit costs, 0.3% net NPA), and strong profitability (2.4% ROA, 18.5% ROE). Affordable housing segment growing fastest among large HFCs with 300 bps higher yields.

    05

    Motor Finance Transformation

    Strategic transformation progressing with shift to multi-OEM model (13% non-Tata OEM share vs 0% in Q4), focus on used CVs and smaller vehicles, 60 bps cost of funds reduction, and operational efficiency improvements. Expected breakeven in Q4 FY'26 with 2%+ ROA target by FY'28.

    06

    Technology and AI Leadership

    Comprehensive digital transformation with AI-led initiatives in production across domains. Multi-LLM architecture with vector databases and RAG pipelines delivering intelligence to workflows. 97% retail disbursements via scorecards/BRE, 98% digital query resolution, 99% digital collections.

    This is an AI-generated summary of a publicly available earnings call transcript.