Concall AI

Tata Capital Limited — Q4 FY26 earnings call

Call held 23 Apr 2026

Management summary

Tata Capital delivered strong Q4 FY26 results, with significant growth in AUM and PAT, driven by robust performance in retail and housing finance. Asset quality improved with declining NPAs and credit costs, supported by technology adoption and operational efficiencies. While geopolitical uncertainties pose a watchpoint, particularly for MSME, the company remains optimistic about future growth and is on track to meet its FY28 guidance.

Highlights

AUM (excluding Motor Finance) grew 28% YoY to INR 2.52 lakh crores, and 8% sequentially, driven by momentum across all business segments.
PAT (excluding non-recurring items, excluding Motor Finance) grew 51% YoY to INR 1,459 crores, and 14% sequentially, supported by lower credit costs and improving asset quality.
Net NPA (excluding Motor Finance) declined by 10 bps to 0.5%, with ROA improving by 20 bps QoQ to 2.5%.
The cost-to-income ratio for FY26 stood at 38.3%, an improvement of 335 bps YoY, reflecting tangible operating leverage from technology and distribution investments.
Housing finance AUM grew 29% YoY to INR 86,653 crores, with PAT growth of 34% YoY, driven by focus on affordable housing and loans against property.

Concerns

Geopolitical developments, particularly the West Asia conflict and El Niño conditions, could moderate growth momentum and carry implications for inflation, energy prices, and global financial conditions.
Motor Finance AUM declined 4% sequentially to INR 25,390 crores, though the business achieved profitability of INR 43 crores in Q4 FY26 after breaking even in Q3 FY26.
Management advises caution for certain parts of the MSME business due to potential impacts on working capital cycles and raw material availability from geopolitical events.

Key financials

3 periods

Headline

AUM (excl. Motor Finance)
₹2.52L Cr
YoY +28% QoQ +8%
PAT (excl. non-recurring, excl. Motor Finance)
₹1,459 Cr
YoY +51% QoQ +14%
Net NPA (excl. Motor Finance)
0.5%
QoQ -0.1%
ROA (excl. Motor Finance)
2.5%
QoQ +0.2%
AUM (incl. Motor Finance)
₹2.77L Cr
YoY +20% QoQ +6%
PAT (excl. non-recurring, incl. Motor Finance)
₹1,502 Cr
QoQ +16%
Net NPA (incl. Motor Finance)
0.9%
QoQ -0.1%
ROA (incl. Motor Finance)
2.3%
QoQ +0.2%
Credit Costs (incl. Motor Finance)
90%
QoQ -0.3%
Capital Adequacy (Mar 2026)
19%
Debt to Equity Ratio (Mar 2026)
5.3×

Q4

Cost of Funds
7.1%
QoQ -0.05%
Net Total Income
6.5%

FY26

Cost-to-Income Ratio
38.3%

What they filed

Q1 FY27: revenue up 13.6%, net profit up 75.9% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	5,428	5,368	5,665	5,575	5,584 +3%	5,783 +8%	6,110 +8%	6,334 +14%
Expenses	1,747	1,569	1,876	1,861	1,835	1,882	1,711	1,835
Other income	6	8	30	25	8	-33	1	3
Interest	2,680	2,765	2,836	2,871	2,742	2,678	2,732	3,017
Depreciation	80	87	95	105	122	128	129	142
Profit before tax	927	955	889	763	893 −4%	1,062 +11%	1,540 +73%	1,343 +76%
Tax rate	24%	25%	26%	26%	26%	26%	23%	26%
Net profit	707	719	655	568	661 −7%	790 +10%	1,183 +81%	999 +76%
EPS	1.89	1.92	1.72	1.43	1.64	1.86	2.79	2.35

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Housing Finance
₹86,653 Cr AUM29% AUM Growth34% PAT Growth10% Credit Costs0.3% Net NPA2.6% ROA (Q4)2.5% ROA (FY26)25% Affordable Housing AUM Growth
Motor Finance
₹43 Cr PAT (Q4)₹25,390 Cr AUM4% AUM Sequential Decline26% Non-Tata OEM Share in New CV Disbursements (Q4)
Retail & SME
86% Share of Total AUM50% Unsecured Retail Disbursements Growth (Q4)10.3% Unsecured Retail AUM Share

Capital allocation

high confidence

M&A Tata Motors Finance Acquisition · Integrated

To expand motor finance business and diversify product mix.
Broke even in Q3 FY26, generated INR 43 crores profit in Q4 FY26. Integration led to diversification of manufacturers and product mix.

Yes, actually we got all our approvals for merger in quarter 1 of FY '26 and we've been working on ensuring that the integration was smooth and also, we could take benefits of the strengths which Tata Motor Finance had built and wherever there was a need to make any changes, so we could make the same. So in terms of our strategy, it was based on moving away and having more manufacturers with whom we deal with and not be dependent on one single manufacturer. We've moved very well on them. As far as incremental business is concerned, now one-fourth of our business comes from other manufacturers beyond Tata.
Liquidity Liquidity disclosed Liquidity buffers remain strong at approximately INR29,500 crores providing flexibility to pursue growth while managing volatility.

Liquidity buffers remain strong at approximately INR29,500 crores providing flexibility to pursue growth while managing volatility.

Guidance & targets

AUM Growth

Overall AUM growth AUM Growth · FY25 to FY28 · High confidence 23% to 25%

So if you look at our guidance for FY '28, we had given a guidance for FY '28 where we had stated that over the period of FY '25 to FY '28, we will grow at 23% to 25%. So we are on track and working towards the same.

— Rajiv Sabharwal

ROA

Motor Finance ROA ROA · by FY28 · High confidence 2%

Looking ahead, we expect steady ROA improvement through FY27 and we are targeting to reach an ROA of 2% by FY28 as we had communicated before.

— Rajiv Sabharwal

Cost-to-Income Ratio

Cost-to-Income Ratio Cost-to-Income Ratio · FY28 · High confidence 33% to 34%

As far as your question on opex to assets is concerned, if you would look at our guidance for FY28, we have said that cost to income should be between 33 to 34% and we do believe that is achievable.

— Rajiv Sabharwal

Credit Cost

Credit Cost Credit Cost · FY28 · High confidence 1%

So, even if you look at the FY26 numbers, our credit costs are 1.2%. Now, based on the nature of portfolio which we have, the high amount of mortgages, the low amount of unsecured book which we have, we do believe that the right credit cost for us would be some 1% and which is the guidance which we have given.

— Rajiv Sabharwal

Unsecured Business

Unsecured business proportion of AUM Unsecured Business · coming year · Medium confidence 15%

With unsecured retail currently at 10.3% of AUM, we continue to see significant headroom towards our target of scaling this to 15% and we remain firmly on track to achieve this.

— Rajiv Sabharwal

High-Yield Businesses

Growth rate of high-yield businesses High-Yield Businesses · coming year · Medium confidence more than 25%

So in the overall, when I say that our guidance towards FY '28 is that we will grow our overall book at 23% to 25% and if we are growing our high-yield businesses slightly more, so it will be more than 25% for the average to be 23% to 25%.

— Rajiv Sabharwal

Branch Network

Increase in branch network Branch Network · going forward · Medium confidence 10% to 15%

So, we can expect a 10 to 15% increase in our branch network.

— Rajiv Sabharwal

What to watch in Q1 FY27

Impact of geopolitical developments on MSME segment

next quarter

Current No significant impact observed in Q4 FY26, but caution advised.

Target Continued resilience, no significant stress or disruption.

Why it matters

Geopolitical events were flagged as a potential risk, and management is closely monitoring the MSME segment for any impact on working capital and raw material.

Looking ahead, growth momentum could moderate amid a more uncertain external environment. Geopolitical developments happening across the world, particularly in the continuing conflict in West Asia, could carry implications for inflation, energy prices, and global financial conditions. We continue to monitor these developments closely.

Risks & concerns

Geopolitical developments (West Asia conflict, El Niño)
medium

Could moderate growth momentum, impact inflation, energy prices, global financial conditions, food inflation, and rural demand.

Management acknowledged
MSME segment vulnerability
medium

Management advises caution for certain parts of the MSME business due to potential impact on working capital cycle and raw material availability from geopolitical events.

Management acknowledged
Market volatility impacting investments
low

Mark-to-market movements in investments (especially private equity) during March, but viewed as temporary valuation adjustments with no impact on long-term view.

Management downplayed

Q&A highlights

7 direct

Impact of West Asia conflict on clients and supply chain Direct

When we looked at it, we did not find any significant impact. Even marginal we did not see at this point of time. When we talk to clients who are there in the SME or the large corporate side, they have stocks of raw materials and which is helping them tide over this situation.

Addresses a macro concern and provides specific feedback from clients, indicating resilience in the face of geopolitical events.

Asked by Saloni Shukla

Credit cost reduction due to AI platform Direct

So I see, I always say, AI is a tool for you which is built on your intelligent processes and your ability to use data and do use data in the real-time basis. So the engine helps us, to do things faster and to use multiple sources of information, but also parallelly the brain behind is the credit policy and the approach which we have in terms of using available data to make credit decisions.

Clarifies the role of AI in credit cost reduction, emphasizing that AI is a tool complementing strong credit policies, not a standalone factor.

Asked by Shayan Ghosh

Integration of Tata Motors Finance and realized benefits Direct

So in terms of our strategy, it was based on moving away and having more manufacturers with whom we deal with and not be dependent on one single manufacturer. We've moved very well on them. As far as incremental business is concerned, now one-fourth of our business comes from other manufacturers beyond Tata.

Details the strategic shift post-merger, including diversification beyond Tata Motors and product mix changes, showing successful integration and benefits.

Asked by Archishma Iyer

Outlook on unsecured lending growth and asset quality Direct

So we've seen significant drop which has been happening and that's the reason we've started looking at increasing our disbursements in each of these businesses. We started activating the same post quarter 1 and if you look at those numbers, our disbursements in each of the unsecured businesses... is increasing and that's an increasing trend in every quarter.

Provides insight into the company's strategy for a high-yield segment, indicating confidence in asset quality improvements to drive growth.

Asked by Archishma Iyer

Non-interest income performance Partial

While on the core fee side that has been showing a good trend for us both in terms of loan-linked fee or in terms of insurance cross-sell or syndication, all of those segments have grown very well for us. We have seen an impact on mark-to-market on our investments and that is more so on the investments on the private equity side.

Explains the reason for weaker non-interest income (mark-to-market impact on PE investments) while core fee income remains strong, providing clarity on a key revenue component.

Asked by Viral Shah

Bounce rates and asset quality in April Direct

if I have to be very honest with you, actually we've seen a bounce rate coming down in April compared to quarter 4 of last year. So there are no signs.

Provides real-time, positive data on asset quality indicators (bounce rates) for the current quarter, alleviating concerns about potential stress.

Asked by Viral Shah

Home loan growth strategy and segment focus Direct

Our approach as far as housing is concerned is to also look at a new segment which we're getting into, which is the near prime segment because we do not want to compete at the 7.25% and 7.2% rates being offered by other players. Our approach is to make the near prime bigger, grow you know make the affordable housing even bigger and make the micro housing also bigger.

Details the nuanced strategy in housing finance, focusing on specific sub-segments (affordable, micro, near prime) to drive margin expansion rather than competing on lowest rates.

Asked by Nischint Chawathe

Cost of funds trajectory and NIMs in FY27 Direct

So, Abhijit I'll say, we should break it up into two parts, the stock and the incremental. If you look at the stock per se, when the interest rate started dropping, the benefit started accruing over the year... So that's the way I will put it. Now how they will shape up in the coming months, we will need to watch.

Explains the dynamics of cost of funds (stock vs incremental) and how it impacts NIMs, acknowledging the need to monitor future trends.

Asked by Abhijit Tibrewal

3 min read 8 chapters

Detailed narrative

Q4 FY26 Performance Overview

Tata Capital reported strong Q4 FY26 results, with AUM (excluding Motor Finance) growing 28% YoY to INR 2.52 lakh crores and 8% sequentially. Profit after tax (excluding non-recurring items and Motor Finance) increased 51% YoY to INR 1,459 crores. Including Motor Finance, AUM stood at INR 2.77 lakh crores, up 20% YoY, and PAT (excluding non-recurring items) grew 16% sequentially to INR 1,502 crores. The company's overall performance was well-balanced across products, with retail and SME segments constituting 86% of total AUM.

Asset Quality and Credit Costs Improvement

Asset quality showed significant improvement, with Net NPA (excluding Motor Finance) declining by 10 bps to 0.5%. Credit costs (including Motor Finance) improved to 0.9%, down 30 bps sequentially from Q3 FY26. The company attributes this to disciplined execution, strong fundamentals, and the effective use of analytics and AI in decision-making and portfolio monitoring. Slippages in personal loans and microfinance declined by 60% and 70% respectively, reflecting robust underwriting and collection infrastructure.

Funding Profile and Margin Stability

Tata Capital maintains a diversified and stable funding profile, supported by its AAA rating. The overall cost of funds for Q4 FY26 stood at 7.1%, a 5 bps reduction sequentially. Margins remained stable, with Net total income at 6.5% in Q4, driven by disciplined pricing and a calibrated shift towards high-yielding segments. The company expects cost of funds for FY27 to be lower than FY26 due to liability repricing and anticipates margin improvement in the coming year.

Technology and Operational Efficiency Gains

Significant investments in technology, data infrastructure, and distribution over the past few years are translating into tangible operating leverage. The cost-to-income ratio for FY26 improved by 335 bps YoY to 38.3%. AI initiatives, such as Underwriting Assist, have reduced credit memo preparation time in SME business from two days to 20 minutes, improving productivity by 30%. The unified voice hub and document intelligence engine also contribute to improved efficiency and customer experience.

Business Segment Performance: Housing Finance

The housing finance business continued its strong performance, with AUM growing 29% YoY to INR 86,653 crores and PAT increasing 34% YoY. The focus on affordable housing and loans against property contributed to margin expansion and portfolio diversification, with affordable housing AUM growing 25% YoY. The company is expanding its presence with 350 branches, supporting deeper market penetration and exploring new segments like 'near prime' housing.

Business Segment Performance: Motor Finance Integration

The Motor Finance business achieved break-even in Q3 FY26 and reported a profit of INR 43 crores in Q4 FY26. While AUM saw a sequential decline of 4% to INR 25,390 crores, this was a conscious strategy to prioritize fitness and profitability. The integration of Tata Motors Finance is on track, with non-Tata OEM share in new commercial vehicle disbursements reaching 26% in Q4, reflecting successful diversification and product mix changes towards used CVs and small/mid CVs.

Strategic Focus on Retail and SME Growth

Retail and SME segments collectively constitute 86% of the company's total AUM, reflecting a granular and resilient growth profile. Unsecured retail disbursements grew 50% YoY in Q4 FY26, with unsecured retail AUM currently at 10.3% of total AUM. The company aims to increase the proportion of unsecured business to 15% of AUM, leveraging improved asset quality trends and increased disbursements in these high-yielding segments.

Outlook and FY22-28 Guidance

Tata Capital remains optimistic about India's growth story and is well-positioned to deliver on its FY28 guidance. The company targets an overall AUM growth of 23-25% between FY25 and FY28, with Motor Finance ROA reaching 2% by FY28. They also aim for a cost-to-income ratio of 33-34% and a credit cost of 1% by FY28. The strategy involves increasing high-yield businesses, expanding the branch network by 10-15%, and continued focus on technology and operational efficiencies.

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

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