TATACAP

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 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.

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.

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.

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.

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.

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.

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.