Summary
Tata Capital Limited - Q3 FY 2026 Earnings Call Summary Monday, January 19, 2026, 5:00 PM IST
Event Participants
Executives Rajiv Sabharwal (MD & CEO), Rakesh Bhatia (CFO), Sandeep Tripathy (Head of Strategy and IR), Sarosh Amaria (MD, Housing Finance)
Analysts Abhijit Tibrewal (Motilal Oswal), Avinash Singh (Emkay Global), Himanshu Taluja (Aditya Birla Sun Life AMC), Nischint Chawathe (Kotak Securities), Raghav (Ambit Capital), Shubhranshu Mishra (Phillip Capital), Sucrit D Patil (Eyesight Fintrade)
Financials & KPIs (Consolidated)
| Metric | Reported | Commentary |
|---|---|---|
| Total AUM | ₹2,61,000 crores | +7% QoQ; Driven by festive demand and GST reduction benefits. |
| PAT (Reported) | ₹1,257 crores | +15% QoQ; Includes impact of New Labour Code and Motor Finance merger. |
| PAT (Adj. for Labour Code) | ₹1,290 crores | +18% QoQ; Adjusted for ₹33 crore one-time impact. |
| Credit Cost | 1.2% | -10 bps QoQ; Improving trends in unsecured retail and Motor Finance stabilization. |
| Stage 3 Assets (GNPA) | 2.2% | Stable QoQ; Increase in ratio primarily due to degrowth in Motor Finance AUM. |
| Net Stage 3 (NNPA) | 1.0% | Stable QoQ; Highlights resilient portfolio quality. |
| Provision Coverage (PCR) | 53.6% | Historically stable; Management maintains cautious provisioning. |
| Net Interest Margin (NIM) | 6.6% | +14 bps QoQ; Includes 17 bps contribution from IPO proceeds. |
| Cost of Funds | 7.2% | -14 bps QoQ; Reflecting transmission of 100 bps RBI rate cuts in FY26. |
| Cost-to-Income Ratio | 38.4% | -129 bps QoQ (excl. Labour Code); Driven by operating leverage and digital scale. |
| Capital Adequacy (CRAR) | 20.3% | Robust; Debt-to-equity declined to 5.1x from 6.1x in Sep-25. |
Geographic & Segment Commentary
- Unsecured Retail: Performance reached a four-quarter high with disbursements up 30% YoY. Exposure stands at 10.4% of AUM, with a strategic target to increase this to 15% as slippages have moderated.
- Housing Finance (TCHFL): AUM grew 30% YoY to ₹81,585 crores with a stable ROA of 2.4%. Strategic focus is shifting toward affordable and micro-housing to protect margins against prime segment competition.
- Motor Finance: AUM declined 6% QoQ to ₹26,584 crores due to deliberate portfolio reorientation. However, disbursements rose 17% QoQ, and the segment achieved operational break-even in Q3.
- SME & Corporate: SME loans saw a significant spurt in Q3 post-GST cuts. Corporate loans saw a strategic uptick to capitalize on market opportunities, while retail/SME continues to dominate at 87% of total AUM.
Company-Specific & Strategic Commentary
- Digital Transformation: 97% of retail customers are onboarded digitally, and 98% of queries are resolved via digital channels. The company is moving from AI pilots to enterprise-wide deployment of Agentic AI in collections and sales.
- Motor Finance Integration: Transitioning from a captive model to a multi-OEM strategy; non-Tata OEM share in new CV disbursements rose to 19%. Product mix is shifting from heavy CVs toward used CVs and LCVs.
- Operating Leverage: Investments in 1,505 branches and tech infrastructure are yielding results, with the cost-to-income ratio trending toward the FY28 target of 33%-34%.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM Growth | 18% - 20% (FY26) | Driven by festive momentum and steady retail demand. |
| Long-term Growth | 23% - 25% (FY25-FY28) | Multi-year CAGR target backed by diversified product mix and digital scale. |
| Credit Cost | < 1.0% (Medium-term) | Expected to decline as Motor Finance stabilizes and unsecured slippages normalize. |
| Cost-to-Income | 38% - 39% (FY26) | Target of 33%-34% by FY28 through tech-led productivity gains. |
| ROA | Progressive Improvement | Improving toward targeted levels by FY28 as Motor Finance ROA normalizes. |
Risks & Constraints
| Risk | Context |
|---|---|
| Competitive Intensity | High pressure in prime housing and LAP segments from banks. Management is mitigating this by expanding into higher-yield affordable and micro-housing segments. |
| Motor Finance Degrowth | The deliberate shrinking of the legacy Tata Motor Finance book impacts headline AUM growth. Management expects growth in this segment to resume only from H1 FY27. |
| New Labour Code | A one-time impact of ₹44 crores was recognized this quarter. Future impacts on operating costs are being monitored as compliance formalizes. |
Q&A Highlights
Asset Quality & Unsecured Retail
- Question: What is the trend in unsecured retail slippages? (Abhijit Tibrewal)
- Answer: Slippages are trending down, and Q3 was significantly better than Q2. Credit costs excluding Motor Finance fell 20 bps QoQ to 1.0% (Rajiv Sabharwal).
Motor Finance Strategy
- Question: Will the Motor Finance book eventually match the 23-25% company growth rate? (Avinash Singh)
- Answer: No, it will likely grow slower than the rest of the book. Its share of total AUM may drop from 9.5% to around 7-8% by FY28 (Rajiv Sabharwal).
Housing Margins
- Question: How are housing margins staying stable despite competition? (Himanshu Taluja)
- Answer: We are passing on lower borrowing costs to customers but offsetting this by growing affordable and micro-housing segments where yields are higher (Sarosh Amaria).
Loan Against Property (LAP)
- Question: What gives confidence in high LAP growth? (Nischint Chawathe)
- Answer: We rely on cash-flow-based underwriting rather than just collateral. As unsecured credit tightens, demand shifts to secured products like LAP (Rajiv Sabharwal).
Key Takeaway
Tata Capital delivered a robust Q3 FY26, characterized by its highest-ever quarterly AUM growth of ₹16,800 crores, bringing Consolidated AUM to ₹2.61 lakh crores (+7% QoQ). The quarter was marked by a significant turnaround in the Motor Finance business, which achieved break-even, and a broad-based recovery in unsecured retail disbursements, which rose 30% YoY. Profitability remained strong with an adjusted PAT of ₹1,290 crores and an improved Consolidated ROA of 2.1%. Management successfully utilized IPO proceeds to cushion margins and lower leverage to 5.1x. While the legacy Motor Finance book continues to de-grow as part of a strategic risk reorientation, the core retail and housing segments are growing at ~30% YoY. Looking ahead, the company is positioned to meet its 18-20% FY26 growth guidance, with a clear focus on reducing credit costs toward 1% and achieving significant operating leverage through AI-driven automation.
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