Tata Capital Aims to Double Loan Book in 3 Years, Cut Credit Costs to Sub-1% Soon

Non-bank lender Tata Capital aims to double its loan book in the next three years and is confident of cutting credit costs to under 1 per cent going forward, a top official said on Monday.

The fresh capital raised in the initial public offer will suffice for over two and a half years, its chief executive and managing director, Rajiv Sabharwal, told reporters after the market debut.

Shares of non-banking financial company Tata Capital Ltd on Monday listed over 1 per cent higher against the issue price of Rs 326.

The stock was later trading at Rs 330.90, up 1.50 per cent from the issue price on both the BSE and NSE.

Speaking to reporters, Sabharwal said, "If our growth rate of our country sustains as we hope it does, then our book can double in the next three years." The company's loan book stands at Rs 2.3 lakh crore at present, and it took just one year to add Rs 50,000 crore to the assets under management (AUM), compared to the ten years it took to reach Rs 50,000 crore initially.

Sabharwal said the credit costs -- primarily booked because of loan calls going awry -- have touched 1.4 per cent after the merger of Tata Motors Finance into it was executed in May this year.

The credit costs for Tata Capital had always been under 1 per cent, and the company is "supremely confident" of getting it below 1 per cent "very soon", Sabharwal said.

Amid concerns about asset quality from the micro, small, and medium enterprise loans at the industry level, Sabharwal asserted that the company is confident the portfolio, comprising over 26 per cent of the Assets Under Management (AUM), will hold up well, with lending to small businesses emerging as a high-growth segment.

"We do believe that with the credit quality holding strong, we should be able to grow at a very healthy pace in the SME sector," he added.

The company originates nearly the entire volume of the loans it extends without depending on co-lending arrangements, Sabharwal said, adding that he expects the same to continue going forward as well.

The company also feels that any adverse movements in interest rates will not impact its net interest margins due to a well-distributed loan portfolio. However, aspects like reliance on digital technologies can help expand the key metric going forward.

Speaking at the listing ceremony, which was also attended by parent Tata Sons' chairman N Chandrasekaran, the company's chairman Saurabh Agrawal said the overall credit outstanding in the economy is set to double to Rs 500 lakh crore over the next five years, and Tata Capital is well positioned to seize the opportunity.

"Amidst uncertainty in the global economy, India's growth story continues to gain strength and momentum," Agrawal, who is also the group chief financial officer for the salt-to-software conglomerate, said.

The GST rationalisation, relief on income tax and RBI's interest rate cuts have given a strong stimulus to domestic demand, he said.