Tata Capital Q1 FY27: Strong profits, a new gold loans push, and steady asset quality

Tata Capital began FY27 with a sharp improvement in profitability and steady balance sheet trends. For the quarter ended June 30, 2026 (Q1 FY27), consolidated assets under management (AUM) rose to INR 2,90,502 crore, up 22% year-on-year and 5% sequentially. Profit after tax (PAT) came in at INR 1,547 crore, up 56% year-on-year.

The quarter’s narrative had three clear pillars. First, the core Retail and SME franchise continued to grow strongly, with Retail plus SME forming 85.4% of net AUM. Second, asset quality stayed stable and credit costs remained contained, with GNPA at 1.9% and NNPA at 0.8%. Third, Tata Capital used the quarter to signal strategic intent in secured lending by announcing the acquisition of Yogloans, an RBI-registered NBFC focused on gold loans.

Performance snapshot: growth, profitability, and efficiency

Operationally, the company’s consolidated net interest income (NII) grew 25% year-on-year to INR 3,571 crore. Net total income increased 23% year-on-year to INR 4,455 crore. Operating expenses were INR 1,621 crore, up 21% year-on-year, while the cost-to-income ratio improved to 36.4% versus 38.3% in Q4 FY26.

Credit costs reduced materially compared with the prior year. Annualized credit cost was 1.0% in Q1 FY27 versus 1.6% in Q1 FY26. Loan losses and provisions were INR 676 crore in Q1 FY27, lower than INR 909 crore in Q1 FY26.

Table: Consolidated financial summary

Note: Figures are consolidated and as presented in the investor presentation.

Portfolio mix and growth: Retail and SME remain the base

Tata Capital’s net AUM at June 30, 2026 was INR 2,90,502 crore. The portfolio mix continued to be Retail- and SME-led: Retail 57.7%, SME 27.7%, and Corporate 14.6%. Management reiterated its stated intent to keep Retail plus SME in the 85% to 88% range.

Within retail, the biggest products were home loans (15.9% of net AUM) and loan against property (14.2%). Personal and business loans together formed 9.0%, while Motor Finance was down to 8.4% of net AUM.

One point the company repeatedly highlighted was the sustained scaling of higher-yield products. In Q1 FY27, disbursements for a set of higher-margin products rose 38% year-on-year, while AUM for the same group rose 10% year-on-year. Management’s explanation was that disbursement growth typically leads book growth, and that the gap should narrow over the next few quarters.

Asset quality: steady metrics, but Motor Finance remains distinct

On a consolidated basis, asset quality improved marginally. Gross stage 3 ratio declined to 1.9% as of June 2026 from 2.0% as of March 2026. Net stage 3 ratio was 0.8%.

The segment detail matters. Excluding Motor Finance, the portfolio stage 3 ratios were materially lower. Motor Finance continued to have higher stress indicators, with gross stage 3 at 7.9% and net stage 3 at 5.1% as of June 2026.

The company disclosed strong collection efficiencies across key retail products, with home loans and loan against property collections consistently near 99.7% to 99.9% through the monthly series provided.

Tata Capital Housing Finance: strong profitability and low credit costs

The material subsidiary Tata Capital Housing Finance Limited (TCHFL) continued to be a key earnings contributor. In Q1 FY27, TCHFL reported net AUM of INR 89,416 crore, up 24% year-on-year, and PAT of INR 532 crore, up 29% year-on-year.

Asset quality for TCHFL remained strong, with GNPA at 0.7% and NNPA at 0.3%. Annualized credit cost was stated at 0.05%.

TCHFL also provided portfolio mix disclosures for its net AUM of INR 89,416 crore, including Prime and Near Prime Home Loans, Prime LAP, Developer Finance, Affordable Housing Finance and Micro Housing.

Strategic move: entry into gold loans via Yogloans acquisition

Tata Capital announced an all-cash acquisition of Yogloans, marking its entry into the gold loan business. Yogloans, headquartered in Kerala and operating across four southern states, had AUM of INR 708 crore as of March 2026, with approximately 85% in gold loans. It operated 162 gold loan branches and served about 32,000 gold loan customers.

Key transaction terms disclosed included a pre-money equity valuation not exceeding INR 318 crore and a primary infusion for growth of approximately INR 93 crore. Tata Capital’s ownership at closing is expected to be about 88.6%, with Yogloans becoming a subsidiary, subject to regulatory approvals.

Management stated on the earnings call that RBI approval was being targeted by the end of calendar year 2026. Post approval, the company expects to expand to 500 plus gold loan branches over the next two and a half to three years.

Funding and capital: diversified borrowings, modest cost uptick

As of June 2026, consolidated total borrowings were INR 2,45,487 crore and the liquidity buffer was INR 29,039 crore. The company reported a total borrowings to total equity ratio of 5.3x.

Average cost of borrowings increased sequentially, with Q1 FY27 at about 7.28% versus 7.15% in Q4 FY26. Management indicated it expects the cost of funds to rise during the year, but also stated that incremental lending is being priced to protect margins.

Tata Capital also highlighted a USD 400 million international bond issuance, which management stated was oversubscribed around four times. In the earnings call, management said foreign borrowings now constitute 12.6% of total borrowings.

Digital and AI: operating leverage through automation

A notable portion of the presentation was dedicated to digital and AI capabilities. Tata Capital disclosed metrics such as 98% digital onboarding, 99% collections via digital channels, and 98% of customer queries being addressable digitally.

Management and the presentation also cited adoption and impact indicators across functions, including AI-driven underwriting document intelligence and operational workflows. The company reported 30,170 on-roll employees as of June 2026, up about 5% year-on-year despite AUM growth of 22% year-on-year, positioning this as a productivity gain.

What management is guiding for FY28

Tata Capital reiterated a set of FY28 guidance metrics (including Motor Finance). These include AUM CAGR of 23% to 25% for FY25 to FY28E, cost-to-income ratio of 33% to 34%, credit cost less than 1.0%, net NPA less than 1.0%, ROA of 2.5% to 2.7%, and ROE of 17% to 18%.

Takeaways

Q1 FY27 reinforced Tata Capital’s positioning as a scaled, diversified NBFC with a Retail and SME-led book and improving profitability. The reported reduction in credit costs and stable NPA metrics supported the quarter’s earnings delivery, while the housing finance subsidiary continued to provide strong, low-risk returns.

The strategic addition of gold loans through Yogloans is the major forward variable, with branch expansion plans clearly articulated but dependent on RBI approval. The other key execution track remains Motor Finance, where the company is focusing on portfolio reshaping and gradual stabilization. The quarter’s numbers suggest momentum, but the next few quarters will test how cleanly the mix shift and new vertical expansion translate into sustained ROA and cost-to-income improvement.