Tata Capital's Q3 FY26: Digital Drive, Robust Growth, and Strategic Realignment

Tata Capital Limited, a prominent financial services company within the Tata Group, has reported a strong performance for the third quarter of Fiscal Year 2026. The company demonstrated sustained business momentum, driven by broad-based growth across its product offerings. This quarter's results underscore Tata Capital's strategic focus on digital transformation, asset quality, and the successful integration of its Motor Finance business.

For Q3 FY26, Tata Capital's Assets Under Management (AUM), including the Motor Finance business, grew by a healthy 7% quarter-on-quarter, reaching ₹2,60,698 crore. This marks the company's highest-ever quarterly AUM growth, adding approximately ₹16,800 crore, fueled by festive demand and the benefits of GST reduction. Profit After Tax (PAT), excluding non-recurring items, surged by 18% quarter-on-quarter to ₹1,290 crore. The Motor Finance segment, a key focus area post-acquisition, achieved PAT breakeven this quarter, signaling positive traction from its strategic reorientation efforts. The company's overall financial health remains robust, supported by a diversified portfolio and prudent risk management practices.

Segmental Performance and Asset Quality

Tata Capital's diversified portfolio continues to be a cornerstone of its balanced growth. Excluding the Motor Finance business, AUM grew by 26% year-on-year to ₹2,34,114 crore, with housing finance leading the charge with 30% growth. Retail and SME loans collectively constitute approximately 87% of the total AUM, highlighting the company's focus on granular, high-quality growth. Unsecured retail disbursements, which had been moderated as a prudent risk measure, have seen a gradual uptick, with slippages coming down and portfolio growth resuming.

Asset quality remains a key strength for Tata Capital. Excluding Motor Finance, Gross Stage 3 assets stood at 1.6% and Net Stage 3 at 0.6% as of December 31, 2025, broadly in line with previous quarter levels. The annualized credit cost improved to 1.0% in Q3 FY26, a 10 basis points reduction from Q2 FY26, reflecting lower slippages. Including Motor Finance, Gross Stage 3 assets were 2.2% and Net Stage 3 at 1.0%, with credit costs improving to 1.2%. The company's provision coverage ratio stood strong at 64.5% (excluding Motor Finance) and 53.6% (including Motor Finance).

Consolidated Financial Summary (Excluding Motor Finance)

Digital Leadership and Strategic Initiatives

Tata Capital's digital transformation journey is a cornerstone of its operational efficiency and customer experience. The company proudly identifies as a digital-first NBFC, with technology embedded across its lending lifecycle. Impressively, 97% of customers are digitally onboarded, and 97% of retail disbursements are facilitated via scorecards or business rule engines. Furthermore, 98% of customer queries are resolved digitally, and 99% of collections flow through digital channels, demonstrating significant value creation at scale.

The company has strategically invested in AI and GenAI, moving from pilot projects to enterprise-wide deployment across various functions. AI underwriting co-pilots and AI-generated credit memos are enhancing credit manager productivity, speed, consistency, and risk governance. This robust AI and data architecture, combined with strong in-house engineering capabilities, supports a scalable AI-enabled operating model for disciplined growth and resilient risk management.

Consolidated Financial Summary (Including Motor Finance)

Outlook and Guidance

Looking ahead, Tata Capital remains cautiously optimistic about India's robust growth outlook, supported by resilient domestic demand and favorable demographics. The company is well-positioned to leverage tailwinds from policy initiatives such as GST rationalization, tax relief measures, and repo rate cuts. Management is confident in meeting its FY26 guidance, projecting AUM growth of 18-20% and PAT growth of approximately 35% (including Motor Finance).

For FY28, Tata Capital has set ambitious targets, including an AUM CAGR of 23-25%, a cost to income ratio of 33-34%, credit costs below 1.0%, Net NPA below 1.0%, ROA between 2.5-2.7%, and Return on Equity between 17-18%. The company's focus on quality-led growth, prudent capital deployment, and sustained improvement in returns positions it strongly for future success.

Tata Capital's Q3 FY26 performance reflects disciplined execution and a continued strengthening of its fundamentals. The moderating credit costs, resilience in retail and housing portfolios, and early signs of stabilization in Motor Finance underscore the company's strategic clarity and operational excellence. With its robust digital infrastructure and diversified portfolio, Tata Capital is poised for sustained growth and value creation for its stakeholders.