Tata Capital Eyes 20% Growth, Bets on Retail & SME

Introduction

Tata Capital is positioning itself for a new phase of expansion, with a clear strategy focused on the housing, retail, and Small and Medium Enterprise (SME) sectors. Managing Director and CEO Rajiv Sabharwal expressed confidence in the company's trajectory, citing strong disbursement growth in the third quarter of FY26. The financial services firm is leveraging its recent IPO, strong brand equity, and a robust digital infrastructure to capture the broad-based recovery in credit demand across India.

A Clear Growth Mandate

Tata Capital has set a consolidated growth guidance of 18% to 20% for the upcoming financial year. Sabharwal confirmed that the company intends to stay within this range, supported by promising performance early in the fourth quarter. "We have reported very good growth, and we hope this momentum will continue. January is looking promising, and as we progress deeper into the January-March quarter of 2026, we expect this growth to accelerate," he stated. This outlook is built on a diversified business model that has shown resilience and consistent performance across its various segments.

The Core Growth Engines: Housing, Retail, and SME

The foundation of Tata Capital's growth strategy rests on three key pillars: housing, retail, and SME lending. These segments collectively account for approximately 88% of the company's total loan book. Housing finance remains the largest and one of the most stable contributors to the portfolio. Sabharwal highlighted the strong and sustained demand in this area, partly driven by government initiatives like 'Housing for All'.

The SME sector is viewed as the backbone of the Indian economy, crucial for both innovation and employment. Tata Capital's SME book constitutes about 26-27% of its portfolio, and the management sees no signs of stress, expressing confidence in its continued healthy growth. The retail segment, encompassing both secured and unsecured loans, continues to see strong demand, fueled by rising consumer aspirations and increased consumption.

Strategic Revamp of Motor Finance

While the core segments drive growth, Tata Capital has also been actively transforming its motor finance business to improve profitability. The strategy involved diversifying its portfolio to include financing for all major Original Equipment Manufacturers (OEMs). The company has also shifted its focus from heavy commercial vehicles to mid and small commercial vehicles and increased the proportion of used vehicle financing to improve yields. After a period of degrowth during this transformation, Sabharwal expects the motor finance book to return to a growth trajectory in the new year.

Calibrated Growth in Unsecured Lending

The company is also scaling up its unsecured retail loan book in a calibrated manner. This segment currently forms about 10.4% of the total portfolio. After a period of caution, improving credit costs over the last year have given the management confidence to resume growth. Strong disbursement numbers in Q3FY26 reflect this renewed focus, and the momentum is expected to continue.

Fortifying the Balance Sheet

Tata Capital's financial strength is anchored by its AAA credit rating, which allows it to secure funds at one of the lowest costs in the market. The proceeds from its recent IPO are being deployed to fund growth and strengthen its Tier-1 capital. This infusion is expected to push the capital adequacy ratio beyond 22%, providing a sufficient buffer to support expansion for the next two to three years. The company maintains a balanced approach to its assets and liabilities, ensuring that its margins remain stable even amid interest rate fluctuations.

Key Financial Metrics

A Diversified Loan Portfolio

Tata Capital's strategy emphasizes a well-diversified loan book to manage risk across economic cycles. The portfolio is spread across multiple products, preventing over-reliance on any single segment.

Digital Transformation at the Forefront

Technology is a key enabler of Tata Capital's strategy. The company has invested heavily in digital platforms and Generative AI to enhance customer experience and operational efficiency. Digital channels are integral to its operations, with 97% of customers onboarded digitally and 99% of collections processed through digital means. This focus on technology has led to significant improvements in efficiency, such as the reduction of the cost-to-income ratio in its housing finance arm from 40% to 31% over three years.

Market Outlook and CEO's Perspective

Rajiv Sabharwal remains highly optimistic about India's economic potential, projecting that credit growth will continue to outpace GDP growth. "If India grows at close to about 6.5% to 7%, credit will grow at about 11% to 12%. Within that, you will find retail and SME businesses growing at about 17% to 18%," he explained. This macroeconomic tailwind, combined with Tata Capital's strong brand, diversified product suite, and expanding distribution, positions the company to capitalize on the significant growth opportunities ahead.

Conclusion

Tata Capital is charting a course for sustained, high-quality growth. Its strategy is anchored in a deep focus on the retail, housing, and SME sectors, supported by a transformed motor finance business and a cautious but confident expansion in unsecured lending. With a fortified balance sheet, a strong digital foundation, and the trusted Tata brand, the company is well-equipped to navigate the competitive landscape and deliver on its ambitious growth targets while creating long-term value for its stakeholders.