Tata Capital is looking to double its loan book in three years

Tata Capital is targeting double-digit loan book growth over the next three years, says Rajeev Sabharwal, Managing Director and CEO, Tata Capital, expressing optimism about India’s macroeconomic environment and the government’s focus on housing for all and financial inclusion. Currently, the loan book is over Rs 2.2 lakh crore and FY2025 profit is over Rs 3,655 lakh crore.

Confident in maintaining industry-leading growth, he added that the company aims to keep credit costs below 1%, supported by strong underwriting and technology-based risk management. He added: “Our client selection process is robust. We use scorecards and business rules engines, integrating information to make better decisions. Our balanced portfolio between assets and liabilities with fixed and variable interest rates ensures margin sustainability even if interest rates move.”

Sabharwal also said that Tata Capital’s strategy will continue to be based on balanced credit expansion, disciplined asset quality, deepening focus on retail and SME segments, while leveraging digital efficiencies and artificial intelligence to drive inclusion, improve execution times, and strengthen governance.

The IPO proceeds will be used to fund growth and enhance tier-1 capital, making a capital adequacy ratio above 22% sufficient for the next two-three years of expansion, Sabharwal said. Tata Capital has a network of around 1,500 branches, with more than 85% of the recent expansions in tier-II cities and beyond. “Our growth is driven by multiple factors, a strong brand that helps us raise money at a low cost, a broad product range and a deeper geographic reach,” he added.

Retail lending remains the backbone of Tata Capital, accounting for about 62% to 63% of its total book, evenly split between housing and consumer companies. Sabharwal emphasized that the company’s strength lies in its wide-ranging diversification across products and customer segments, which ensures that there is no concentration risk. “Be it passenger car loans, two-wheelers, personal or business loans, we are there for everything. Likewise, in housing, we have prime, affordable and micro housing portfolios. We believe our consumer and housing portfolio will always be the largest and will continue to grow at over 25%,” he said.

SMEs make up about 26-27% of Tata Capital’s portfolio. Despite broader concerns about pressure on SME assets, Sabharwal said the company’s SME track record remained sound and resilient. “SMEs are the backbone of the Indian economy, not only in terms of innovation but also in terms of employment. We do not see any pressure in our SME portfolio, even on the non-secured side,” he noted.

Sabharwal credited digitalization with improving access and efficiency in the SME sector. “More than 90% of withdrawals in our supply chain business are now done digitally, which is a big change from the past. Technology has allowed us to serve small businesses faster and more efficiently,” he said, adding that digital lending will remain a key differentiator for the company.

He added that operating efficiency has improved significantly due to digitization. “The cost-to-income ratio in our housing finance arm has improved from 40% three years ago to 31% now, driven by digital adoption and the use of artificial intelligence,” he noted. Digital transformation and GenAI investments are a key part of Tata Capital’s operating model.

The company uses AI not only to enhance efficiency but also to enhance transparency and customer convenience. “We use GenAI to make credit processes more robust and reduce processing time. On the service side, we use it to respond to customers in near real-time. The focus is on using technology to facilitate access and improve operating efficiency,” Sabharwal explained.

While Tata Capital collaborates with fintech companies to improve the efficiency of operations, Sabharwal explained that business creation remains largely organic. “Ninety-nine percent of our book is organic, and we intend to continue that way. We know our business well and want to maintain control of quality,” he said.

Post listing, Tata Capital’s priorities are governance excellence, customer focus and sustainable value creation for shareholders. “We will continue to keep customers at the heart of everything we do, ensure high standards of governance, and use technology to simplify access. We want to retain customers for life,” Sabharwal added.