Now Reading: Nuvama ups Tata Capital target price to Rs 415
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Nuvama ups Tata Capital target price to Rs 415
Nuvama has raised its target price for Tata Capital to Rs 415, implying an 11.98% upside from Wednesday's close of Rs 370.60. The brokerage said the drag from the Tata Motors Finance…
Nuvama has raised its target price for Tata Capital to Rs 415, implying an 11.98% upside from Wednesday's close of Rs 370.60. The brokerage said the drag from the Tata Motors Finance merger is largely behind the company and that margins are expected to expand by 25 basis points over two years.
Management is targeting a cost-to-income ratio of 33-34% from 38-39% and expects credit costs to settle around 1%. Tata Capital aims for a return on assets of 2.5-2.7% by FY28, up from 2.3% in Q1 FY27. Nuvama noted that 60% of the improvement could come from margins and 40% from operating efficiencies.
The brokerage described Tata Capital as the third-largest private NBFC entering a phase of higher growth. However, it warned that current valuation leaves limited room for execution misses, and a further re-rating would require sustained high growth and stronger return ratios.
Indian Opinion Analysis
Tata Capital's push for a lower cost-to-income ratio mirrors a broader industry trend among large NBFCs seeking scale efficiencies after rapid loan growth. The 1% credit cost target is ambitious: the RBI's 2023 stress-test data showed most large NBFCs reported credit costs above 1.5% during the last full cycle. The Rs 415 target price implies a price-to-book multiple that values in the projected RoA improvement. Investors will watch the September quarter disclosures for actual margin and cost ratio movement, and for any sign of asset quality pressure as unsecured loan growth slows after the RBI's tighter risk-weight norms in November 2023.
Source: businesstoday.in
This brief was synthesised by AI from the source linked above.
