How Tata Capital built a future-ready, digital first customer-centric organisation
“In a free enterprise, the community is not just another stakeholder in business, but is in fact the very purpose of its existence”
- Jamsetji Nusserwanji Tata
The Tata group’s ethos is rooted in purpose and arises from global recognition in ethics and excellence; industry leadership and inclusiveness; as also success and sustainability. And, Tata Capital Limited (TCL), the flagship financial services company of the Tata group, continues this legacy with accolades that reflect trust, performance and responsibility.
The forthcoming IPO of the company has evinced a lot of interest among different segments of investors. And, the offer document, which has recently been made public, offers several insights into the company, its journey and the key investment highlights and risks therein. The Tata group has a strong presence in financial services, including offering lending products through Tata Capital, insurance services mainly through Tata AIA Life Insurance Co and Tata AIG General Insurance Co, and asset management services through Tata Asset Management. Further, Tata Capital benefits from its relationship with over 70 group companies and over 950 dealer and vendor partners within the group ecosystem. Promoter Tata Sons has infused equity of Rs8,970 crore since commencement of lending operations in 2007 and holds 88.6 per cent of the equity of TCL.
“The financial services sector continues to remain a critical enabler, translating economic policy and infrastructure investments into real opportunities for businesses and individuals,” says Saurabh Agrawal, chairman, Tata Capital & group CFO-ED, Tata Sons. “With healthy credit growth, stable asset quality and growing confidence in the system, 2024-25 has reinforced the sector’s role as a catalyst for national development”. Agrawal, a postgraduate diploma holder in management from IIM, Calcutta, has previously served as chief strategy officer, corporate strategy & business development cell, Aditya Birla Management Corporation, as well as head, corporate advisory & finance, South Asia and SEA, Standard Chartered Bank.
Fastest growth
Tata Capital started its journey in 2007 and forayed into home loans and private equity and incorporated the NBFC business over the next few years. It launched the clean-tech finance business as early as 2013. It then crossed the Rs50,000 crore mark in loan book size in 2017 and Rs1 lakh crore mark in 2022, despite the pandemic. In 2024, it procured licence as NBFC-ND-SI from RBI. And, in 2025, TCL reached the Rs2 lakh crore mark.
As on date, TCL is the third largest diversified NBFC in India with total gross loans of Rs2,26,550 crore as at 31 March 2025 (CRISIL Report). It is among the fastest growing large diversified NBFCs in India, based on growth in total gross loans, at a CAGR of 37.3 per cent from March 2023 to March 2025. TCL serves 7 million customers through its comprehensive suite of 25 plus lending products, where it caters to a diverse base comprising salaried and self-employed individuals, entrepreneurs, small businesses, small and medium enterprises and corporates. It is focussed more on retail and SME customers, with loans to such customers forming 88.5 per cent of the total gross loans. More importantly, the loan portfolio is highly granular, with ticket sizes ranging from Rs10,000 to over Rs1 crore, and over 99 per cent of loan accounts having a ticket size of less than Rs1 crore. In addition, 79 per cent of the loans were secured and organic books accounted for over 99 per cent.
“Maintaining disciplined margin management, Tata Capital has effectively navigated an evolving interest rate environment,” adds Agrawal. “Its diversified funding base provided stability and competitive borrowing costs. Advanced analytics and robust underwriting framework have ensured consistent, high quality asset origination”. Agrawal operates an omni-channel distribution model that combines a wide branch network, a robust partner ecosystem and a strong digital presence. TCL has an extensive pan-India distribution network comprising 1,496 branches across 27 states and union territories.
‘Phygital’ strategy
The branch network is complemented by proprietary digital platforms, including websites and mobile apps, which work together to support ‘phygital’ strategy. Furthermore, it establishes partnerships with direct selling agents (DSAs), original equipment manufacturers (OEMs), dealers and digital partners to broaden its reach. “Our marketing and brand-building efforts have gained momentum during 2024-25, resulting in stronger recall, increased market penetration and deeper, more sustainable customer engagement,” says Rajiv Sabharwal, MD and CEO, TCL. Sabharwal has a bachelor of technology degree in mechanical engineering from IIT, Delhi and a postgraduate diploma from IIM, Lucknow. He has previously served as a partner at True North Managers LLP and as chairman, ICICI Home Finance Co.
“Our people are the most important asset in our business,” proclaims the management in the offer document. “Their expertise, talent, integrity and dedication contribute significantly to the success of our business. To retain and engage our top talented individuals, we will continue to offer career opportunities as well as leadership development programmes that would promote their growth, retention and engagement. We will also continue to promote our culture of innovation, diversity and inclusion, to attract talented individuals to our company”.
The management team is guided by a board of six directors, of which four are independent entities. The independent directors provide governance oversight on functioning. Under the guidance of the board of directors, the management team has built a business that has delivered sustained growth and profitability across business cycles. Each of the businesses is led by a member of the management team and supported by a dedicated team with domain knowledge and operational skills.
“Our continued investments in innovation, risk management and operational excellence give us the confidence to navigate the evolving landscape effectively,” affirms Sabharwal. “We are confident that our strategic direction, coupled with the unwavering commitment of our team, will enable us to deliver consistent and sustainable value to all stakeholders”. Sabharwal lays emphasis on digital and analytics, which are at the core of the business.
TCL’s digital underwriting platform is integrated with credit bureaus and alternate data sources, enabling rule-based underwriting engines to facilitate an informed, data- driven underwriting process. In collections, it employs machine learning (ML) powered collection models, which help monitor repayment behaviours and utilise predictive analytics to optimise loan recovery efforts and enhance collection efficiency. As a result, its credit costs have remained low, amounting to 0.9 per cent of average total net loans (excluding TMFL) in 2024-25. Post-merger, credit costs were 1.4 per cent of average total net loans in 2024-25.
The company’s operations are underpinned by advanced digital and technological tools integrated into their platform, which span the entire customer lifecycle for all products. This drives efficiency, enhances customer experience and fosters sustainable growth. TCL leverages websites and mobile apps to engage with and acquire customers, providing both assisted and completely online journeys for various products. As much as 97.8 per cent of their customers were onboarded through digital platforms in 2024-25. The company offers its customers over 200 online services across multiple channels, including website, mobile apps, WhatsApp, email, chatbot (TIA), and interactive voice response (IVR) system. This has also helped customers manage their servicing needs independently, resulting in a digital service adoption rate (excluding TMFL) of over 80 per cent during 2024-25.
Over the past few years, TCL made investments in expanding its distribution network resulting in a 2.1x increase in branch count (excluding TMFL branches) from 2022-23. Digital platforms have also experienced substantial growth, with mobile app downloads surpassing 21 million as on 31 March 2025 and website traffic reaching 75.8 million visits in 2024-25. “We have built comprehensive and scalable digital platforms that serve as the backbone of our distribution network enhancing accessibility, transparency and building customer trust,” says Sabharwal.
Tata Capital has adopted new and emerging technologies such as AI, ML and GenAI across platforms, and continue to invest in them and expand the application of these technologies across businesses and functions. Digital advancements are central to the company’s objectives of enhancing operational efficiency, increasing employee productivity and improving the customer experience.
TCL has seen steady expansion in the housing finance segment, which appears to be emerging as a strong pillar of its broader retail growth strategy. Tata Capital Housing Finance’s (TCHF) portfolio has grown at a healthy 33.2 per cent CAGR from 2022-23 to 2024-25, positioning the company to tap into structural opportunities in India’s underpenetrated housing finance market. The company’s home loan segment has accounted for Rs38,400 crore (17 per cent) of Tata Capital’s consolidated gross loan book as on 31 March 2025 – up from Rs30,850 crore in 2023-24 and Rs22,100 crore in 2022-23. This marks a year-on-year growth of 24.5 per cent and a two-year growth of 73.8 per cent, indicating sustained demand for residential credit and a growing footprint in the segment. This trend is consistent with Tata Capital’s broader retail-focussed strategy. Retail loans accounted for 62.3 per cent of its loan portfolio in 2024-25, as against 56.7 per cent in 2022-23, underlining the focus on consumer-led financing solutions.
Projects in energy
In 2011, the erstwhile subsidiary Tata Cleantech Capital Ltd (TCCL) was set up by TCL and International Finance Corporation, US, with a primary focus on green and sustainable financing. With effect from 1 January 2024, TCCL has merged into the company. In Tata Cleantech & Infrastructure Finance, Tata Capital provides term loans to finance projects in renewable energy, energy efficiency, electric mobility, waste management, water management sectors and other infrastructure projects.
The company has formed deep partnerships with global climate investors, providing it with consistent access to long-tenure, low-cost capital. The gross loans under cleantech and infrastructure grew from Rs10,463.18 crore as on 31 March 2023, at 31.8 per cent CAGR to gross loans of Rs18,181.6 crore, as on 31 March 2025. Cleantech & Infrastructure Finance comprised 8 per cent of the total gross loans as on 31 March 2025. It has an average ticket size of Rs1,26.4 crore and generally a tenor of up to 23 years, with an average rate of interest of 10.5 per cent as at 31 March 2025, as on which date, it has also financed more than 500 cleantech projects, with over 22,400 MW of renewable energy capacity sanctioned.
TCL harnessed its merger with Tata Motor Finance Ltd (TMFL) to become a full-stack provider of vehicle finance, while leveraging its capabilities towards superior business outcomes. This will be a key growth engine in the future. Pursuant to the TMFL scheme of arrangement, the entire business of TMFL, including all of its assets, liabilities and undertakings, has been transferred to Tata Capital. The merger has been complemented and expanded its portfolio of vehicle finance products, across both commercial and passenger vehicles.
“The merger of Tata Motors Finance with Tata Capital has enhanced our scale and capabilities, strengthening our leadership position in the industry,” claims Agrawal. “We are now poised to begin a dynamic new chapter, anchored by resilience, digital advancements and the Tata ethos of trust and excellence”.
TCL has expanded from a single OEM to a multi-OEM model spanning pan-India to diversify the acquired vehicle finance business. Its strategy for this business includes optimising the portfolio mix by increasing the share of used and small and light commercial vehicles, thereby improving overall yield of the portfolio. Furthermore, it intends to leverage TMFL’s customer base for more cross-sell opportunities.
In this, TCL aims to gradually reduce the borrowing cost of TMFL debt, leveraging superior credit rating and a broad suite of liability instruments. Additionally, it will seek to improve overall asset quality by strengthening risk management practices and collection infrastructure. It will also consolidate branches and further leverage digitisation, technology and analytics, with an aim to reduce the cost to income ratio.
Maintaining quality
Analysts feel that the company’s strong risk management framework has covered a wide range of risks including credit, operational, market, information security, fraud and reputational risk, among others. Risk management accountability and oversight form an integral part of the company’s governance, reinforcing their responsible business practices. The proactive risk management approach with multiple layers of defence, backed by advanced data analytics capabilities, has enabled the company to maintain their asset quality.
“Our robust underwriting and collections efforts enable us to maintain the quality of our asset portfolio,” says Sabharwal. “We have designed our underwriting processes for a wide variety of product offerings, adopting a customised product-based approach, which includes rule-based underwriting, high-touch methods or a combination of both”.
TCL is rated ‘AAA with stable outlook’ by CRISIL, ICRA, CARE and India Ratings. And, its commercial papers are also rated ‘A1+’ by CRISIL, ICRA and India Ratings, as on 31 March 2025. According to the CRISIL Report, this is the highest possible credit rating for NBFCs in India. It has also secured a BBB- international rating from both S&P Global Ratings and Fitch Ratings, which is at par with India’s sovereign rating.
The company’s credit ratings enable it to borrow from a diverse pool of domestic and international lenders at competitive rates. It has borrowing relationships with various public sector banks, private sector banks, foreign banks, financial institutions, mutual funds, insurance companies, provident funds and pension funds, among others. As on 31 March 2025, it had outstanding borrowings from multiple lenders, of which 24 were commercial banks, including 12 private sector banks. It had borrowings at fixed and floating rates, across instruments including short/long-term loans from banks, non-convertible debentures, sub- ordinated and perpetual debt, external commercial borrowings and commercial papers.
The company has well-diversified funding sources, with no single lender contributing more than 10 per cent of the total borrowings, as on 31 March 2025. According to the CRISIL, it had the second largest outstanding debt securities among large diversified NBFCs in India as on 31 March 2025. It was able to further diversify its borrowing mix through loans from NHB via its material subsidiary, TCHFL. As part of its continuing efforts to diversify the funding mix, it has completed its maiden dollar-denominated bond issuance, raising $400 million in January 2025 from overseas investors. Its diverse borrowing mix allows it to maintain a sustainable maturity profile for borrowings.
As a result of its credit ratings, diverse funding mix and long-term relationships with lenders, the company’s average cost of borrowings’ ratio was 7.8 per cent in 2024-25. Its Asset Liability Committee (ALCO) oversees the monitoring and implementation of ALM policies, ensuring optimal asset-liability matching to mitigate risks, enhance profitability, maintain minimal dependence on short term debt and comply with regulatory guidelines.
Tata Capital is committed to sustain this growth by identifying promising business opportunities that offer long-term potential for profitability and sustainability. For instance, the company launched micro-finance loans in 2021-22, factoring in 2022-23, secured business loans and education loans in 2023-24 and new car loans in 2024-25. Moving forward, it plans to continue to expand product range and launch innovative solutions to meet evolving market demands and customer expectations.
“TCL continues to take a disciplined approach to preserve margins, while supporting growth,” Agrawal adds. “As we navigated through an evolving interest rate environment, our diversified funding base ensured stability and flexibility, enabling us to manage our cost of borrowings. In addition, our robust credit underwriting framework – powered by advanced analytics and risk assessment tools – ensures high-quality asset origination across segments”.
As the company expands its branch network, it will also continue to enhance the productivity of existing branches as well as extend existing product offerings across all branches. Further, it will endeavour to scale recently launched products such as affordable housing loans, affordable loans against property and secured business loans and increase their contribution to total gross loans. The company will continue to strengthen existing relationships and onboard new partners, including DSAs, OEMs – such as mobile apps, website, and digital partnerships – to broaden reach and deliver a more seamless and cost-effective customer experience.
“We are building a future-ready, digital-first, and customer-centric organisation – one that is resilient through economic cycles and capable of delivering sustainable value over the long term,” informs Sabharwal. “Our continued investments in innovation, risk management, and operational excellence give us the confidence to navigate the evolving landscape effectively”. He remains committed to building a digital-first organisation, through continued investments in technology across the lending value chain from origin to repayment.