This article first appeared on GuruFocus .
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Consolidated AUM:INR3,08,030 crores, up 26% YoY and 6% QoQ; crossed INR3 lakh crore milestone.
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AUM (ex-Motor Finance):Grew 32% YoY and 7% QoQ.
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Consolidated PAT:INR1,660 crores, up 51% YoY and 7% QoQ.
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Return on Assets:2.3% (2.5% excluding Motor Finance).
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Return on Equity:14%.
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Housing Finance AUM:INR95,098 crores, up 26% YoY and 6% QoQ.
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Affordable & Micro Housing Portfolio:Grew 22% YoY and 5% QoQ.
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Housing Finance PAT:INR552 crores; ROA 2.5%, ROE 18.0%.
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Consolidated Disbursements:INR51,665 crores, up 29% YoY.
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High-Margin Business Disbursements:Grew 40% YoY; AUM growth up to 14% from 10% in Q1.
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Retail & SME Portfolio:85.4% of AUM.
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Branch Network:Net addition of 24 branches; ~1,515 branches across 1,094 locations in 26 states/UTs; affordable and micro housing expanded into 23 new locations.
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Customer Base:9.2 million customers.
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Credit Costs:Declined 17% YoY; annualized consolidated credit cost at 0.9% vs 1.0% in Q1 FY27.
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Gross Stage 3 Assets:Stable at 1.9% as of September 2026.
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Provision Coverage Ratio:Improved to 59%.
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Cost of Funds:7.33% in Q2 FY27 vs 7.28% in Q1 FY27.
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Total Borrowings:~INR2.61 lakh crores; mix: bank loans ~39%, NCDs 35%, ECBs/MTNs 12%, CP and WCDL 9%, NHB borrowings 3%.
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NIM:Declined marginally on higher cost of funds and slight yield moderation in mortgage business; 2025 bps PLR hike approved to support NIM plus fee from Q3/Q4.
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Consolidated Equity:INR47,778 crores; debt-to-equity at 5.5x.
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Capital Adequacy (Stand-alone):17.3%, with CET1 at 14.7%.
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Available Liquidity:~INR36,400 crores.
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Cost-to-Income Ratio:Improved 438 bps YoY to 35.3%; cost to average assets at 2.3%.
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Employee Strength:31,655 on-roll (up 6% YoY vs 26% AUM growth); over 80% in frontline sales and collections.
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Release Date: October 27, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Consolidated AUM crossed INR3 lakh crore, growing 26% YoY and 6% QoQ, with disbursements up 29% YoY to INR51,665 crore.
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Profit after tax grew 51% YoY to INR1,660 crore, with ROA at 2.3% and ROE at 14%.
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Asset quality remained stable with GS3 at 1.9% and credit costs declined 17% YoY to 0.9% annualized.
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Cost-to-income ratio improved by 438 bps YoY to 35.3%, driven by operating leverage and AI-led productivity gains.
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High-margin businesses showed robust growth with disbursements up 40% YoY and AUM growth at 14%, expected to further improve margins.
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Strong capital position with stand-alone capital adequacy at 17.3% and CET1 at 14.7%, providing growth headroom.
Negative Points
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NIM declined marginally by 10 bps QoQ due to higher cost of funds and competitive pressure in prime home loans.
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Motor Finance book continues to shrink, with portfolio rundown and elevated NPAs; growth expected only from Q4 FY27.
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Rising interest rate environment with expected further repo hikes may increase funding costs and pressure margins.
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Regulatory uncertainties around revolving credit and insurance commission capping could impact profitability.
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Capital raise planned for H2 FY28, which may dilute equity and affect ROE.
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Rural exposure via microfinance (<1% of book) faces risks from subpar monsoon and El Nino effects on food prices and rural demand.
Q & A Highlights
Q: With two more rate hikes expected in FY27, do you see any revision to your FY28 ROA/ROE guidance, and how exposed are you to rural/drought-hit markets? A: Rajiv Sabharwal (MD & CEO) said the company remains confident of meeting all FY28 guidance parameters, with no downward revision contemplated. Rural exposure is limited to microfinance, which is under 1% of the book, with no tractor or farm loans and negligible presence in Maharashtra, so drought impact is not a concern.
Q: What is the NIM trajectory for H2 FY27 and FY28 given the rising rate environment and competitive pressure in prime mortgages? A: Rajiv Sabharwal (MD & CEO) noted NIM fell about 10 bps QoQ in Q2 (5 bps from higher cost of funds, 5 bps from prime home loan competition). NIM plus fee is expected to be stable to marginally better in Q3 and show a distinct improvement in Q4, aided by the PLR hikes, a rising share of high-margin businesses, and lower repricing pressure as rates rise.
Q: When do you expect the Motor Finance book to stabilize and return to growth, and why did Motor Finance GS3 rise this quarter? A: Rajiv Sabharwal (MD & CEO) said the portfolio rundown is reducing each quarter, with stabilization expected in Q3 and growth from Q4. The NPA increase is partly due to the shrinking denominator and partly seasonal (Q2 is typically the peak), while absolute slippages are significantly lower than Q2 last year.
Q: What is the sensitivity of NIM to further repo hikes, and what is the reset timing of the 2025 bps PLR increase? A: Rajiv Sabharwal (MD & CEO) said the PLR hike reflects only the October 25 bps repo increase, effective November 1, and future hikes will be evaluated based on the asset-liability mix. With 66% of assets versus 48% of liabilities floating, further repo hikes should be neutral to positive for margins.
Q: Where is the SME growth coming from, and will retail growth pick up in H2? A: Rajiv Sabharwal (MD & CEO) attributed SME growth to supply chain finance and term loans, supported by expanded locations. Supply chain is now well diversified, with auto down to about 35% from two-thirds four years ago. Retail momentum is expected to accelerate in Q3 and further in Q4, with stronger branch expansion planned for affordable and micro housing.
Q: What is driving the 30% YoY growth in Tata Capital Housing fee income, and is there anything extraordinary? A: Rakesh Bhatia (CFO) said the increase is driven by assignment (DA) income, which rose 58% YoY, while non-assignment income held steady as a percentage of AUM.
Q: What explains the INR186 crore de-recognition of associates, and have you tightened lending screens given the drought situation? A: Rakesh Bhatia (CFO) said the gain arose from a private equity fund exiting a portfolio company classified as an associate, with only INR27 crores flowing into Tata Capital's PAT after other LPs' share. Rajiv Sabharwal (MD & CEO) added that screens have been tightened in certain secured and unsecured SME segments due to cost pressures linked to crude prices.
Q: What is the status of the flexi loan product amid RBI's draft revolving credit guidelines, and what proportion of the book is flexi? A: Rajiv Sabharwal (MD & CEO) said flexi loans are only about 22.5% of the book, and more than half can be converted to modified products without revolver capability, with testing underway from early November. The modified products are priced similar to flexi loans, and the company expects the regulator to take a balanced view after industry feedback.
Q: Can you quantify the potential impact of insurance commission capping, and what mitigating levers exist? A: Rajiv Sabharwal (MD & CEO) declined to quantify the impact until final guidelines are issued, noting the company is evaluating product mix (retail versus group), improving NIM plus fee in non-insurance business, and lower operating costs if insurance sales decline. He emphasized insurance remains valuable for borrowers and the company is engaging with the regulator.
Q: When do you plan to raise capital given the declining CRAR? A: Rakesh Bhatia (CFO) said capital adequacy is monitored closely, including Tier 1 and sub-debt mix, and based on the current growth trajectory, a capital raise is expected in H2 FY28, more towards Q3Q4.
Q: With 26% AUM growth exceeding the 2325% guidance, was Q2 growth opportunistic, and will you prioritize margins over growth? A: Rajiv Sabharwal (MD & CEO) said there was no one-off, but some deals were passed up for not meeting margin requirements. The company intends to stay within the 2325% guidance and will not chase growth at the expense of margins.
Q: Would you consider selling the Motor Finance NPA pool (~INR2,0002,100 crores) to an ARC? A: Rajiv Sabharwal (MD & CEO) said this has not been considered, as the company believes its in-house collections team is more efficient than an ARC, with collections increasingly digital. He noted most of the GNPA stems from the pre-March 2025 book and agreed to re-evaluate the suggestion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
