What Does Tata Capital Plan to Do With Its ₹650 Cr Rights Issue? Here’s Everything You Need to Know

Synopsis: Tata Capital has approved a Rs 650 crore rights issue to infuse equity into its housing finance arm, TCHFL. The move aims to strengthen capital adequacy, support loan book expansion, and maintain regulatory buffers amid rising AUM growth. The capital raise reflects scale-driven growth rather than balance sheet stress.

Tata Capital Limited has approved an equity infusion of Rs 650.02 crore into its wholly owned subsidiary Tata Capital Housing Finance Limited (TCHFL) through a rights issue, marking a measured approach to capital strengthening. 

The equity infusion involves the issuance of shares with a face value of Rs 10 each in one or more tranches, providing flexibility on timing and utilisation. As Tata Capital holds sole ownership, this development is effectively an internal capital restructuring exercise to further strengthen the balance sheet of the housing finance subsidiary.

With a market cap of Rs 1.42 lakh crore, the shares of Tata Capital Ltd have closed at Rs 334, and they are trading at a PE of 32 compared to its industry PE of 18. The shares have a dividend payout ratio of 4.31%.

Strengthening Capital Base to Support Housing Finance Growth

The main reason for the rights issue of Rs 650 crore is to facilitate business growth in the housing finance business. With assets under management growing 26% on a year-on-year basis to Rs 2.34 lakh crore, the group is experiencing overall growth in lending. The housing finance business is inherently capital-intensive, requiring robust net worth support to fuel further growth in the loan book while maintaining optimal leverage ratios.

Regulatory Cushion and Strategic Preparation for Next Growth Cycle

Another important purpose is the regulation of capital. Housing finance companies function under tight capital adequacy and provisioning requirements. By injecting equity into the company rather than just borrowing, Tata Capital ensures that TCHFL has adequate capital reserves even as it expands. This is particularly important in a growing credit cycle, where keeping gross NPAs low at 1.6% and net NPAs low at 0.6% requires careful credit underwriting with adequate capital provisioning.

The rights issue also meets with Tata Capital’s strong Q3FY26 financial performance. The parent company registered a 19.7% increase in net profit over the previous quarter at Rs 790 crore and a 44% increase in net interest income at Rs 2,541 crore. Including non-recurring items, the profit after tax registered a 36% increase over the previous year at Rs 1,258 crore. The strong financial performance provides the parent company with adequate internal accruals to inject capital into its subsidiary without putting pressure on its own balance sheet.

Strategically, this capital injection prepares Tata Capital Housing Finance for the next phase of growth in the growing Indian housing sector. With a growing credit demand and stable asset quality, the rights issue of Rs 650 crore is more about scale than stress. In essence, Tata Capital plans to use the funds to strengthen capital adequacy and support loan book growth, maintain regulatory buffers, and enhance long-term competitiveness in the housing finance segment.

Financials 

The revenue from operations for the company stood at Rs 7,975 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 7,104 crores, up by about 12 per cent YoY. Similarly, the net profit stood at Rs 1,265 crore in Q3 FY26, up compared to the Rs 1,050 crore profit in Q3 FY25.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post What Does Tata Capital Plan to Do With Its ₹650 Cr Rights Issue? Here’s Everything You Need to Know appeared first on Trade Brains.