Systematix
Target: ₹400
CMP: ₹303
Recent investor interactions have raised concerns around whether the erstwhile ) franchise continues to operate as a quasi-captive financier post its merger into Tata Capital Ltd, potentially implying elevated asset quality risks and structurally weaker profitability in future.
However, our latest channel checks across dealers and fleet operators in Mumbai, Thane and Navi-Mumbai indicate a materially different picture.
Feedback suggests the company is currently prioritising pricing discipline, underwriting quality, and operational integration over aggressive market share expansion.
Higher lending rates, lower dealer incentives, and moderated disbursement growth together reinforce our view that the merged franchise is presently operating with a far more calibrated and profitability-focused approach rather than pursuing volume growth at any cost.
Tata Capital represents a well-diversified NBFC franchise backed by strong parentage from Tata Sons, a broad product suite, extensive distribution, and a CRISIL AAA credit rating. While profitability metrics currently trail leading peers, we expect operating leverage, NIM expansion, and lower credit costs to drive a gradual improvement in ROAs.
We retain our Buy rating and a target price of ₹400.
Our FY27/FY28 PAT estimates are about 4-7 per cent ahead of consensus largely driven by lower Credit cost and higher growth, as we believe the street remains conservative despite the company’s solid execution track record and clear levers for ROA improvement.