Mumbai: Tata Capital, the flagship financial services company of the $103 billion salt-to-aviation Tata Group, is expecting to record its highest-ever profit this fiscal year, after tweaking its loan book to capitalise on rising retail demand and reducing exposure to lumpy corporate loans.
Consumer loans and mortgages would top the growth as it aims to widen the reach in tier-3 and tier-4 towns and increase digital penetration.
Chief executive Rajiv Sabharwal said the company now has a firm base for growth in the next few years as it has made its loan book granular.
“Tata Capital delivered its best-ever profits last year. We expect FY22 performance to be better than FY 21 … Expanding our margins, keeping credit costs down and increasing the pace of digitisation while growing the loan book will be the major themes going forward,” Sabharwal said. “There is pent up demand and we expect domestic consumption to increase. The growth momentum in the economy will be sustained.”
The company had recorded a net profit of ₹1,126 crore in fiscal 2021.
Tata Capital is the holding company for the group’s three lending businesses – Tata Capital Financial Services, Tata Capital Housing Finance and Tata Cleantech Capital – and also three investment and advisory businesses: Tata Securities, Tata Capital Singapore and private equity funds.
“Over the last three years or so, our endeavour was to make the loan book more granular with retail loans being a dominant part and we have been largely successful in our strategy. Retail loans including mortgages are now about 65% of our loan portfolio. The rest of the loans are 20% corporate and 15% SME loans,” Sabharwal said.
Tata Capital’s loan book has grown 8% to ₹83,044 crore in September 2021 from ₹77,219 crore at the end of March 2021. Net interest margins plus fees have improved to 6% from 5.5% in the same period.
Sabharwal said a better product mix and lower cost of funds have helped expand the net interest margin. He expects credit costs to be in the current 80-basis-point range, down from 3.7% in the first quarter when the economy came to a standstill. One basis point is 0.01 percentage point.
“Our gross NPA on an absolute basis has come down despite growth in loan book, mainly due to better recoveries. Controlling credit costs and maintaining asset quality while growing our book remains our priority,” Sabharwal said.
Since taking over as CEO in April 2018, Sabharwal has led the company’s pivot towards retail loans and has consolidated the group’s secured loan business which makes up 80% of the company’s loans.
Gross NPAs have fallen to 2.2% of loans from 2.5% six months earlier, as recoveries improved in line with the economy.
Sabharwal said the company has enough capital and is not considering raising funds anytime soon. It has always maintained that the call for listing on the stock market will be made by parent Tata Sons.
Stay connected with us on social media platform for instant update click here to join our Twitter, & Facebook
Denial of responsibility! NewsAzi is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.
