Fitch Ratings, a US-based agency, recently assigned Tata Capital Ltd (TCL) its first-time long-term foreign and local currency issuer default ratings (IDRs) of 'BBB-' with a stable outlook. Additionally, they provided a shareholder support rating (SSR) of 'BBB-', indicating confidence in TCL's parent company, Tata Sons Private Ltd (TSOL), to offer extraordinary support if needed. This confidence arises from TCL's status as the largest entity within Tata Group's financial services segment, recognized as a significant growth driver for the conglomerate.

Fitch emphasized TSOL's direct oversight of TCL's strategic decisions and consistent capital injections into the subsidiary. The increasing contribution of TCL to TSOL's consolidated profitability further underscores its importance within the group. Fitch also highlighted the potential consequences for future Tata Group ventures in the event of TCL's default.

Regarding TCL's financial health, Fitch observed a low gross non-performing loan ratio of 1.6%, expected to remain favorable compared to industry peers in the medium term. TCL's borrowers in urban and semi-urban areas exhibit better income profiles, resulting in lower credit costs despite a high provisioning coverage ratio of 155%.

In the broader economic context, Fitch forecasts resilient GDP growth for India, projecting 6.9% in FY24 and 6.5% in both FY25 and FY26. This outlook supports the profitable expansion of finance and leasing companies like TCL.

In summary, Fitch's assessment highlights TCL's strong position within the Tata Group, supported by TSOL, robust financial indicators, and favorable economic projections, positioning TCL well for future growth and stability.