2026-07-13 20:05:53
Latest Post
Bajaj Consumer Care Delivers Strong Performance in Q1 FY27 as Net Profit Surges 84.8% Year-on-Year
Kamdhenu Brand Steel Sales Cross 1.13 Million MT in Q1 FY27; Captive Solar Plant Commissioned in Rajasthan
JBM Electric Vehicles partners with Drivn to supply 500 Electric Buses
Kalpataru Limited Reports 17% Surge in Collections and Key Luxury Launches for Q1 FY 2026-27
Ashok Leyland Secures ₹222.65 Crore Arbitral Award Against Delhi Transport Corporation
Research
Cholamandalam Investment and Finance - Healthy growth, improving productivity; maintain Buy - Anand Rathi
Posted On : 2013-01-24 06:48:45( TIMEZONE : IST )
Robust loan growth; higher NIM. AUM for Chola Investment and Finance (CIF) rose 41.0% yoy (9.5% qoq) to Rs.171.2bn, fuelled by robust disbursement in its vehicle (up 36.6% yoy) and home equity (up 41% yoy) businesses. We expect 30.3%+ CAGR in loan growth over FY12-15, driven by strong branch expansion and diversifying product mix. Calculated NIM on AUM, at 7.6%, increased 34bps qoq, as product mix shifted towards higher yielding assets and a stable cost of funds. We expect NIM to improve further as: Product-mix alters in favour of tractor finance and easing liquidity lowers the cost of funds.
Improving productivity to drive higher RoAs. On greater control over costs, cost-to assets in the quarter improved 15bps yoy, to 3.76%, despite a 46% yoy rise in the branch network. For FY15, we expect cost-assets to improve to 3.3%, from 3.7% in FY12, as asset growth is likely to outstrip growth in operating costs, a result of the streamlining of processes.
Lower NPA coverage; capital raising in the offing. With higher delinquencies in the used CV segment, gross NPA rose 12% qoq. We, conservatively build in our estimates higher credit costs of 65bps over FY13-15 (30bps in FY12) to factor in the greater share of used CVs, and tighter NPA-recognition norms. CIF's board has approved Rs.3bn capital infusion to augment its Tier 1 capital, which could boost loan growth over FY12-15e.
Our take. On higher NIM and productivity we raise our FY14/15 estimates by 10.5%/14.1%. We raise our target from Rs.269 to Rs.343 and value the NBFC at 2.1x FY14e BV (2x FY14e earlier) on the higher expected RoE. Deeper penetration in tier-2 and 3 cities will continue to drive robust asset growth. This, coupled with high-yielding new products and improving productivity, could lead to sharp improvement in profitability over FY12-15 (50.2% CAGR). Hence, we retain Buy. Our target is based on the two-stage DDM (CoE: 16%; beta: 1.1; Rf: 8%). Risk. A deficient monsoon could lead to higher NPA.
