Don’t Trade in the Dark—Get Your Pre-Market Report Every Day.Join Now
Search stocks
Cholamandalam Investment & Finance Company Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤11th May 26

Summary : Cholamandalam Investment and Finance Company Limited reported strong Q4 FY26 performance with robust AUM and disbursement growth, improving asset quality, and a positive outlook for FY27 driven by diversification and strategic expansion.

Management Perspective positive : Management expressed happiness with Q4 performance, highlighted strong growth across segments, and showed confidence in achieving future targets and improving asset quality. They noted 'sustained momentum' and 'encouraging' trends.

Concall Report Analysis & Insights

Business Overview

  1. Q4 FY26 disbursements grew 25% year-on-year to INR32,913 crores.
  2. AUM increased 21% to INR2,42,630 crores, reflecting sustained momentum.
  3. Vehicle Finance grew 26% YoY, MSME AUM grew 29% YoY, Consumer disbursements grew 45% YoY.
  4. NIMs improved by 40 bps YoY in Q4 due to reduced cost of funds.
  5. Return on assets was 4.1% (before overlay) and return on equity was 23% for Q4 FY26.

Future Growth Prospects

  1. Committed growth trajectory of 20-23% for FY27, with net credit cost declining to 1.5%.
  2. Pre-tax ROA expected to improve, moving closer to 3.5%.
  3. CSEL loan losses expected to decline, with pre-tax ROA crossing 3% in current fiscal year.
  4. Vehicle Finance disbursement growth targeted at 15-20%, asset growth at 18%.
  5. Plans to add 100 new Home Loan branches and over 300 Gold Loan branches.

Management Insights

  1. Continuously improving underwriting tools (Gini coefficient) to reduce credit costs across divisions.
  2. Asset quality improved across CSEL, CD, and Vehicle Finance segments in Q4.
  3. Collection costs remained stable, and recoveries improved due to better capacity utilization and SARFAESI.
  4. Stage 2 and Stage 3 assets showed improvement in the last quarter.
  5. Diversification across product segments and geographies provides comfort against market uncertainties.

Risk Factors

  1. Global uncertainties and potential for higher credit costs led to a INR200 crore management overlay.
  2. Potential second-order stresses from crude/fuel prices and supply chain disruptions.
  3. Mild moderation in home loan disbursements due to election-related administrative slowdowns.
  4. Cost of funds may marginally increase over the course of FY27.

Good To Know

  1. Strong liquidity position with INR21,186 crores, and comfortable ALM.
  2. Capital Adequacy stood at 19.21% with Tier 1 capital at 14.73%.
  3. INR1,370 crores of CCDs converted in FY26, with balance INR630 crores by H1 FY27.
  4. Board recommended a final dividend of INR0.70 per share (35%), in addition to interim INR1.30 (65%).
  5. CGTMSE insurance covers 70% of business loan assets, targeting 80-82%.

Key Drivers

  1. Strong AUM and disbursement growth.
  2. Improving asset quality and credit costs.
  3. Diversified portfolio reduces market risks.
  4. Strategic branch expansion drives growth.

Key Analyst Discussions

Competitive Environment

  1. Analysts asked about competition from banks in the Vehicle Finance segment.
  2. Management stated no significant change in competitive behavior observed.

Market Trends & Consumer Behavior

  1. Questions on CV volumes and on-ground sentiment despite market disruptions.
  2. Inquiries about customer behavior, bounce rates, and early defaults.
  3. Discussions on the impact of fuel price increases on LCV operators and freight rates.
  4. Analysts asked about demand elasticity in end segments due to freight rate changes.

Financial Highlights

  1. Analysts inquired about the AUM growth and credit cost trajectory for FY27.
  2. Questions were raised regarding the total recoveries cost for FY26.
  3. Clarification sought on CSEL's loan loss decline and ROA outlook.
  4. Discussions on home loan disbursement range and factors for pickup.
  5. Queries about overall cost growth versus AUM growth and operating leverage.

Product Composition

  1. Questions on Gold Loan AUM, exposure per customer, ticket sizes, and yields.
  2. Inquiries about growth potential and ROA outlook for the CSEL segment.
  3. Clarification sought on the run-down status of the Fintech book.
  4. Discussions on Vehicle financing sub-segments and geographical trends.

Strategic Considerations

  1. Analysts asked about capital raising plans and internal accruals for growth.
  2. Questions on the internal policy regarding the gearing ratio.
  3. Inquiries about the approach to ARCs for recovery, especially for SBPL.
  4. Discussions on plans for branch additions across various business segments.