Cholamandalam Investment & Finance Company is one of the premier diversified non-banking finance companies in India, engaged in providing vehicle finance, home loans and Loan against property.
The mission of Chola is to enable customers enter a better life. Chola has a growing clientele of over 20.9 lakh happy customers across the nation. Ever since its inception and all through its growth, the company has kept a clear sight of its values. The basic tenet of these values is a strict adherence to ethics and a responsibility to all those who come within its corporate ambit - customers, shareholders, employees and society.
Business Segment
Vehicle Finance
For the past 20 years, Chola has created value for its customers by supporting them in becoming entrepreneurs in the field of commercial transportation. Chola has financed over 750,000 customers, and increasing by over 15,000 new customers every month. Chola enjoys a valued and stable relationship with manufacturers and dealers, one of the key reasons, why it is a leader in the commercial vehicle segment.
Loan Against Property
Chola believes that nothing is impossible for those who aspire to enter a better life. Loans against your property is intended to finance all your dreams and that of your family members. You could use the additional revenue for a multiple requirements, the choice is yours.
Home Loan
Chola is of the belief that every family should own a home. Chola offers home loans to suit all budgets, convenient repayment options and fast track approval process. Chola supports your dreams of purchasing a home by offering you guidance on choosing the right loan. We have over 167 branches across India making it easier to service your loan needs.
SME Loan
Chola SME Loans are business loans created exclusively for Small and Medium Enterprises to grow and diversify their business. Chola offers a range of financial solutions to meet your specific short-term or long-term funding and business expansion requirements.
Business at Glance
Business Composition
AUM as on Sept 30th 2022 is 87,667 Crore.
Vehicle finance – 66%
- o Used vehicle – 27%
- o CVs – 32%
- o Other Vehicles - 41%
LAP – 21%
- o Residential – 83%
- o Commercial – 17%
Home Loan – 8%
New Business – 5%
Segmental Breakup
Geographical Prensence
Business Performance
Disbursements
AUM
Profitability and Net Worth
Asset Ratio
Shareholder's Returns Ratio
Industry Performance and Outlook
Auto Sector Performance during Q2FY23
The Light commercial vehicle segment had a growth of 46% in Q2 FY’23 & 70% in H1 FY’23. This segment is witnessing healthy demand from e-commerce as well as from agriculture and its allied sectors along with replacement demand.
The Small commercial vehicle segment had a growth of 17% in Q2 FY’23 & 51% in H1 FY’23. This segment is expected to grow in the coming quarters due to its nature of deployment in last mile connectivity, improvement in road infrastructure and increasing logistic services.
The Heavy commercial vehicle segment had a growth of 53% in Q2 FY’23 & 87% in H1 FY’23. The recovery in macroeconomic environment and improved freight availability will aid growth in this segment during the year.
The Passenger vehicle (Car & MUV) segment had a growth of 38% in Q2 FY’23 & 39% in H1 FY’23. This segment is poised for an all time high sales this fiscal aided by improved consumer sentiments, festive demand and easing of semiconductor supply.
The Two-wheeler industry had a growth of 13% in Q2 FY’23 & 28% in H1 FY’23. Healthy rural cash flow, festival season coupled with OEM offers will help this segment to grow in coming quarters.
Used vehicle business has contributed to 28% of our disbursement volumes and this segment is expected to grow even further.
The Construction Equipment segment had a growth of 8% in Q2 FY’23 & 30% in H1 FY’23. The volumes are expected to pickup in coming quarters supported by improvement in construction, mining activities and increased spend on infrastructure.
The Tractor industry had a growth of 5% in Q2 FY’23 & 11% in H1 FY’23. Expectation of strong rabi harvest and improved cash flow on account of healthy crop procurement will aid growth in this segment.
Auto Industry Outlook
LAP Sector Performance during Q2FY23
The sector witnessed improvement in the disbursements post pandemic. Disbursements would further pick-up because of the festive season to a certain extent. Lowticket LAP would perform better than high-ticket LAP as the former is linked to essential services; services sector would perform better than manufacturing sector.
The LAP segment has witnessed a considerable reduction in GNPAs. The recovery is expected to continue going forward across segments with an estimated reduction of 30-40 bps in FY 2023. Further moderate Loan to Value(LTV) and rising property prices would produce
some comfort on credit risk front.
In the large, growth of NBFCs in LAP Business is closely linked to economic activities and is expected to grow at 5%-7% in FY 2023, as the business normalize further in the second half of this FY.
LAP Outlook
Home Loan Sector Performance during Q2FY23
Demand remained robust in Q2 FY23 and Affordable HFC growth is expected to be 17-20% in FY23.
Despite recovery analysts expect asset quality metrics to remain volatile, given the vulnerable borrower profile, especially of self-employed borrowers and impact of restructured accounts. However, overall GNPA is expected to reduce further.
• Healthy provision cover is expected to provide a
cushion to absorb the losses on the identified asset
quality stress
Shareholding Pattern
Financial Snapshot
Investment Thesis
Healthy market position, especially in the vehicle finance segment:
Chola Finance has sustained its strong market position in the new and used vehicle financing segment, which constitutes over two-thirds of the total financing business. Disbursements grew by 36% for fiscal 2022 and further rose by 267% year-on-year for the quarter ended June 30, 2022, aided by better macroeconomic conditions and a lower base. Consequently, assets under management (AUM) grew by 21% year-on-year for quarter ended June 30, 2022 and stood at Rs 81,925 crore as on June 30, 2022 (Rs 76,907 crore as on March 31, 2022, Rs 69,996 crore as on March 31, 2021).
Strong expectation of support from the Murugappa group
Chola Finance continues to derive significant equity and management support from the Murugappa group, which holds a majority equity stake of 51.6% in the company through Cholamandalam Financial Holdings Ltd (45.5%) and other group entities. The overall credit risk profile has strengthened due to increasing business diversity and better debt protection metrics. The group has extended timely funding support to Chola Finance during weak liquidity conditions in the past. In fiscal 2020, the group infused Rs 300 crore in Chola Finance, thereby augmenting its capital levels. For over two decades, Chola Finance has been the Murugappa group’s arm in the financial services domain, which is a key growth engine, and has contributed to around 40% of the consolidated net profit in fiscal 2022. The group is likely to maintain its majority equity stake in the company and shall provide financial and managerial support as and when required.
Sources of the report:
Company's website
Company's presentation
Crisil Report
