Tag: Cholamandalam Finance

Cholamandalam Investment and Finance posts 33% growth in loan disbursals in FY24; analysts divided on the stock

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Cholamandalam Investment and Finance Company (CIFC) has reported a 17% growth in loan disbursals to ₹24,600 crore in the last quarter of 2023-24 against ₹21,020 crore in the year-ago quarter. For the full fiscal, the financial and investment company reported a 33% jump in disbursals to ₹88,300 crore in 2023-24 against ₹66,532 crore in 2022-23.

Two analysts gave mixed reviews on the latest quarterly performance by the financial services provider. While Jefferies assigned a ‘buy’ call with a potential upside of 15%, brokerage Nomura assigned a ‘reduce’ rating on the stock while projecting up to a 17% downside.

In a bullish call, Jefferies pegs the target price at ₹1,400 per share, showing a potential upside of 15% from Friday’s close. It stated that the overall loan disbursal growth of 17% for the March quarter beat its estimate by 4 percentage points.

Auto loan disbursement growth slowed down in the fourth quarter due to a high base impact but growth in non-auto segment was better than its estimates, Jefferies stated in a note.

The company’s vehicle loan disbursements increased by 6% year-on-year to around ₹12,900 crore in the March quarter and by 21% year-on-year to around ₹ 48,200 crores for the 2023-24 fiscal.

Loans against property jumped 52% to ₹4,200 crore in the fourth quarter, from the same period last year, and by 44% to around ₹13,400 crore in the 2023-24 fiscal.

Its home loans business grew by 21% to ₹1,700 crore in the fourth quarter and by 64% to around ₹6,300 crore in FY24.

The micro small and medium enterprise loans business edged up by 1% to around ₹2,130 crore in the March quarter and by 27% to around ₹8,100 crore in FY24.

In a bear case scenario, Nomura assigned a ‘reduce’ rating to the stock  with a target price of ₹1,000 per share, reflecting a downside of 17% from the current price.

Nomura in a report stated that the company’s fourth quarter growth was below expectations and its profitability and growth are expected to moderate further.

A 35% growth in assets under management on a yearly basis in the fourth quarter was below its estimates of 36%, while the full year growth of 7% also lagged its estimate of 9%. “Moderation in industry volume growth, falling ASP growth and elevated competition from banks should lead to only 10% disbursement CAGR during FY24-26F vs 38% in FY22-24,” Nomura said.

The company’s total assets under management rose by 35% to around ₹1,53,000 crore. Its collection efficiency on billing at an overall level stood at around 130% in the fourth quarter.

The company continues to hold around ₹8,100 crore as cash balance as of March 2024, including ₹3,750 crore invested in qualified high quality liquid assets (HQLA).

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Chola Finance cuts back on loans via two “adventurous” fintechs after a spike in bad loans

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Chennai-headquartered Cholamandalam Investment and Finance has cut down its dealings with two fintech partners after a spike in non-performing loans in the businesses related to them, the non-banking finance company’s President and CFO, Arun Selvan, told CNBC-TV18.

While Selvan refrained from naming the two fintechs, he said some tie-ups are with startups that tend to become a little ‘adventurous’ in what they do.

Partnership business is around 1.5% of Chola’s total assets and includes around 10 partners, he said.

Selvan said around 6% of the NBFC’s overall book is unsecured with 4% unsecured non-consumer loans. So, only 2% of loans will come under the purview of the Reserve Bank of India’s (RBI’s) new risk weights on unsecured consumer loans. “We will certainly have a relook at it considering the revised RBI norms on higher capital risk weightage etc. So, we will have a slightly higher pricing but it is not due to higher losses for the rest of the partnerships other than the two which I mentioned,” he noted.

The RBI on November 16 tightened rules for consumer lending, asking banks and NBFCs to set aside higher capital buffers and put in place board-approved policies to monitor exposure limits to this segment.

In the latest quarter’s post-earnings call with CNBC-TV18 Selvan talked about adopting a cautious approach and maintaining gross non-performing asset (GNPA) ratio at a comfortable level of around 2-2.5%, due to the spike in new business NPLs.

The NBFC announced its second quarter results in November. The company’s net profit rose 35% year-on-year (YoY) to ₹762.49 crore.

The stock was trading half a percent higher at 10:30 am on Monday, December 18, in its seventh straight session of gains. The shares have jumped 70.8% in 2023 so far.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

CNBC-TV18 Newsbreak confirmed | Cholamandalam Investment and Finance launches QIP to raise Rs 2,000 crore

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Non-banking finance firm Chola Investment Finance launched a qualified institutional placement on Thursday (September 28) as confirmed by CNBC-TV18, sources privy to the developments told CNBC-TV18.

The company has launched a Qualified Institutional Placement (QIP) and will issue Compulsorily Convertible Debentures (CCDs) to raise funds, with an overall goal of mobilising up to Rs 2,000 crore, sources in the know told CNBC-TV18.

The indicative price for Chola Investment Finance’s QIP has been set at Rs 1,180 per share, reflecting a 3.3 percent discount to the Current Market Price (CMP), sources close to the development said. And, what we understand from sources, the demand for QIP remains strong and it is currently 6-7 times the size company has determined.

Also Read:Cholamandalam Investment and Finance may launch Rs 2,000 crore QIP today: Exclusive

Simultaneously, the floor price for both the QIP and CCDs has been established at Rs 1,200.51 per share, offering a nearly 2 percent discount compared to the CMP. The company’s board is slated to convene on October 4 to determine the final issue price for the QIP and CCDs.

A Qualified Institutional Placement (QIP) allows companies to raise funds by issuing securities to qualified institutional buyers. On the other hand, compulsory convertible debentures (CCDs) are financial instruments that, once converted, typically result in equity ownership for the holder.

Cholamandalam’s QIP is one part of the total fund-raising approval of Rs 4,000 crore that the board had approved on August 1 this year.

What Jefferies says on Chola Fin

Global brokerage Jefferies has a ‘Buy’ call on Chola Investment Finance with a target price of Rs 1,350 per share, a premium of more than 10 percent to its current market price.

The brokerage anticipates that this equity fundraise and CCD issuance will be 7-9 percent Book Value (BV) accretive while having a marginal dilutive impact on earnings per share (EPS).

Additionally, they anticipate a slight decrease in Return on Equity (RoE), projecting it to be in the range of 20-21 percent for the fiscal years 2024-2025.

The stock in Thursday’s session hit record high level of Rs 1,240 per share and it has nearly doubled this year. In the month of January this year, the stock had hit 52-week low of Rs 658 per share, and from that level it is up 90 percent so far.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Cholamandalam Investment and Finance may launch Rs 2,000 crore QIP today: Exclusive

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Cholamandalam Investment and Finance ltd., the Non-bank lender of the Murugappa Group is likely to launch a qualified institutional placement as early as today, people with knowledge of the matter told CNBC-TV18.

The company aims to raise Rs 2,000 crore through the QIP with an option to upsize, sources said.

Floor price of the QIP is likely to range between Rs 1,160 – Rs 1,180 per share, which is a discount of 4-6 percent from the current market price but nearly the same as its 15-day average price.

The source further said that the proposed QIP is getting strong demand, which has now surged to as high as 10 times the base size of Rs 2,000 crore.

Cholamandalam’s QIP is one part of the total fund raising approval of Rs 4,000 crore that the board had approved on August 1 this year.

Along with the QIP, the company is also exploring options to issue Compulsorily Convertible Debentures (CCDs) worth Rs 2,000 crore, according to the sources.

The company is yet to respond to CNBC-TV18‘s queries regarding the proposed QIP.

Cholamandalam Finance had last raised Rs 1,200 crore during the March quarter of financial year 2020. This was done through a mix of a QIP, through which it raised Rs 900 crore and a preferential issue of Rs 300 crore. Back then, the company had issued shares at a price of Rs 320 apiece in the QIP to investors like the Government of Singapore, among others.

For the June quarter, Cholamandalam Investment Finance saw its Net Interest Income rise by 47 percent year-on-year, while its net profit had risen by 28 percent compared to the same period last year.

Shares of Cholamandalam Investment and Finance have risen 70 percent so far in 2023 and are trading at a record high. The stock’s low this year was on January 6, when it fell to Rs 658. This is the best annual performance for the stock so far since 2014, during which the stock had risen 93 percent.

Shares of Cholamandalam Investment and Finance are trading 2.4 percent higher at Rs 1,226.75.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stock downgrades signal caution amidst market highs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The current market rally has been met with celebration as all-time highs are achieved. However, it’s important to note that the rapid surge in many stocks has outpaced their underlying fundamentals. As a result, several stocks have recently received downgrades, indicating a more cautious outlook.

Let’s begin with Cholamandalam Finance, an exceptional company that recently saw a “neutral” rating from Citi following its downgraded assessment. Although the stock has risen by 56 percent year-to-date and 48 percent since the March lows, Citi believes that the stock has reached its peak multiples, trading at 4.5 times FY25 price to book and close to 21 times EPS. This reasoning has led to the downgrade of Cholamandalam Finance.

Moving on to One 97 Communications, Macquarie was the first to upgrade the stock when it was priced at around Rs 400 levels. However, Macquarie has now become the first to downgrade it to a “neutral” rating at Rs 850.

The downgrade is attributed to lingering business risks and uncertainties, particularly due to Ant Financial’s intention to sell a 25 percent stake in the company.

SBI Cards, another stock in focus, has observed an 8 percent increase year-to-date, with a significant 16 percent rally in the past three months since the March lows.

Nomura has downgraded the stock to “reduce” and significantly revised its target price to Rs 700, down from the earlier target of Rs 1,030. Nomura expresses concerns over profitability and stretched valuations, leaving no room for errors.

Narayana Hrudayalaya, a stock that has performed well, recording a 30 percent increase year-to-date, has been downgraded to “reduce” by Kotak Instl Eq. With their earlier target price of Rs 1,000, they now advise clients to sell into the recent rally following the substantial one-year surge.

While there are cautionary downgrades, one stock that has experienced a consensus upgrade in recent weeks is InterGlobe Aviation. The stock has seen a remarkable 48 percent rally from its lows, attracting multiple positive updates.

Morgan Stanley, for instance, has upgraded the stock for the second time in the last 10 days, raising the target price to Rs 3,321. UBS also anticipates strong Q1 results, which will establish a robust foundation for FY25, leading them to increase the target price to Rs 3,300.

Additionally, Kotak Institutional Equities has included IndiGo in its model large-cap portfolio with a target price of Rs 3,000, while Citi raised its target price to Rs 2,900.

Despite the flurry of upgrades, it’s crucial to consider the potential supply overhang. The Gangwal Family, as promoters, recently sold a 5 percent stake in IndiGo, with lockup restrictions set to expire on July 12. This suggests the possibility of further stake sales.

However, it’s important to note that such sales can only occur after the quarterly results are announced. This potential overhang notwithstanding, IndiGo has received significant upgrades across the board, highlighting its positive prospects.

As we navigate the current market landscape with its highs and cautious sentiments, it is essential to remain informed about both the downgrades and upgrades affecting various stocks.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Shriram Transport outperforms Cholamandalam Finance, M&M Finance on asset quality

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Commercial vehicle financiers have been among the businesses hit hard by the COVID pandemic, with many borrowers falling behind on loan repayment. That is because commercial vehicles largely caters to rural and semi-urban areas which suffered more from the second wave and partial lockdowns during the June quarter.

In the absence of any moratorium on interest payment, stressed assets for the financiers have risen.

Typically, CV financing is the bastion of the unorganised segment with the organised segment forming only 25-30 percent of the total pie.

Demand for used CVs, however, has been resilient and this is expected to further improve because of increase in prices of CVs.

While stressed assets have weighed on the performance of listed (organised segment) CV financiers, the lowest rise in stressed assets has been for Shriram Transport when compared to Cholamandalam or M&M Fin.

Gross non performing asset ratio rose the least for Shriram Transport at 112bps quarter-on-quarter, when compared to 283bps for Cholamandalam and 650bps for M&M Financial.

Also, Shriram transport has been able to strengthen its balance sheet by improving its provision coverage ratio, while it has declined for others; especially Cholamandalam Finance which now has the lowest provision coverage ratio at a mere ~26 percent. Provisioning coverage ratio or PCR is the percentage of funds that a lender sets aside for losses due to bad debts.

Shriram Transport’s PCR strengthened by 211 bps while it declined by 1818 bps for Chola and by 420 bps for M&M Finance.

Shriram Transport’s disbursal declined the least compared to peers, underscoring strong demand is strong for used CVs. Market experts are expecting CV OEMs (manufacturers) to increase CV prices by 10-12 percent in August-September, which could again lead to demand for used CVs.

Shriram transport’s AUM growth in Q1FY22, both YOY & QOQ was largely in line with their Q4FY21 growth rate. M&M Fin has seen the highest decline in AUM, both YOY and QOQ.

Net interest margin declined by 42 bps for Shriram Transport and by 140 bps for M&M Finance. But it improved by 40 bps for Cholamandalam.

M&M Fin reported net loss in Q1FY22 vs poll of profit.

Shriram Transport remains one of the best capitalized CV financier

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Buy Tata Consumer on dips, like Bajaj Finance, Cholamandalam, HDFC, says Deven Choksey

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Deven Choksey of KRChoksey on Wednesday discussed the fundamentals of the market as well as various stocks.

“Tata consumer remains a good choice. It is getting added into Nifty, so there is enough amount of enthusiasm also further getting added into. This space is particularly liked by many investors now. Any correction in the price would mean the meaningful entry of some of the good long-term investors into this company,” Choksey told CNBC-TV18.

The non-banking financial companies (NBFCs) are rallying, he said.

“I don’t see any new reason for the stock prices to go up except for the fact that demand for credit is continuously growing,” he said.

Speaking about financial stocks, Choksey said, “We continue to stay with Bajaj Finance. That remains a long stay in our portfolio. We have been liking Cholamandalam Investment and Finance Company, so we continue to have preference over there as well. In the housing finance companies (HFCs), HDFC remains a good pick for us.”

On public sector undertakings (PSUs), he said, “Perception always remains a weak point in these companies as far as the stock market performance is concerned. In our portfolio, the PSUs have a very small presence and at this point of time we are not adding anything.”

Choksey also said that better times for commercial vehicles (CVs) has started.

“We are in for about three-four years of a good cycle for the CV segment. To me, Tata Motors and Ashok Leyland look interesting. Both of them have a relatively stable business model. These companies are ready for relatively better times, both these companies remain in our portfolio and continue to attract our attention,” he pointed out.

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Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Beginning of multi-year investment cycle, says Kotak Equities’ Sanjeev Prasad

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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This is the beginning of a multi-year investment cycle and we will see positive results of the government’s measures taken over the last few years, said Sanjeev Prasad, Managing Director, Co-Head of Kotak Institutional Equities on Tuesday.

Speaking about the Union Budget 2021, Prasad said,

“The budget also was fairly sensible, fairly credible set of numbers both on the revenue side and also on the expenditure side and the more important thing is the continuous focus on the supply side reforms.”

The government has been doing the right things for the last two years on the reforms side, Prasad said,

“Of course FY22 numbers will be pretty strong from an earnings perspective, but the market is looking beyond that and focusing on the fact that the government has been doing the right things in the last one and a half, two years in terms of reforms on the investment side which will kick start investment cycle so the hopes are high.”

On banks, he said, “It is a combination of fairly strong results which companies have reported, if you look at the banks there were a lot of concerns about the potential increase in NPAs and credit cost but looking at numbers which most of the banks reported the third quarter looks like things are pretty much under control.”

On NBFCs, Prasad said, “We have been positive on most of the NBFCs the smaller ones. In the mid-cap portfolio, we have a bunch of NBFCs over there starting with Cholamandalam Finance, Mahindra & Mahindra Financial Services and Shriram Transport Finance actually their valuations are reasonable even after the run-up which we have seen barring Cholamandalam Finance is well above its pre-COVID price to book valuations, others are still on the reverse side.”

Given the CV segment is doing better, we like NBFCs in the CVs financials space, Prasad said.

“The good thing is at least commercial vehicle cycle seems to be doing fine if you look at the collection efficiency data reported by CRISIL. So at least the CV cycle is doing fine so that is why we like Cholamandalam Finance and Shriram Transport Finance among the CV financials along with some of the other NBFCs.”

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

CG Power a long term bet; helps reduce reliance on auto: Tube Investments

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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S Vellayan, MD of Tube Investments spoke to CNBC-TV18 on the company’s acquisition of CG Power and fund raising plans.

“We wanted to hit revenue growth compounding at 17 percent, the second is we wanted our profitability to go double digit within 3 years,” Vellayan said.

“Also we wanted to diversify away from auto. We have a huge dependence on the auto sector and I don’t like that dependence because of its extreme cyclicality. So CG was perfect from both perspectives,” he said.

He said CG Power was a very strong franchise.

“The performance degraded for all the wrong reasons. We believe that given the environment, the turnaround will take a little bit of time. But we are fairly bullish about getting to good performance numbers,” he said.

“We are more bothered about where we can get the company in 3-4 years versus worrying about whether we can kind of turn it around kind of within a 3-6 months period,” he said.

Vellayan refrained from making any guidance for the auto business.

“We don’t spend a lot of time kind of forecasting what the future can be, nobody knows when the auto market is going rebound or not. We have done a lot of work to push down breakeven in that business and improve our profitability. So if the auto market does pick up that is great news for us and we will have a great year next year,” he said.

Vellayan sounded cautious on the outlook for the NBFC arm, Cholamandalam Investment and Finance Company.

“We still have to see how the whole moratorium effect plays out because we have only seen two months of it, post moratorium. So I would still say that we have to continue kind of that slightly cautious outlook till we get into February-March. Traditionally, in financial services the fourth quarter tends to be the strongest quarter, so if that does play out in collections then that puts us in a very strong position for next year,” he said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow