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Informist, Wednesday, Oct. 23, 2024

By Aaryan Khanna

NEW DELHI – Cholamandalam Investment and Finance Co. Ltd. is likely to be the pick of vehicle financiers in the Jul-Sept quarter, analysts said. Even as the vehicle financing sector is seen as a laggard, the non-bank financier is likely to post robust growth in Jul-Sept due to its diversified portfolio, analysts said.

Cholamandalam Investment's net profit is seen rising 30.2% on year to INR 9.93 billion in Jul-Sept, according to an average of estimates from 10 brokerages. Sequentially, the net profit is seen rising 5.4%.

The estimates for Cholamandalam Investment's net profit ranged from INR 9.25 billion to INR 10.32 billion. The lender is scheduled to announce its earnings for Jul-Sept on Friday. Eight of the 10 brokerages have a positive rating on the stock, with Axis Securities and Sharekhan saying it was a preferred pick in the sector.

"Diversified players (are) likely to perform better (in Jul-Sept)," Nirmal Bang said in its pre-earnings note. "We expect the slowdown in the vehicle finance portfolio for CIFC (Cholamandalam)... to be offset by diversified segments such as home loans, loans against property and micro, small and medium enterprises."

Cholamandalam Investment's net interest income is seen at INR 27.59 billion in Jul-Sept, up 36.9% from a year ago, according to the average estimates. The non-bank lender's advances are expected to rise over 30% on year with strong disbursements, particularly in the loans-against-property segment, analysts said.

Brokerages will keenly await the company management's guidance on credit costs and margins. With the domestic interest rate cycle at its peak, and no interest rate cuts yet, analysts expect a slight squeeze in the financier's net interest margins in the Jul-Sept quarter. 

Credit costs are expected to rise marginally from the previous quarter, consistent throughout the sector. The lender's asset quality is likely to be stable from the previous quarter, analysts said. Cholamandalam Investment's gross non-performing asset ratio was at 3.62% and its net non-performing asset ratio was at 2.37% at the end of June.

"We do not expect worrisome trends on asset quality and credit costs are likely to remain stable," Axis Securities said in its pre-earnings note. "We expect CIFC (Cholamandalam Investment) to deliver healthy earnings growth during the quarter."

KR Choksey said it would closely monitor the trends in the consumer financing segment.

Following are the Jul-Sept earnings estimates for Cholamandalam Investment and Finance based on reports compiled by Informist from 10 brokerage houses:

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Edited by Saji George Titus

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