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Informist, Thursday, Feb. 13, 2025

By Kshipra Petkar and Aaryan Khanna

MUMBAI – Cholamandalam Investment and Finance Co. doesn't see a big change in its borrowing mix going ahead but may return to public debt issuances in 2025-26 (Apr-Mar), according to Chief Financial Officer Arul Selvan. Public debentures formed 3% of the company's overall borrowing as of Dec. 31.

"We were not wanting to lock in at higher pricing with a longer turnaround time in public debt, so we have kept away from it. But we will again re-initiate the public debt once the repo rate reductions come into play," Selvan told Informist.

Last week, the Reserve Bank of India's Monetary Policy Committee cut the repo rate for the first time in almost five years, reducing it by 25 basis points to 6.25%. The committee is widely expected to cut the policy rate again in April, with economists predicting the overall quantum of rate cuts in the current easing cycle to be 75 bps.

According to Selvan, the lender will continue to primarily rely on bank borrowing when it comes to funding. With Cholamandalam Investment generating a lot of priority sector loans, banks lend to the company at a discount as it counts towards their priority lending targets as well. The non-bank's total borrowing stood at INR 1.67 trillion at the end of December. Term loans from banks account for 46% of borrowings, followed by securitisation at 17%.

Selvan also expects the strain on the company's business from macroeconomic factors easing in the next few quarters. Slower government spending and an extended monsoon hit consumption this year, hurting Cholamandalam Investment's business. However, with rural consumption likely to pick up after a strong monsoon and with no hurdles in front of government spending in the coming months, Selvan said the outlook is bright for vehicle finance, which is the largest business segment for Cholamandalam Investment.

"So, at least right now, the future looks better than what it was. So that should get better results going forward," Selvan said. Cholamandalam Investment's disbursals in Oct-Dec amounted to INR 258.06 billion, up 15% on year, as it posted a 24% increase in its net profit to INR 10.87 billion.

A slight moderation in cost of funds is also expected in Jan-Mar, Selvan said, with further cooling seen in future quarters once the full benefit of the RBI's rate cuts are felt. In Oct-Dec, Cholamandalam Investment's cost of funds was 7.1%, unchanged from Jul-Sept. Once cost of funds eases, the lender will once again focus on Small and Medium Enterprises, which is currently low on its priority list, with the final quarter of 2024 seeing a fall in disbursements to SMEs to INR 19.11 billion from INR 19.81 billion a year ago, with the cost of funds for the segment higher at 7.8% in Oct-Dec.  End

Edited by Deepshikha Bhardwaj

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