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Informist, Thursday, Nov. 6, 2025

 

By Aaryan Khanna

 

NEW DELHI – Widening margins are likely to help Cholamandalam Investment and Finance Co. report a healthy rise in its net profit for the September quarter. Growth in the company's assets under management, while still the highest in the industry, may continue to slow due to sluggish growth in its core vehicle finance segment.

 

Cholamandalam's net profit is likely to have risen 6.2% on quarter and 25% on year to INR 12.07 billion in the reporting quarter, according to the average of nine analysts' estimates. Nirmal Bang Equities Pvt. Ltd. had the highest estimate at INR 13.55 billion, while YES Securities (India) Ltd. had the lowest at INR 11.30 billion. The Chennai-headquartered firm will detail its September quarter results later on Thursday.

 

The lender's net interest income – the difference between interest earned and expended – likely rose 13.3% on quarter and by a third from a year ago to INR 36.08 billion in the September quarter, according to the average of the nine brokerages. The net interest margin is expected to improve sequentially as costs of funds ease, led by lower rates on bank borrowing. The lender reported a net interest margin of 7.8% in Apr-Jun.

 

"Expect NIM to improve with the benefit of rate cuts; 50% of bank borrowings are EBLR-linked which should reprice in Q2 (Jul-Sept)," Prabhudas Lilladher said in its pre-earnings note, referring to the external benchmark-linked rate for bank loans. The Reserve Bank of India's Monetary Policy Committee had cut its repo rate by 100 basis points between February and June, which is expected to be reflected in lower borrowing costs largely in the September quarter.  

 

Disbursements are seen similar to both a year and a quarter ago at INR 243 billion in Jul-Sept, analysts said. The vehicle finance segment – which makes up about half of Cholamandalam's loan portfolio – is expected to see greenshoots in demand on a low base. The effect of this will be limited in the reporting quarter and show up more in the December quarter, analysts said. Meanwhile, assets under management may rise about 18-22% on year to INR 1.93 trillion – INR 2.01 trillion. The management has guided for FY26 loan book growth at 20-25%, down from 27% in FY25.

 

"VFs' (vehicle financiers') AUM growth moderation is likely to continue, driven by lower disbursement growth over the past few quarters," JM Financial Institutional Securities said in its pre-earnings note. "For VF players, we expect disbursement/AUM growth to gradually pick up led by festivities while credit costs are expected to marginally inch up on account of higher stress in non-VF book for (Cholamandalam)."

 

Most brokerages see credit costs largely similar to the high 1.8% that the lender reported in the June quarter. Cholamandalam's credit costs have shot up since the March quarter, and the management guided for its loan losses as a percentage of its assets to be 1.4-1.5% in 2025-26 (Apr-Mar), against an earlier guidance of 1.3% and similar to 1.4% in FY25.

 

The lender's cost-to-income ratio is also expected to remain high at around 40% as operating expenses rise due to investments in its upcoming business segments. Cholamandalam has sought to move from a vehicle financier to a more diversified non-bank finance company over the past few years. Earlier this year, it had also entered the gold loan business, which required investments in separate branches and personnel.

The non-bank financial company is expected to get a boost from the reduction in goods and services tax rates in the second half of the financial year ending March. The government had reduced the goods and services tax rates on most regular-use items, including some categories of vehicles during its overhaul of the indirect tax regime effective Sept. 22. Commentary on loan growth, credit costs and expenses will be closely monitored after its September quarter earnings, analysts said.

 

At 1249 IST, the company's shares were down 1.8% at INR 1,713.70 on the National Stock Exchange, ahead its earnings. The company's shares have jumped nearly 19% since its June quarter earnings were announced, when its profit after tax had missed analysts' estimates. Twelve of the 20 brokerages tracked by Informist have a 'buy' rating on the stock, with an average target price of INR 1,654. Seven have a 'hold' or equivalent rating on the stock with an average target price of INR 1,513, while the sole 'sell' recommendation has a target price of INR 1,050. 

 

Following are the Jul-Sept earnings estimates for Cholamandalam Investment and Finance Co. from nine brokerages in descending order of the estimate of net profit in INR million:

 

Brokerage	Net interest income	Net profit
Nirmal Bang Equities Pvt Ltd	32,931	13,553
Nuvama Wealth Management Ltd	40,900	12,800
Anand Rathi Share and Stock Brokers Ltd	38,139	12,189
Prabhudas Lilladher Pvt Ltd	33,282	11,939
JM Financial Institutional Securities Pvt. Ltd.	33,639	11,897
Kotak Securities Ltd	33,282	11,869
Emkay Global Financial Services Ltd	40,450	11,727
Motilal Oswal Financial Services Ltd	33,313	11,324
YES Securities (India) Ltd	38,805	11,304
Average	36,082.33	12,066.89

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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