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Informist, Monday, May 4, 2026

 

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--Cholamandalam Invest: Core asset quality resilient despite mgmt overlay Q4 
--CONTEXT: Comments of Cholamandalam mgmt at post-earnings analyst call
--Cholamandalam Invest: See 20-23% AUM growth FY27, 1.5% credit cost
--Cholamandalam Invest: Don't need further buffer for West Asia war right now 
--Cholamandalam Invest: No change in customer behaviour post West Asia war
--Cholamandalam Invest: Recoveries up Q3, Q4 on higher client capacity use
--Cholamandalam Invest: Early defaults in vehicle fin segment Apr lower YoY
--Cholamandalam Invest: NIM may be stable around 8% FY27
--Cholamandalam Invest: Higher ylds FY27 may be offset by higher cost of fund
--Cholamandalam Invest: See 3.5% pre-tax return on total assets FY27
--Cholamandalam Invest: Vehicle fin upcycle started Q4, continuing 
--Cholamandalam Invest: Aim to gain mkt share in vehicle fin lending segment
--Cholamandalam Invest: See 18% AUM growth in vehicle fin FY27
--Cholamandalam Invest: See 15-16% disbursement growth in vehicle fin FY27
--Cholamandalam Invest: See 15% disbursement growth in home loans FY27 
--Cholamandalam Invest: See over 25% AUM growth in home loans FY27
--Cholamandalam Invest: See loan against property AUM growth 25-30% FY27
--Cholamandalam Invest: Expect to open 360 new gold loan branches in FY27

 

By Aaryan Khanna and Janwee Prajapati

 

NEW DELHI/MUMBAI - Cholamandalam Investment and Finance Co. Ltd. aims for its assets under management to grow 20-23% in the financial year 2026-27 (Apr-Mar), continuing its industry-leading pace over the past few years, its management said in a post-earnings conference call with analysts Monday. It also sees annualised credit costs falling to 1.5% in the current financial year, down from 1.6% in FY26, netting out the impact of the management overlay of INR 2 billion made in Jan-Mar for the potential impact of the war in West Asia. 

 

As on Mar. 31, the lender's assets under management grew 21% on year INR 2.43 trillion. Competitors like Shriram Finance Ltd. guided for 18% growth in FY27 on a higher asset base of INR 3.02 trillion, after ending FY26 with a 15% on-year growth. Cholamandalam Investment sees broad-based growth across its diversified segments, with mortgage assets under management likely to grow at a faster clip, the management said. 

 

"...last year when we started, we were having three engines of Chola (Cholamandalam)...they were driving the growth. Now all eight engines are driving," the company's management said. "And we are diversified within vehicle finance, we are diversified within Chola, we are diversified in the geographic point of view."

 

Assets under management in the loans against property and home loan verticals, its second- and third-largest segments, should grow about 25-30% on year in FY27, the company said. Secured segments with a small base such small business and personal loans, as well as loans to small- and medium-enterprises, are likely to grow over 30%. For home loans, the management expects disbursements to grow around 15% on year after some stagnation in recent quarters. Some growth was impacted in the March quarter ahead of state elections in Tamil Nadu and Kerala, Cholamdandalam said.

 

The vehicle finance segment, which made up about half of the loan book at the end of March, should grow about 18% on year, the same as in FY26. Disbursements in the segment will likely grow about 15-16%, the management said. The non-banking financial company is targetting an increase in market share in its largest business as the sector has reversed a years-long downcycle in Jan-Mar, with an upcycle continuing into April, they said.

 

Seasonal defaults in the vehicle finance segment in April have been lower compared with 2025 and 2024, the executives said. The company had seen no change in customer behaviour on the ground after the impact of the West Asia war that began at the end of February. Underlying core asset quality was also resilient despite the decision to create an INR 2-billion buffer in Jan-Mar to deal with potential slippages. Based on its current assessment of the impact of the geopolitical situation, the management said it does not see any reason to create a further buffer right now.

 

Credit costs are likely to shrink slightly on year as collection efficiency improves from better technology, as well as the implementation of higher underwriting standards that led an improvement in the March quarter also, the management said. The lender's gross and net stage 3 asset ratio fell around 30 basis points on quarter to 3.05% and 1.61%, respectively, as on Mar. 31. However, the credit cost guidance of 1.5% for FY27 is higher than the 1.0-1.4% the lender had maintained before FY25 due to the recent growth in high-yielding, unsecured segments, the management said. 

 

"Another thing is that we need to understand the high yield business...all are having little higher net credit cost by design," the management said, referring to segments like consumer and small enterprise loans. "As of now, let us actually hold it (credit cost) at 1.5% for this financial year. We will try to do better."

 

The financier's net interest margin is likely to remain steady at around 8% in FY27 with the growth in high yielding segments likely to be offset by an increase in Cholamandalam's cost of funds, Chief Financial Officer Arul Selvan said. Meanwhile, pre-tax return on total assets is likely to rise to about 3.5% for the financial year begun April from 3.3% in FY26, he said. The lender posted a 3.8% return on assets in the March quarter, based on its profit before tax.

 

Expenses are unlikely to come down as the non-bank lender is looking to open new branches and ramp up lending in its relatively newer verticals, the management said. It plans to quadruple its gold loan branches to 480 from the current 120 by March, while also adding over 300 branches in other verticals, including 100 each for home loans and loans against property. Cholamandalam Investment guided for its operational expense ratio to be 3.0-3.1% in FY27, similar to the financial year ended March.

 

The analyst call came after the Chennai-based lender reported its earnings for the March quarter. Cholamandalam Investment posted a profit after tax of INR 16.41 billion in Jan-Mar, up nearly 30% on year and over 27% sequentially. Its total income rose 20% on year in the March quarter to INR 85.39 billion. At 1415 IST, the non-bank lender's shares were up 4.7% at INR 1,636.10 on the National Stock Exchange.  End

 

Edited by Vandana Hingorani

 

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