Company Result : Cholamandalam Investment and Finance Co Ltd by JM Financial Services
In-line asset quality trends, muted disbursement growth
Cholamandalam Investment and Finance (CIFC) delivered PAT at INR 12.7bn, up 20% YoY, 17% QoQ, and 6% ahead of JMFe. The company's RoE/RoA stood at 21.9%/2.6%, witnessing sequential improvement of 215bps/25bps QoQ. PPOP growth of 43% YoY and 10% QoQ (+4% vs JMFe) was largely driven by lower-than-expected operating expenses. Credit cost of the quarter stood at ~1.4% (down 17bps QoQ). However, disbursement growth for the quarter was only 7% YoY (~15% YoY last quarter) driving down AUM growth to 27% YoY (~30% YoY last quarter). For full year FY25, disbursement growth has come down ~14% YoY in FY25 vs ~58% CAGR during FY22-24 which will put downward pressure to AUM growth in FY27. We will watch out for management commentary during earnings call around growth outlook amidst moderating disbursements, NIM outlook amidst rate cuts and credit cost.
* Strong earnings aided by low opex: CIFC reported PPOP growth of +43% YoY, +10% QoQ, +4% JMFe and PAT at INR 12.7bn (+20% YoY, +17% QoQ, +6% JMFe) which was underpinned by strong operating leverage. Total operating expenses at INR 14.3bn grew 11% YoY and 1% QoQ, 5% lower than JMFe. Consequently, the cost-to-income ratio improved to 38% from 40% QoQ. Calculated NIMs expanded to 8.2% (~5bps up QoQ), as CoF improved 19bps QoQ to 7.9%, offsetting an 11bps QoQ decline in yields to 15.8%.
* Strong asset quality performance: Asset quality performance remained resilient with headline GS3/NS3 ratios improving sequentially to 2.81%/1.54% (-10bps/-9bps QoQ). While GS3 ratios for VF and LAP segments improved by 14bps/26bps, they increased marginally across HL, SME, SBPL, and CSEL portfolios. Calculated credit costs moderated by 17bps QoQ to ~139bps (-7bps vs JMFe), even as write-offs remained elevated at INR 5.0bn (1.07% of AUM).
* Growth moderation amid muted disbursements: Disbursement growth moderated during the quarter, rising 7% YoY and 2% QoQ to INR 264.2bn, slightly below estimates (-3% vs JMFe). VF disbursements were muted at 11% YoY growth, remaining flat sequentially. On the other hand, LAP disbursements were robust (+30% YoY, +32% QoQ), while home loans grew steadily (+14% YoY, +9% QoQ). Disbursements in new businesses declined sharply (-23% YoY, -17% QoQ). Consequently, AUM grew by 27% YoY and 6% QoQ. We will review our estimates and target price, if needed, post the earnings call scheduled on 28 April 2025. Click here to register for the call.
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SEBI Registration Number is INM000010361
