EUR 120.00 For Business Accounts Only

MOSL: CHOLAMANDALAM INV & FIN (Buy)-Diversifying the asset franchise-Two-wheeler finance and home loans the next growth engine

Cholamandalam Inv & Fin: Diversifying the asset franchise; Two-wheeler finance and home loans the next growth engine

(CIFC IN, Mkt Cap USD2.6b, CMP INR1193, TP INR1525, 28% Upside, Buy)

 

• Cholamandalam Investment and Finance (CIFC) has successfully navigated the liquidity crisis, which is now a thing of the past. After drawing down bank lines and borrowing INR60b (approximately one quarter of disbursement) in September, CIFC refrained from incremental borrowings in October and resumed borrowings only in November. As per reported data, CIFC recently managed to raise money via CPs at ~7.5%, i.e. at pre-crisis levels. Due to its healthy liquidity position, CIFC has not needed to cut back on disbursements during the quarter.
• In vehicle finance, festive demand has been weaker-than-expected with dealer inventory piling up. However, management believes this is just a blip and expects robust volumes over the ensuing months of the financial year. However, given the high base of the previous year, we expect mid- single-digit disbursement growth in this segment.
• The company has identified two segments that could reap benefits over the medium-to-long term - two-wheeler finance and home loans. These products were launched around five years back. However, rather than scaling up the book, management took the opportunity to understand the nuances of the businesses. CIFC now believes it has the tools to scale these two segments meaningfully over the next three years.