MOSL: CHOLAMANDALAM INV. & FINANCE (Buy)-Muted disbursements; PAT beat despite elevated credit costs
CHOLAMANDALAM INV. & FINANCE: Muted disbursements; PAT beat despite elevated credit costs
(CIFC IN, Mkt Cap USD5.8b, CMP INR526, TP INR650, 23% Upside, Buy)
- Cholamandalam Inv & Fin (CIFC) reported 1QFY22 PAT of INR3.3b (11% beat), up 34% QoQ / down 24% YoY. This was on account of strong control over opex (12% below our estimates), despite elevated credit costs (up 10% QoQ to INR5.5b; annualized: 3.2%). NIM on AUM (calculated) stood at 7.4%, up 20bp QoQ.
- The PAT beat, however, belies the poor on-the-ground demand in 1QFY22 and gives credence to CIFC’s conservative underwriting. Disbursements were muted (down 55% QoQ / flat YoY) across both Vehicle Finance (VF) and LAP. We believe the blip in disbursements in 1QFY22 is only transitory and could be a function of the widespread lockdowns and CIFC’s core customer segment’s inability to make a purchase decision. Given the strong demand improvement since the relaxation of the lockdowns and improvement in business activity, we expect a strong pickup in disbursements from 2QFY22.
- Apart from mobility restrictions, part of the asset quality deterioration in 1QFY22 could be the result of its ‘earn and pay’ CV customer’s inability to earn in Apr/May’21 and to make repayments – leading to forward flows into Stage2/3. Collection efficiencies improved MoM in Jul’21; we should see a gradual improvement in asset quality over the remainder of FY22.
Cholamandalam Investment and Finance Company Limited is a diversified non-banking finance company. The Company provides vehicle finance, home loans and corporate mortgage loans, small and medium enterprises (SME) loans, investment advisory services, stock broking and a range of other financial services. The Company focuses on vehicle finance, corporate finance, home equity loans and distribution of financial products. The Company operates from over 530 branches across India. The Company also offers Rural and Agri Loans, which include loans for purchase of tractors and farming equipment; wealth management, which includes mutual funds, fixed deposits and bonds, life and general insurance, and home loan, and securities, which include stock and derivatives, Internet broking, demat services, exchange traded funds and bonds. Its subsidiaries include Cholamandalam Securities Limited, Cholamandalam Distribution Services Limited and White Data Systems India Private Limited.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.