Ending FY24 On A High, Chola Finance CFO Expects 20-25% Growth In FY25

In the quarter ended March 2024, Cholamandalam Investment and Finance reported a 24% year-on-year increase in net profit, reaching ₹1,058 crore compared to ₹852 crore a year ago. Total loan disbursements also saw an 18% year-on-year increase during the quarter, reaching a record ₹24,784 crore in March 2024 compared to ₹21,020 crore a year ago. As the numbers show, the non-banking finance company had another strong quarter ending the financial year on a high.

We caught up with the company’s president and CFO Arul Selvan to gain more insights into the quarter;y results and the outlook for the new financial year.

Q4 In Rearview

“It was a good quarter for us. Normally all Q4s are always good. I think the stock market also recognised it. You can see the price movement there. So overall we have done reasonably well this quarter,” said Selvan describing the results. Post the results, the company’s shares had gone up around 10%.

He further said that the quarter was marked by good growth in disbursement, profitability, lower credit cost, and lower NPA numbers. “All this augurs well for this quarter’s performance ” he added.

The Outlook For FY25

Talking about the company’s expectations for the year ahead, Selvan said that while they do not give out any large guidance numbers, they are expecting around 20-25% growth in AUM. “We’ll endeavour to do a 20-25% assests growth in the coming year, that’s our target while all the businesses will grow in a sort of a seamless manner.”

Selvan added that vehicle finance will continue to be a major contributor, but in percentage terms, the growth may be lower because other businesses have a lower base. Talking about the LAP (loan against property) and home loans businesses the CFO said that they are expanding into newer geographies, so their growth would be higher.

The LAP And Home Loan Business

The two business segments stood out for the company in the latest quarterly results. In the March quarter, loans against property disbursements went up 55% year-on-year to reach ₹4,273 crore while the home loans business grew 24% YoY to ₹1,747 crore. So we asked Selvan about what worked for the segment.

“The loan against property and home loans are going into newer geographies. With regards to any new product, we first test the product and see its acceptance levels in the southern market and then we scale them up in the other markets. So likewise, we have been doing it for the loan against property and home loans where the predominant part of the portfolio is still on the south side.

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But now over the last few quarters we have been progressively expanding them into other geographies like north, west and east. So, this drive will continue in the coming years so that we will sort of balance them. Today if you see vehicle finance it is more or less balanced across all geographies. So, these two portfolios will also come to that level over the next two to three years.”

The Vehicle Finance Business

Vehicle Finance is the company’s biggest segment amounting to over 50% of the company’s disbursements. In the March quarter, disbursement for the segment grew 6% YoY ₹12,962 crore. So we asked the CFO what was the company’s outlook for the segment for the year.

Selvan said that the performance for the segment would heavily depend on how the rural economy does as that is the company’s focus area. “There is also a dependence on monsoons. If monsoons are good, then the economy should grow around 20%, I would say, or another way to look at it is to say that we will grow faster than the industry where we will capture some amount of market share by going deep into the market.

So our growth, whether it is a commercial vehicle or a passenger vehicle or tractors or two-wheelers, etc., will be a little higher than the industry growth so that we are always improving market share,” he added.

He further said that the used vehicle segment is also doing good because the demand is still there. “There are a lot of demand because the used vehicles currently in the market are BS4 vehicles and the price difference between an old BSIV and a new BSVI vehicle is wider. So people still go for BS4 vehicles at least of lower vintage let’s say 5 to 7 years which is where we cater,” Selvan explained.

Is A Rate Cut Around The Corner?

There were a lot of murmurs about a possible rate cut during the year ending March 2025, however, slowly those murmurs have died down. So we asked the CFO if he is expecting RBI to cut interest rates anytime soon.

“That may happen only in the second half. I don’t see RBI cutting rates in the first half as things are currently. But it also depends on many factors like, what is the geopolitical situation, how is the monsoon, and what are the election results. Interest rate is quite sensitive to these factors,” Selvan said.

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