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Cholamandalam Investment and Finance Company Limited — Q4 FY25 earnings call

Call held 28 Apr 2025

Management summary

Cholamandalam Investment and Finance Company Limited reported a strong Q4 FY25, with full-year AUM growing 30% to INR 1,99,876 crores and PAT increasing 24% to INR 4,259 crores. Asset quality improved with GNPA at 3.97% and NNPA at 2.63%. The company is targeting 20-25% AUM growth, driven by 30% growth in non-vehicle segments and 20% in vehicle finance, while strategically reducing exposure to lower ROTA and higher delinquency segments like supply chain finance and Fintech-led CSEL. A new Gold Loan business is being launched with a target of INR 2,000 crores AUM.

Highlights

Total AUM grew 30% YoY to INR 1,99,876 crores from INR 1,53,718 crores.
Disbursements for the year grew 14% YoY to INR 1,00,869 crores.
PAT for the year grew 24% YoY to INR 4,259 crores.
PBT ROA for the year was 3.3% and ROE for the quarter was 22.2%.
Asset quality improved with GNPA at 3.97% and NNPA at 2.63%.

Concerns

SME disbursements dropped 4.2% YoY for the year due to a conscious decision to slow down on lower ROTA products like supply chain finance.
CSEL disbursements dropped 29.5% YoY in Q4 due to progressive exit from some partnership-led volumes and issues with FLDG rule changes impacting Fintech business.
Credit costs in newer businesses (CSEL, SME) are higher, though expected to improve by year-end.

Key financials

2 periods

Headline

Total AUM
₹2.00L Cr
YoY +30%
Disbursements (FY)
₹1.01L Cr
YoY +14%
Net Income (FY)
₹13,570 Cr
YoY +36%
PAT (FY)
₹4,259 Cr
YoY +24%
PBT ROA (FY)
3.3%
GNPA
4%
QoQ -0.75%
NNPA
2.6%
Capital Adequacy Ratio
19.8%
Credit Cost (FY)
1.4%

Q4

Disbursements
₹26,417 Cr
YoY +7%
ROE
22.2%

What they filed

Q1 FY27: revenue up 21.9%, net profit up 45.5% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	6,255	6,733	7,046	7,267	7,491 +20%	7,898 +17%	8,417 +19%	8,856 +22%
Expenses	1,897	2,038	2,010	2,286	2,460	2,554	2,597	2,652
Other income	68	105	92	87	123	111	148	102
Interest	3,059	3,275	3,365	3,468	3,517	3,646	3,753	4,007
Depreciation	63	59	64	67	71	74	72	75
Profit before tax	1,305	1,466	1,699	1,532	1,566 +20%	1,736 +18%	2,143 +26%	2,224 +45%
Tax rate	26%	26%	26%	26%	26%	26%	23%	26%
Net profit	968	1,088	1,260	1,138	1,160 +20%	1,290 +19%	1,645 +31%	1,656 +46%
EPS	11.52	12.94	14.98	13.53	13.78	15.28	19.31	19.43

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Disbursements (Q4)

₹26,417 Cr Total

Vehicle Finance ₹14,430 Cr 54.6%
LAP (Loan Against Property) ₹5,539 Cr 21.0%
Consumer and Small Enterprise Loans (CSEL) ₹2,328 Cr 8.8%
Home Loan ₹1,983 Cr 7.5%
SME ₹1,733 Cr 6.6%
Secured Business and Personal Loans (SBPL) ₹404 Cr 1.5%

Capital allocation

high confidence

Dividend ₹0.7/share (final)

The Board has recommended a final dividend of INR0.70 per share, subject to approval of the members of the company at the ensuing AGM. This is in addition to the interim dividend of INR1.30 per share for the financial year '24-'25, declared by the company on 31st Jan 2025.
Liquidity Cash ₹15,267 Cr Includes INR 5,866 crores held at HQLA for LCR purposes. Total liquidity position including undrawn consortium lines was INR 15,712 crores.

The company continues to hold a strong liquidity position with INR15,267 crores of cash balance including INR5,866 crores held at HQLA for LCR purposes and shown under investment. The total liquidity position was INR15,712 crores, including undrawn consortium lines.

Guidance & targets

Volume

Overall AUM Growth Volume · FY26 and medium term · High confidence 20-25%

at the AUM level, we still believe we have always guided in the 20% to 25% range, and we still believe that will hold.

— Vellayan Subbiah
Non-Vehicle Growth Volume · FY26 · High confidence 30%

For that, we need to achieve 30% growth in non-vehicle and 20% growth in vehicle. 30% growth in non-vehicle is easily possible.

— Ravindra Kundu
Vehicle Finance Growth Volume · FY26 · High confidence 20%

Now we will try vehicle finance to deliver 20%.

— Ravindra Kundu
Home Loan Disbursement Growth Volume · FY26 · High confidence 15-20%

So, for home loans, we are seeing around 15% to 20% growth. That is on disbursement side and book will be growing at the rate of 30% plus for next 2 years.

— Prashant Kumar
Home Loan Asset Growth Volume · Next 2 years · High confidence 30%+

— Prashant Kumar
LAP Disbursement Growth Volume · Coming year (FY26) · High confidence 25-30%

Maybe in the coming year, we are targeting between 25% to 30% disbursement growth, which will be enough to deliver 30% asset growth.

— Ravindra Kundu

Credit Quality

Overall Credit Cost Credit Quality · Next year (FY26) · High confidence 1.3%

Previously 1.4% → 1.3%

So, we are expecting 1.4% to go down to 1.3% in the next year as far as the credit cost is concerned.

— Ravindra Kundu
Vehicle Finance Credit Cost Reduction Credit Quality · This year (FY26) · High confidence 20 bps

So, Vehicle Finance will reduce the credit cost in this year. So, if they reduce it by 20 basis points, the company will get benefited by 10 basis points because they are 55% of the overall book.

— Ravindra Kundu
SME/CSEL Credit Cost Reduction Credit Quality · By year-end (FY26) · High confidence 50 bps

If they come down by 50 basis points and they are 10% of the book, so they can reduce it for the company by 0.5%.

— Ravindra Kundu
Home Loan Delinquency Rate Credit Quality · FY26 · High confidence 0.4-0.5%

From 0.40% today

So, on a full year basis, you still expect to maintain that 0.4% for FY '26? Ravindra Kundu: 0.4% to 0.5%.

— Ravindra Kundu

Profitability

NIM Improvement Profitability · Full year (FY26) · High confidence 10 bps

So NIM should improve around 10 bps is what I would right now consider.

— Arul Selvan
PBT ROA Profitability · Coming year (FY26) · Medium confidence 3.4% then 3.5%

We will be working towards a 3.4% conservatively to look at in the coming year and then move on to 3.5% because we still have gold loan-related opex coming up in the current year.

— Arul Selvan

Efficiency

Opex to Asset Ratio Efficiency · Next year (FY26) · High confidence 3-3.1%

Target is to keep it in the 3, 3.1 to asset ratio. We will endeavor to follow that trend.

— Arul Selvan

New Business

Gold Loan AUM New Business · Fiscal year or 1.5 years · Medium confidence INR 2,000 crores

in this fiscal year or maybe 1.5 years' time, we will try to achieve INR2,000 crores and see the performance of gold loan

— Ravindra Kundu

What to watch in Q1 FY26

Overall AUM Growth

Next quarter/FY26

Current 30% YoY (FY25)

Target 20-25% (FY26)

Why it matters

Key indicator of business expansion and market share gain.

at the AUM level, we still believe we have always guided in the 20% to 25% range, and we still believe that will hold.

Risks & concerns

Higher Credit Costs in Newer Businesses (SME, CSEL)
medium

Credit costs in SME and CSEL are currently higher due to strategic shifts and issues with Fintech partnerships, but expected to reduce by year-end.

Management acknowledged
Dependence on Monsoon for Vehicle Finance Performance
medium

Vehicle finance NCL improvement is partly dependent on a good monsoon, which was favorable last year.

Management acknowledged
Home Loan Delinquency Rate
low

Analyst noted a Q4 delinquency rate of 0.6% for Home Loans, but management clarified the full-year rate is 0.40% and expects to maintain 0.4-0.5% for FY26.

Analyst downplayed
Impact of Tamil Nadu Bill on Lending
low

Analyst raised concerns about a new Tamil Nadu bill, but management clarified it does not apply to NBFCs and thus will not impact their operations.

Analyst downplayed

Q&A highlights

8 direct

Overall Growth Expectation and Home Loan Growth Direct

at the AUM level, we still believe we have always guided in the 20% to 25% range, and we still believe that will hold. In Home Loans in specific, I will let Prashant take that question. So, for home loans, we are seeing around 15% to 20% growth. That is on disbursement side and book will be growing at the rate of 30% plus for next 2 years.

Analyst sought clarification on overall and specific segment growth targets, which management confirmed with specific numbers for AUM and Home Loans.

Asked by Dhaval from DSP Mutual Funds

Credit Cost Trajectory and Drivers Direct

So, we are expecting 1.4% to go down to 1.3% in the next year as far as the credit cost is concerned. As the overall growth is concerned, as boss said that we are targeting 20% to 25% always we have mentioned that. For that, we need to achieve 30% growth in non-vehicle and 20% growth in vehicle.

Analyst questioned the drivers for credit cost reduction, and management provided a detailed segment-wise explanation for the expected improvement.

Asked by Abhijit Tibrewal from Motilal Oswal

Gold Loan Business Strategy and Targets Direct

At the beginning, we are launching 120 branches in South and East. And we are having a plan to pilot it and see that how it is working. And in this fiscal year or maybe 1.5 years' time, we will try to achieve INR2,000 crores and see the performance of gold loan.

Analyst sought details on the new gold loan business, and management outlined the rollout plan, target AUM, and geographical focus.

Asked by Abhijit Tibrewal from Motilal Oswal

Opex Trend with New Business Expansion Direct

Target is to keep it in the 3, 3.1 to asset ratio. We will endeavor to follow that trend.

Analyst inquired about the impact of new business launches (like Gold Loan) on operating expenses, and management provided a clear target for the opex-to-asset ratio.

Asked by Avinash Singh from Emkay Global

Fintech Book Share and CSEL NCL Direct

Fintech is 1.5% of the overall Chola book. ... We are saying that the CSEL NCL, which is actually where we are as of now, will be remaining at the same level in terms of absolute value. So, for example, I will tell you the CSEL number. It is actually per quarter, it is INR210 crores to INR230 crores to INR240 crores, which is delivering. This number remains as it is in quarter 1 and quarter 2. And after that, when the book will get run down, then INR230 crores, INR240 crores of per quarter NCL will go down.

Analyst probed into the specific impact of the Fintech book on CSEL's asset quality, and management clarified its size and the expected NCL trajectory.

Asked by Nidhesh Jain from Investec

Rationale for Standalone Gold Loan Branches Direct

In the gold loan, you need to have a separate vault, separate RFID. And we are also basically introducing some more control where who is entering inside the branch, who is taking out gold. All those things are getting tracked from head office. That is possible only when you have stand-alone gold loan branch.

Analyst questioned the operational strategy for the new gold loan business, and management explained the specific infrastructure and control requirements necessitating standalone branches.

Asked by Viral Shah from IIFL Capital

Impact of Tamil Nadu Bill on Lending Direct

It is very clearly mentioned, the legislation will not apply to banks, nonbanking finance companies. ... And it is also not applicable to us, first of all. Registered with RBI, cooperative banks, and cooperative societies.

Analyst raised a potential regulatory risk, and management provided a clear clarification that the new legislation does not apply to NBFCs like Cholamandalam.

Asked by Renish from ICICI Securities

Home Loan Delinquency Rate Direct

So as far as actual delinquencies are concerned, we are maintaining a 0.40% for the year. If you compare with the last quarter, this quarter, it was slightly up and last year, there was a release in terms of Stage 2 and Stage 3. This year, we are maintaining at 0.40%. And going forward, we foresee that it will be at similar levels. ... So, on a full year basis, you still expect to maintain that 0.4% for FY '26? Ravindra Kundu: 0.4% to 0.5%.

Analyst questioned a reported rise in Home Loan delinquency, and management clarified the full-year rate and provided forward guidance, alleviating concerns.

Asked by Pranuj from JP Morgan

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Detailed narrative

Strong Financial Performance and AUM Growth

Cholamandalam Investment and Finance Company Limited reported robust financial results for Q4 FY25 and the full fiscal year. Total AUM grew by 30% year-on-year to INR 1,99,876 crores from INR 1,53,718 crores. Disbursements for the year reached INR 1,00,869 crores, marking a 14% increase, while Q4 disbursements were INR 26,417 crores, up 7%. Net income for the year surged 36% to INR 13,570 crores, and PAT increased 24% to INR 4,259 crores.

Improving Asset Quality and Capital Adequacy

The company demonstrated an improvement in asset quality, with Gross Stage 3 assets (90+ dues) decreasing to 2.81% as of March '25 from 2.91% in December '24. GNPA, as per RBI norms, also reduced to 3.97% from 4% in December '24, and NNPA stood at 2.63%. The Capital Adequacy Ratio remained strong at 19.75%, well above the regulatory requirement of 15%, with Tier 1 capital at 14.41% and Tier II capital at 5.34%.

Segmental Performance and Strategic Shifts

Vehicle Finance disbursements grew 12% for the year to INR 53,922 crores, with Q4 growth at 11%. LAP and Home Loan segments showed strong growth, with LAP disbursements up 32% for the year to INR 17,913 crores and Home Loan up 16% to INR 7,404 crores. Conversely, SME and CSEL disbursements saw declines due to strategic decisions to exit lower ROTA products like supply chain finance and progressively move away from certain partnership-led Fintech volumes, which had higher credit costs.

Guidance for FY26 and Profitability Outlook

Management provided guidance for 20-25% overall AUM growth for FY26, driven by 30% growth in non-vehicle segments and 20% in vehicle finance. They anticipate a reduction in overall credit cost from 1.4% to 1.3% and a NIM improvement of 10 basis points for the full year. The Opex to Asset ratio is targeted to be maintained at 3-3.1%, reflecting a focus on efficiency amidst growth.

New Gold Loan Business Initiative

The company is launching a new Gold Loan business, starting with 120 standalone branches in South and East India. This initiative will be cautious and technology-driven, with a target to achieve INR 2,000 crores in Gold Loan AUM within the fiscal year or 1.5 years. This move aims to diversify the product portfolio and tap into a new growth avenue, leveraging existing market opportunities.

Shareholder Returns and Liquidity Position

The Board recommended a final dividend of INR 0.70 per share, which, combined with the interim dividend of INR 1.30 per share declared earlier, brings the total dividend for FY25 to INR 2.00 per share. The company maintains a strong liquidity position with INR 15,267 crores in cash balance, including INR 5,866 crores held at HQLA for LCR purposes, and a total liquidity position of INR 15,712 crores including undrawn consortium lines.

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