Cholamandalam Investment and Finance Company Limited — Q4 FY26 earnings call

Call held 4 May 2026

Management summary

Cholamandalam Investment and Finance Company Limited delivered a strong Q4 FY26, marked by 25% YoY disbursement growth and 21% YoY AUM growth. Profitability metrics like ROA (4.1% before overlay) and ROE (23%) showed significant improvement, supported by 40 bps NIM expansion and 20 bps reduction in credit costs. While home loan disbursements saw temporary moderation, the company remains confident in its diversified growth strategy and expects continued improvement in asset quality and profitability, targeting a pre-tax ROA of 3.5% for FY27.

Highlights

  • Aggregate disbursements grew 25% YoY to INR 32,913 crores in Q4 FY26, reflecting strong broad-based growth.

  • AUM increased 21% YoY to INR 2,42,630 crores, demonstrating sustained portfolio momentum.

  • NIMs improved by 40 bps YoY in Q4 FY26 due to a gradual reduction in the cost of funds.

  • Credit costs (before management overlay) declined by 20 bps YoY in Q4, indicating stable portfolio performance.

  • Return on assets (before overlay) was 4.1% in Q4 FY26 (vs 3.6% in Q4 FY25) and return on equity was 23%, underscoring improved profitability.

Concerns

  • Home loan disbursements saw mild moderation in Q4 due to procedural timing factors, including election-related slowdowns and land-record mismatches.

  • A management overlay of INR 200 crores was provided as a precautionary buffer against potential second-order stresses from heightened global uncertainties.

  • Operating expenses were higher in Q4 primarily due to a one-time payment for CGTMSE insurance, though expected to normalize in the current financial year.

Key financials

  1. Aggregate Disbursements ₹32,913 Cr +25%YoY
  2. AUM ₹2.43L Cr +21%YoY
  3. NIMs Improvement 40 bps
  4. Credit Costs Decline (pre-overlay) 20 bps
  5. ROA (pre-overlay) 4.1%
  6. ROE 23%
  7. Capital Adequacy Ratio 19.2%
  8. Tier 1 Capital 14.7%
  9. Liquid Assets ₹21,186 Cr

What they filed

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

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue6,255 6,733 7,046 7,267 7,491 +20%7,898 +17%8,417 +19%8,856 +22%
Net profit968 1,088 1,260 1,138 1,160 +20%1,290 +19%1,645 +31%1,656 +46%
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

  • Vehicle Finance
    26% Q4 Disbursement Growth₹1.20L Cr Auto AUM18% Auto AUM Growth
  • MSME
    11% Q4 Disbursement Growth29% AUM Growth
  • LAP
    ₹52,295 Cr AUM26% AUM Growth
  • SME
    ₹9,338 Cr AUM41% AUM Growth
  • SBPL
    ₹3,537 Cr AUM46% AUM Growth
  • Consumer Segment
    45% Q4 Disbursement Growth₹1,130 Cr Gold Loan Disbursed (Q4)20% AUM Growth
  • Home Loans
    23% AUM Growth
  • CSEL
    4% AUM Growth5.2% Loan Losses2.3% Q4 ROA39% Disbursement Growth

Capital allocation

high confidence
  • Debt Debt disclosed
    • Conversion CCD amounting to INR1,370 crores were converted in FY '26 out of total INR2,000 crores issued. ₹1,370 Cr
    Out of the total issuance of INR2,000 crores CCDs, CCD amounting to INR1,370 crores were converted in FY '26. The balance INR630 crores of CCD is expected to be converted in the first half of FY '27.
  • Dividend ₹0.7/share (final) Payout ratio 35%
    The Board of Directors of the company has recommended a final dividend of INR0.70 per share, which is 35% on the equity shares of the company, subject to the approval of the members of the company at the ensuing Annual General Meeting. This is in addition to the interim dividend of INR1.30 per share(65%) for the financial year FY25-'26 declared by the company on 31st January 2026.
  • Liquidity Undrawn ₹21,186 Cr Total liquid assets including undrawn sanction lines amount to INR 21,186 crores, ensuring a strong liquidity position.
    We hold a strong liquidity position with a total liquid asset of INR21,186 crores, which includes undrawn sanction lines.

Guidance & targets

Volume

  • Overall AUM Growth Volume · FY27 · High confidence 20% to 23%
    For this financial year, we continue to maintain our committed growth trajectory of 20% to 23%.

    — Ravindra Kundu

  • CSEL Combined Portfolio Asset Growth Volume · by end of current financial year · High confidence approximately 20%
    By the end of this financial year, we expect the combined CSEL portfolio... to reach approximately 20% asset growth by Q4.

    — Ravindra Kundu

  • Vehicle Finance Disbursement Growth Volume · this year · High confidence 15% to 20%
    In Vehicle Finance, we expect the current momentum seen in Q4 to continue. Based on this, we are guiding towards disbursement growth of around 15% to 20% and asset growth of approximately 18%.

    — Ravindra Kundu

  • Vehicle Finance Asset Growth Volume · this year · High confidence approximately 18%

    — Ravindra Kundu

  • Home Loan Disbursement Growth Volume · current year · High confidence 12% to 15%
    For the current year, we expect disbursement growth in the range of 12% to 15%, while maintaining steady AUM growth of around 25% or higher.

    — Prashant

  • Home Loan AUM Growth Volume · current year · High confidence around 25% or higher

    — Prashant

  • Mortgage Businesses (HL & LAP) AUM Growth Volume · current year · High confidence 25% or higher
    We remain confident of achieving asset growth of 25% or higher in the Home Loan and LAP businesses.

    — Ravindra Kundu

  • SBPL and SME Growth Volume · current year · High confidence exceeding 30%
    In addition, our other mortgage segments SBPL and SME-are expected to grow at a rate exceeding 30%.

    — Ravindra Kundu

  • Overall Company Growth Volume · current year · High confidence 20% to 23%
    Therefore, we are comfortable reiterating our guidance of maintaining overall company growth in the range of 20% to 23%.

    — Ravindra Kundu

Profitability

  • Net Credit Cost Profitability · FY27 · High confidence around 1.5%

    From 1.6% today

    We are also expecting our net credit cost to decline from 1.6% pre-overlay to around 1.5%.

    — Ravindra Kundu

  • Pre-tax ROA Profitability · FY27 · High confidence closer to 3.5%
    Consequently, our return on assets should improve, moving closer to a pre-tax ROA of 3.5%, as previously discussed.

    — Ravindra Kundu

  • NIMs Profitability · FY27 · High confidence around 8%
    We expect NIMs to largely remain stable at around 8%.

    — Arul Selvan

  • Operating Expense Ratio Profitability · FY27 · High confidence 3.0% to 3.1%
    Operating expenses are expected to remain broadly stable in the range of 3.0% to 3.1%.

    — Arul Selvan

  • CSEL Pre-tax ROA Profitability · Current financial year · High confidence cross 3%

    From 2.3% today

    As a result, with a Q4 ROA of 2.3%, we believe that pretax ROA should comfortably cross 3% during the current financial year.

    — Ravindra Kundu

  • CSEL Operating Expense Ratios Profitability · Current financial year · High confidence closer to 4.5%

    From around 6% today

    As a result, the one-time impact seen in Q4-around 6%-will not recur, and operating expense ratios are expected to normalize closer to 4.5%.

    — Ravindra Kundu

  • Credit Cost Guidance Profitability · this year · High confidence 1.5%
    For this year, our credit cost guidance is 1.5%.

    — Ravindra Kundu

  • Credit Cost Guidance Profitability · next year · High confidence 1.4%

    From 1.5% today

    If we achieve this level, then next year the expectation would naturally be to improve further, say to 1.4%.

    — Ravindra Kundu

Market Share

  • Unsecured Business CGTMSE Coverage Market Share · Medium confidence 80% to 82%

    From 70% today

    As of now, we have covered around 70 percentage of our assets. And we continue to improve that. Probably, we may go up to 80% to 82%.

    — Sucheth Bharathan

Capacity

  • Home Loan Branch Additions Capacity · next financial year · High confidence 100 new branches
    We are planning to open around 60 new branches in Q1 and another 40 branches in Q2, taking the total to approximately 100 Home Loan branches in the next financial year.

    — Prashant

  • Gold Loan Branch Additions Capacity · High confidence around 300 plus
    Unique branches would be the gold loan branches, which should be in the range of around 300 plus.

    — Arulselvan

What to watch in Q1 FY27

Net Credit Cost Trajectory

next financial year
Current ~1.5% (guidance for current FY)
Target ~1.4%

Why it matters

A key profitability driver, management expects continuous improvement in credit costs.

For this year, our credit cost guidance is 1.5%. If we achieve this level, then next year the expectation would naturally be to improve further, say to 1.4%.

Risks & concerns

  • Global uncertainties and potential for higher credit costs

    medium

    Management provided a INR 200 crore overlay as a precautionary buffer against potential second-order stresses from volatility in crude/fuel prices, LPG supply, and commodity flows.

    Management acknowledged

  • Procedural timing factors impacting home loan disbursements

    low

    Home loan disbursements saw mild moderation in Q4 due to election-related administrative slowdowns, land-record digitization mismatches, and localized lien-marking delays.

    Management acknowledged

  • Higher operating expenses due to CGTMSE insurance payment

    low

    Operating expenses were higher in Q4 due to a one-time payment for CGTMSE insurance, which is expected to be spread evenly across quarters in the current financial year, normalizing ratios to 4.5%.

    Management acknowledged

Q&A highlights

8 direct
FY27 AUM Growth and Credit Cost Trajectory Direct
For this financial year, we continue to maintain our committed growth trajectory of 20% to 23%. We are also expecting our net credit cost to decline from 1.6% pre-overlay to around 1.5%.

Management provided clear numerical targets for AUM growth and credit cost reduction for the upcoming fiscal year.

Asked by Kunal Shah

Need for additional overlay buffer Direct
Yes, this is more of a precautionary measure, considering the global uncertainty and the potential for higher credit costs. As of now, however, there is no need for any additional overlay.

Clarifies the rationale behind the INR 200 crore management overlay and indicates no immediate need for further provisions.

Asked by Kunal Shah

Impact of CV volume growth on ground sentiment and growth guidance Direct
Not only has the commercial vehicle segment shown strong performance, but the passenger vehicle segment has also reported good numbers in the month of April. We have had the opportunity to review our own performance as well, and our sales, credit, and collections have been very strong compared to April 2025. As of now, at the ground level, we have not observed any change in customer behavior.

Management confirmed strong on-ground demand and customer behavior, supporting their growth outlook despite global uncertainties.

Asked by Raghav Garg

Gold Loan segment ticket sizes and yields Direct
If you look at our portfolio, our average loan ticket size in Q4 has declined. When we started, the average ticket size was around INR 3 lakh, and it has now come down to approximately INR 2 lakh... So, ticket size is INR2 lakh now. It had started with INR300,000, it has come down. And yield has gone up now to 15.

Provides specific details on the Gold Loan strategy, highlighting a shift towards smaller ticket sizes and higher yields for better granularity.

Asked by Raghav Garg

CSEL segment turnaround, asset quality, and ROA outlook Direct
loan losses declined to 5.2% in Q4, and we expect this trend of improvement to continue going forward. As a result, with a Q4 ROA of 2.3%, we believe that pretax ROA should comfortably cross 3% during the current financial year.

Outlines the improving performance and profitability targets for the CSEL segment, indicating a positive turnaround.

Asked by Viral Shah

Capital raising plans given growth targets and CAR Direct
If our Tier 1 ratio were to approach 13%, we would certainly begin evaluating equity-raising options. However, in a scenario where we are delivering a pre-tax ROTA of around 3.5% and growing at a pace of less than 23% to 25%, we believe we should be largely self-sufficient in meeting our capital requirements through internal accruals.

Clarifies the company's capital management strategy, indicating self-sufficiency for current growth plans and the trigger for external capital raises.

Asked by Deep

Vehicle Finance disbursement and AUM growth for the year Direct
In Vehicle Finance, we expect the current momentum seen in Q4 to continue. Based on this, we are guiding towards disbursement growth of around 15% to 20% and asset growth of approximately 18%.

Provides specific growth targets for the largest segment, confirming expectations of sustained momentum.

Asked by Abhishek

Impact of fuel price increases on LCV operators and freight rates Direct
The bulk of our business is in small commercial vehicles, light commercial vehicles, passenger cars, and construction equipment, where fuel price fluctuations have a much lower impact... Pricing in this segment is daily. It is not fixed or predetermined, and operators adjust freight rates dynamically rather than having to work within a fixed pricing structure.

Explains the limited impact of fuel price volatility on the portfolio due to the segment mix and dynamic pricing mechanisms in LCVs.

Asked by Piran

2 min read 6 chapters

Detailed narrative

Strong Q4 FY26 Performance and AUM Growth

Cholamandalam Investment and Finance Company Limited reported aggregate disbursements of INR 32,913 crores in Q4 FY26, marking a 25% year-on-year growth. This led to a healthy AUM increase of 21% year-on-year, reaching INR 2,42,630 crores by the end of the quarter, driven by sustained momentum across all major product segments. The company's Return on Assets (ROA) stood at 4.1% (before overlay) and Return on Equity (ROE) was 23% for the quarter, indicating improved profitability.

Segmental Growth Drivers and Diversification

The Vehicle Finance business grew 26% YoY in Q4, with Auto AUM increasing 18% to INR 1,19,558 crores. The MSME segment (LAP, SME, SBPL) recorded 11% disbursement growth, with MSME AUM growing 29% YoY, including 41% for SME and 46% for SBPL. The Consumer segment delivered 45% YoY disbursement growth, supported by the newly launched Gold Loan business disbursing INR 1,130 crores in Q4 FY26. This diversification across all eight business engines provides higher comfort and resilience.

Improving Asset Quality and Credit Cost Management

Credit costs (before management overlay) declined by 20 bps year-on-year in Q4, reflecting stable portfolio performance. The company provided a management overlay of INR 200 crores as a precautionary buffer against global uncertainties, while core asset quality indicators remained resilient. Loan losses in the CSEL segment declined to 5.2% in Q4, and early defaults and non-starter accounts in April 2026 were significantly lower compared to April 2025, indicating an improving trend.

Capital Adequacy and Funding Strategy

The company maintains a strong liquidity position with INR 21,186 crores in total liquid assets, including undrawn sanction lines. The Capital Adequacy Ratio stood at 19.21% and Tier 1 capital at 14.73% as of March 2026. Out of INR 2,000 crores in CCDs issued, INR 1,370 crores were converted in FY26, with the remaining INR 630 crores expected to convert in H1 FY27, ensuring comfortable capital levels for sustained growth without immediate external equity raising.

Strategic Focus on Granular Growth and Yields

Cholamandalam is implementing a more granular acquisition strategy, particularly evident in the gold loan segment where the average loan ticket size has decreased from INR 3 lakh to approximately INR 2 lakh, leading to improved yields of 15%. This approach, combined with continuous efforts to improve underwriting tools and Gini coefficients across all divisions, aims to further reduce credit costs and enhance asset quality across segments like CSEL, CD, and Vehicle Finance.

Outlook on Profitability and Operational Efficiency

Management expects NIMs to remain largely stable at around 8% and operating expenses to stay within 3.0% to 3.1% of assets for FY27. Net credit costs are projected to decline from 1.6% (pre-overlay) to around 1.5% in FY27, leading to a pre-tax ROA target of 3.5%. The CSEL segment's pre-tax ROA is expected to comfortably cross 3% in the current financial year, with operating expense ratios normalizing closer to 4.5% after a one-time impact in Q4.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Financial Services earnings calls