Detailed Narrative
Emergency Response to External Allegations
Cholamandalam held an unscheduled investor call to address allegations made by an external agency regarding cash deposits, related party transactions, and compliance practices. Management categorically denied all allegations as malicious and baseless, emphasizing that all operations are conducted within applicable regulatory frameworks. The company is considering legal action for libel against the agency making these allegations.
Strong Financial Position Amid Allegations
Despite the allegations, company demonstrated robust financial health with CAR at 19.79%, Tier 1 capital at 14.53%, and strong liquidity position with Rs. 14,900 crores in cash and bank balances. Net worth increased by over Rs. 3,000 crores from FY25 closing levels to Rs. 26,783 crores. AA+ ratings maintained across all rating agencies.
Business Model Clarifications and Industry Context
Management provided detailed explanations about cash-based collections, which serve financial inclusion needs of self-employed non-professionals in rural and semi-urban areas. Cash collections have decreased from 50% to 15% over time. Related party transactions are standard industry practices, fully disclosed, and conducted at arm's length pricing verified by third parties and statutory auditors.
Corporate Structure Evolution and Compliance
Company has already simplified corporate structure over past three years, with MMS payments reduced to less than Rs. 1 crore annually versus historical levels. All transactions are subject to multiple levels of audit including statutory, internal, and ASM audits. Recent six-week regulatory inspection completed successfully.