Motilal Oswal's research report on Cholamandalam Investment and Finance Company
Mr. Ravindra Kundu (currently Executive Director) has been appointed MD & CEO for a period of five years, effective 7th Oct’24. CIFC’s 1QFY25 PAT grew ~30% YoY to INR9.4b (in line). NII grew ~40% YoY to ~INR25.7b (in line). Other income grew ~62% YoY to~INR4.6b (6% beat). Opex rose ~50% YoY to ~INR11.8b and the cost-income ratio rose ~2pp YoY to ~39% (vs. ~37% in 1QFY24). This was primarily driven by ~110% YoY growth in employee expenses. PPoP grew ~38% YoY to INR18.5b (8% beat). GS3/NS3 increased ~15bp/10bp QoQ to 2.6%/1.4%, while PCR on S3 declined ~1pp QoQ to ~45.5%. ECL/EAD increased to 1.77% (~1.72% in 4Q). This translated into annualized credit costs of ~1.5% (1.3% in 1QFY24). Write-offs stood at ~INR3.2b in 1QFY25 (vs. INR2.01b in 1QFY24)
Outlook
We estimate a CAGR of 22%/27%/35% in disbursement/AUM/PAT over FY24- FY26. While opex may remain high for a year or two due to ongoing investments and pilots in new businesses, CIFC has levers on cost ratios and business AUM growth to deliver healthy RoA/RoE of ~2.7%/22% in FY26. We retain BUY on CIFC with a TP of INR1,675 (4.5x FY26E BVPS).
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