Buy Cholamandalam Investment and Finance Company; target of Rs 1920: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Cholamandalam Investment and Finance Company

Cholamandalam Investment and Finance (CIFC) is currently navigating a cyclical soft patch, reflected in moderation in business volumes and AUM growth. This phase has also coincided with the strategic winding down of the CSEL business, which was developed through digital partnerships. To offset this, the company is actively building new growth engines, such as consumer durables and gold loans—both segments with significant potential to scale over the medium term. In terms of asset quality, the company has witnessed some seasonal weakness, further accentuated by early and prolonged monsoons. In FY26 YTD, credit costs have remained elevated for the company, driven by multiple factors, including: 1) higher delinquencies in newer business segments, 2) the early onset of monsoon that disrupted fleet utilization, particularly in mining and rural transport markets, and 3) widespread floods in certain parts of the country, which affected operations and collections. We believe that credit costs are likely to remain elevated in 2Q as well, driven by extended (and early) monsoons and localized flood-related disruptions.

Outlook

We expect CIFC to deliver a PAT CAGR of ~25% over FY25-28, with RoA/RoE of 2.7%/20% by FY28. We reiterate BUY with a TP of INR 1,920 (based on 4x Sep’27E BVPS).

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Cholamandalam Investment and Finance Company_15102025_Motilal Oswal