Bullish on home loan biz; waiting for Acche din: Chola Fin

Financial service provider, Cholamandalam Investment and Finance’ overall business growth was restricted to 10 percent as the company exited the gold loan business, says Vellayan Subbiah, Managing Director at Chola.Speaking to CNBC-TV18, Subbiah says vehicle finance rose 12 percent and home equities increased 16 percent."Another business we continue to be excited about is the housing loans business which is affordable houses for the self employed," he adds.The company's net income margins rose to 8.5 percent as cost of funds fell, he says, adding "as long as this steady improvement continues, we will be okay on GNPAs (gross non performing assets); but if the market remains flat or deteriorates in anyway then that will result in a slight GNPA increase".Below is the transcript of Vellayan Subbiah’s interview with Latha Venkatesh and Nigel D’Souza on CNBC-TV18.Latha: Tell us the share of money brought in by your various businesses; vehicle financing I would assume is the biggest? A: As far as we are concerned, vehicle finance is up 12 percent and home equity is up 16 percent. The overall number shows 10 percent because we stopped the gold loan business so the disbursements there are taken out of the denominator. However, both our continuing businesses have grown steadily and that is quite encouraging for us. Another business we continue to be very excited about is the housing loans business which is affordable housing for the self-employed and because of the small base numbers there the growth numbers don’t make as much sense but all are exciting segments for us. Latha: You were telling us about the extent of growth, what about margins? Will your net interest margins do better? A: Net interest margins have been up. They are at 8.5 percent; actually net income margins are at 8.5 percent and that has been up over last year. We have got two things going for us predominantly due to decrease in cost of funds and that has helped push NIMs up as well. Nigel: I was just looking at your gross NPAs, it has moved out from around 2.4 percent to around 2.8 percent. Do you expect it to stabilise at this particular level because though the number is quite small in percentage terms it is quite a big jump?A: What happens to GNPAs is fairly dependent on what happens to the overall economy. We are all waiting for acche din and the quicker it gets here the better. We have seen improvements and the good thing we have seen is starting October last year up to March we saw improvements in collections performance, March always tends to be the best month and then in June especially in June-July we began to see better performance versus April and May. So, all of these are encouraging trends and quite a few people even on the show with you basically started to see some growth and so there are some green shoots but not massive amounts of growth yet. So, as long as this steady improvement continues we will be okay on GNPAs but if the market remains flat or deteriorates in anyway then that will result in a slight GNPA increase.