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UBS Investment Research
Cholamandalam Investment & Finance
3QFY11 – positive set of results
Pre-exceptional PAT grew 236% YoY to Rs252mn
Key highlights for the quarter include 1) Strong disbursements growth of 46%
YoY, 2) NIM improved 76bps QoQ to 7.2%, 3) Improved CAR at 18.8%, 4)
Return on total assets (without securitisation gain) for non personal loan (PL)
business improved 90bps QoQ to 4.1%, 5) No securitisation income was booked in
this quarter, 6) Owned PL book reduced to Rs 950mn (-64% YoY) and 7) Stable
asset quality for non personal business (Net NPL for Vehicle Finance (VF) and
Home equity (HE) <1%).
Higher provisioning and PL losses suppresses profitability in this quarter
Despite the higher disbursements growth in all its segments – VF (+54% YoY), HE
(+22%) and Business Finance (42%); the reported PAT came in lower due to PL
losses of Rs510mn and an extra one-time standard assets provision requirement of
Rs 181mn for non PL business to meet new RBI guideline for NBFC.
Management confident of continued growth on conference call
The company expects the disbursements for its vehicle finance and home equity
business to continue at the same growth rate in the 4Q. The net managed PL book
now stands at Rs2.4bn (Rs1.4bn of this is in zero bucket). CIFC plans to provide
for entire PL losses by next year and expects the complete rundown by end FY12.
The company plans to do away with securitisation income completely in future.
Valuation: Maintain Buy with a PT of Rs252
We maintain our Buy rating and residual income based PT of Rs252. Our PT
implies FY12E P/BV of 2.3x and PE of 12x.
Cholamandalam Investment & Finance
Cholamandalam Investment and Finance Company Limited (CIFCL), a nonbank
financial company, was established in 1978 and is part of the Chennaibased
US$3bn revenue Murugappa Group. The company initiated its business as
a vehicle financing company and later diversified into business finance, home
equity loans and consumer finance. As at 30 September 2010 CIFC had AUM of
Rs77bn, with vehicle financing representing 62% of its assets. CIFC exited its
consumer finance business in 2008. The company has three subsidiaries and
offers insurance products and stock broking services through two of them.
Statement of Risk
We believe the key risks facing Cholamandalam are an economic slowdown,
interest rate risk, liquidity risk, increased competition and regulatory change.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Cholamandalam Investment & Finance
3QFY11 – positive set of results
Pre-exceptional PAT grew 236% YoY to Rs252mn
Key highlights for the quarter include 1) Strong disbursements growth of 46%
YoY, 2) NIM improved 76bps QoQ to 7.2%, 3) Improved CAR at 18.8%, 4)
Return on total assets (without securitisation gain) for non personal loan (PL)
business improved 90bps QoQ to 4.1%, 5) No securitisation income was booked in
this quarter, 6) Owned PL book reduced to Rs 950mn (-64% YoY) and 7) Stable
asset quality for non personal business (Net NPL for Vehicle Finance (VF) and
Home equity (HE) <1%).
Higher provisioning and PL losses suppresses profitability in this quarter
Despite the higher disbursements growth in all its segments – VF (+54% YoY), HE
(+22%) and Business Finance (42%); the reported PAT came in lower due to PL
losses of Rs510mn and an extra one-time standard assets provision requirement of
Rs 181mn for non PL business to meet new RBI guideline for NBFC.
Management confident of continued growth on conference call
The company expects the disbursements for its vehicle finance and home equity
business to continue at the same growth rate in the 4Q. The net managed PL book
now stands at Rs2.4bn (Rs1.4bn of this is in zero bucket). CIFC plans to provide
for entire PL losses by next year and expects the complete rundown by end FY12.
The company plans to do away with securitisation income completely in future.
Valuation: Maintain Buy with a PT of Rs252
We maintain our Buy rating and residual income based PT of Rs252. Our PT
implies FY12E P/BV of 2.3x and PE of 12x.
Cholamandalam Investment & Finance
Cholamandalam Investment and Finance Company Limited (CIFCL), a nonbank
financial company, was established in 1978 and is part of the Chennaibased
US$3bn revenue Murugappa Group. The company initiated its business as
a vehicle financing company and later diversified into business finance, home
equity loans and consumer finance. As at 30 September 2010 CIFC had AUM of
Rs77bn, with vehicle financing representing 62% of its assets. CIFC exited its
consumer finance business in 2008. The company has three subsidiaries and
offers insurance products and stock broking services through two of them.
Statement of Risk
We believe the key risks facing Cholamandalam are an economic slowdown,
interest rate risk, liquidity risk, increased competition and regulatory change.
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