Cholamandalam Investment - Tailwinds Ahead :: Edelweiss, PDF link

Please Share::

We met Mr. Vellayan Subbiah, MD, Cholamandalam Investment and Finance Ltd. (CFL). Please find below the key takeaways from our discussion.

Recovery sometime away

Post the change in the government at the centre, there has been change in the sentiment but the actual recover at sometime away. Without commenting on the exact timeline of recovery, the company do not see pick-up in demand in short term. Utilization will depend on production side of economy not the consumption side. For the demand to pick up, the manufacturing sector has to pick up.

Asset quality to stabilize in coming quarters

The volume of repossessed vehicle has peaked out in Q4FY14. Pricing levels in case of repossessed vehicles not picked up yet. The pace of asset quality deterioration is slowing down. The accretion to higher level NPA buckets is coming down. In addition, as a strategy the company is not focusing on gaining market share. The focus is on quality of growth.

NIM’ expected to improve

The rise in NPA is recent quarters led to interest income reversal. This led to pressure in NIM’s. The improvement is asset quality will have positive impact on NIM’s. Currently bulk of customers is buying in second hand vehicle market due to pricing pressure in repossessed market. Repossessed vehicles yield is higher than new vehicles. In addition, the securitization will help in maintaining the margins. 

Home equity business doing well

Currently home equity segment constitutes 25.7% of the loan book. In this segment around 85% of the loans are given to self employed individuals against self occupied residential property. The company provides loan to value of 50-52% and that too on distress sale valuation. The company is not seeing any asset quality pressure in this segment. Currently these loans are disbursed through around 67 branches (total 540 branches). In addition, MSME and home loan are disbursed through ~20 branches only.

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
LINK
https://www.edelweiss.in/research/Cholamandalam-Investment--Tailwinds-Ahead/10005020.html