Release Date: January 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cholamandalam Investment and Finance Co Ltd (BOM:511243, Financial) reported a 15% increase in disbursements for Q3 FY25, reaching INR25,806 crore.
- The company's total assets under management (AUM) grew by 34% year-on-year, reaching INR189,141 crore.
- Net income for the quarter increased by 37% year-on-year to INR3,541 crore.
- The company maintains a strong liquidity position with a cash balance of INR15,159 crore at the end of December 2024.
- The Board of Directors approved an interim dividend of 65%, equating to INR1.30 per share.
Negative Points
- Stage 3 asset levels increased to 2.91% as of December 2024, up from 2.83% in September 2024.
- Gross Non-Performing Assets (GNPA) rose to 4% from 3.78%, indicating a deterioration in asset quality.
- The company's net credit cost guidance for the year was revised to 1.4%, higher than the initial target of 1.3%.
- The cost-to-assets ratio has not improved as expected, remaining elevated due to increased investment in collections and technology.
- The company faces challenges in the vehicle finance segment, particularly in small and light commercial vehicles, which have shown increased delinquency rates.
Q & A Highlights
Q: Can you provide insights into the asset quality, particularly regarding Stage 3 assets and credit costs in new businesses?
A: The asset quality has seen some fluctuations, with Stage 3 assets slightly increasing. In the vehicle finance segment, NCL has improved by 10 basis points. However, the CSEL segment shows higher NCL due to partnerships, which we are phasing out. We expect improvements as we exit these partnerships. For SME, credit costs should normalize as SARFAESI resolutions progress. (Unidentified Company Representative)
Q: What is the growth outlook for the next financial year, and do you still expect a 25% growth rate?
A: We are maintaining our growth target of 25% for the next financial year. (Unidentified Company Representative)
Q: How are net interest margins expected to evolve, especially if there are changes in the interest rate cycle?
A: Borrowing costs are stable, and any reductions in rates will be reflected with a lag. We expect quarter four to be better than quarter three, with improvements in collection efficiency. (Unidentified Company Representative)
Q: Can you elaborate on the stress in the vehicle finance segment and the expected timeline for improvement?
A: Stress in vehicle finance is primarily in small and light commercial vehicles, which are now showing signs of improvement. We anticipate a gradual recovery over the next three to four quarters. (Unidentified Company Representative)
Q: What is the current status of capacity utilization in the vehicle finance segment, and how does it impact credit costs?
A: Capacity utilization has improved from 50% to 70%-80% in small commercial vehicles, but it remains below last year's levels. This gradual improvement should positively impact credit costs over time. (Unidentified Company Representative)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
