Cholamandalam Investment and Finance Company Ltd (NSE: CHOLAFIN) Q3 2026 Earnings Call dated Feb. 02, 2026
Corporate Participants:
Unidentified Speaker
Vellayan Subbiah — Executive Chairman
Ravindra Kumar Kundu — Managing Director
Arul Selvan — Chief Financial Officer
Analysts:
Nischint Chawathe — Analyst
Suraj Das — Analyst
Kunal Shah — Analyst
Piran Engineer — Analyst
Shubhranshu Mishra — Analyst
Raghav Garg — Analyst
Shreya Shivani — Analyst
Viral Shah — Analyst
Akshay Jain — Analyst
Aravind Ravichandran — Analyst
Nidhesh Jain — Analyst
Sonal Gandhi — Analyst
Abhijit Tibrewal — Analyst
Presentation:
Nischint Chawathe — Analyst
After which we will take the Q and A’s over to you. Elaine.
Vellayan Subbiah — Executive Chairman
Thank you N and good morning everyone. I’m happy to take you through our performance for Q3FY26. We had aggregate disbursements of 29,962 crores which is a growth of 16% year on year and that takes our AUM to 2.27,770 crores. AUM growth remains steady at 20% at the end of this quarter. Disbursements saw healthy growth across all major product segments in the quarter. Vehicle Finance delivered a 17% year on year increase in disbursements supported by broad based industry momentum across cvs, PVS and two wheelers in both new and used categories. GST rate reduction also helped bring down vehicle prices which further strengthened customer sentiment and supported sustained demand across segments.
LAP Home Loan Loan Against Property, Home Loan and SPPL also delivered strong dispersible growth during the quarter. This momentum was supported by sustained housing demand across key markets coupled with healthy traction and mortgage back lending for both self occupied residential properties and SME credit demand. Q3 witnessed robust customer inquiries and improved conversion rates across segments contributing meaningfully to the overall expansion of our retail mortgage portfolio. LAP grew dispersals by 26% year on year and home loans grew dispersals by 10% year on year and SPPL by 30% year on year in Q3 of FY26. AUM growth in these business verticals continue to be strong with LAP clocking 31%, HL registering 27% in SPPL having a 52% growth over Q3FY25 disbursement growth in the unsecured segment was also strong with momentum picking up in Q3 registering a 32% growth over Q2 of FY26 due to the withdrawal from fintech based lending.
The growth year on year continues to be negative over Q3 of FY25. This will change from Q1 of FY27 to as we had stopped lending through FinTech relationships from one of FY26. Likewise in SME also the growth and disbursement over Q3 of FY25 continues to be negative due to the conscious slowdown in supply chain finance on a sequential basis. Dispersals grew by 16% driven by term loans and equipment finance. The AUM growth was robust at 33%. The newly introduced gold loan business dispersed 772 crores during Q3 FY26 operating out of 118 dedicated branches in the south and eastern parts of India.
As highlighted in our previous call, NIM was improved by 33bps in Q3 over previous year with the RBI’s rate cut progressively impacting our cost of funds. Rate of blink. Operating expenses have remained steady on a year on year basis even after incorporating the impact of the new labor code in this quarter. This reflects our continuous focus on cost discipline and productivity. Credit cards improve marginally as the impact of running down the fintech business continues to influence our credit costs. On the vehicle finance side, the credit costs have stabilized and we are looking at a reasonable moderation in Q4.
ROA for Q3. FY26 stands at 3.2% and ROE at 19.11% with the second half progressing well. We anticipate Q4 to reflect improved performance line with past trends in terms of liquidity and capital adequacy. We hold a strong liquidity position with total liquid assets of 18,857 crores including undrawn sanction lines. The ALM is comfortable with no negative mismatches. No negative cumulative mismatches across all time buckets. A capital adequacy position stood at 19.16% in December 25th with Tier 1 capital at 14.12%. Out of the total issuance of 2000 crores, CCDs amounting to 307 crores were converted in the month of October 2025.
Further, 1,063 crores of CCDs were converted in January 2026. This will improve Tier 1 capital. In Q4 of 2026. There’s a balance of 633 crores of CCDs which is expected to be converted in April and July of 2026. And finally, the board approved the payment of an interim dividend of 65% which is rupees one rupee and 30 paise per share. So I’ll stop with that and we’d be happy to take it. Turn it over to you for questions.
Questions and Answers:
Nischint Chawathe
Sure. Yeah, sure. The first question comes from Suraj Das of Sundaram Mutual Fund. Suraj, your line is unmuted. You can ask it.
Suraj Das
Hi, am I audible?
Nischint Chawathe
Yes.
Suraj Das
Yeah. Hi. Sir. Thanks for the opportunity. Sir, one question on the vehicle side first. In terms of the asset quality, I mean if I look at the, let us say overall credit cost on the vehicle that is running a bit higher versus your historical levels. Anything that you want to call out in terms of specific geography or particular oum or probably any sub segment that is probably giving the cause, I mean pain and While you are highlighting that probably the vehicle credit cost will see substantial moderation going ahead. But what could the rationale? Is it because of let us say the growth and hence automatically the credit cost coming down? Or it would be, you know, more from you know, underlying cash flow improvement from the borrowers or maybe the state governments coming payment coming in or something like that.
So just first if you can highlight, I mean what is the cause of the, you know, this pain because your vehicle freight cost is running at 2% which is relatively, you know, higher versus the peers as well as your historical levels. That would be my first question.
Ravindra Kumar Kundu
Yeah. Morning Suresh. So few data point which we I would like to tell you about the vehicle finance is that stage three from June quarter of 3.89 has gone up to 4.1. In September and December it is remained at 4.17. So in stage three we have got the stability. Now as far as the stage two is concerned it has the 3.9 in June and gone up to 3.96 but it has come down to 3.6. So 30 basis point improvement in stage two has been seen. And also internally we are monitoring the early default and non starters.
Those are coming down significantly well in stage three in the quarter three itself and likely to further improve in in the March quarter. So this is in line with our plan only our NCL numbers in quarter one was 2.2 which has come down to 2.1 in quarter the next quarter and then in in the this quarter it has 2%. So from the first two quarter to third quarter the NCL has also come down though it is at the elevated level. But as you know that that the first two first two quarter of the you know in India is actually getting impacted due to the rains and and also capacity utilization get impacted.
That is the case the seasonal effect. And it is. It is similar to the last year. But this year onwards we are seeing that there is a good demand coming up. Vehicle demand has improved after the GST rate cut and all those things happen. And then we are seeing that disbursements are going up. That means the deployment of the customers have improved and the capacity utilizations are improving. So we are expecting quarter four of vehicle finance going to be very good and then they are going to maintain it the next financial year. So coming back to the your point that it is at elevated level.
Yes, but it started coming down in the stage two and early deferred stat has come down. Stage three is stable from here it will go down.
Suraj Das
But sir, this early Starter or let us say the early delinquency coming down, is it a factor of underlying cash flow improvement or is it a factor of more let us say growth. Because this quarter the disbursement growth has been relatively good on a Q basis.
Ravindra Kumar Kundu
Early default is basically pertaining to the first six month or twelve month of the book where the customer is getting into the first telling. So it is nowhere related to the denominator effect. If one customer goes into the first bucket it is early default or non starter only. The period we basically monitor non starter for six months and it is a very stringent norm and it is nowhere getting impacted because of the denominator. And therefore early for non starter going down is. And also stage two has come down for the full book is actually the indication that the collection efficiency is increasing.
And in the month of January also we have seen that which recently we have completed. So this trajectory is going to be maintained in vehicle finance and not only in vehicle finance we are seeing the similar impact in benefit coming in C cell also.
Suraj Das
Sure. And this improvement has been across OEM across geography,
Ravindra Kumar Kundu
Across OEM across your geography, across the type of product new and used.
Suraj Das
Sure sir. And the last question on growth. I think this quarter the vehicle disbursement growth has been very strong. Partly could be, you know, pent up demand also. But how do you see the overall disbursement growth going ahead?
Ravindra Kumar Kundu
Since we have seen the January I have opportunity to tell you that things are looking better then quarter three in this quarter till now because 30, 60 more days to go. So quarter four will be better than quarter three in terms of overall disbursement. And as well across all the businesses we are seeing the disbursements around like you know quarter three. You would have seen that SME or you know CSAIL are slightly behind in terms of the disbursement comparing the quarter three of the last year because they were doing much higher and they have given up some put portfolio.
But now the disbursements are up.
Suraj Das
And if I can squeeze in last one question sir. Can you give the sleepages and write off number in vehicle this quarter or nine month maybe.
Ravindra Kumar Kundu
Those numbers are consistent. Actually we have not seen any significant change in terms of it is before. Explore. Okay, 53.
Suraj Das
Yeah, 353.
Ravindra Kumar Kundu
353 up to 401.
Suraj Das
Okay. And 353 is write off.
Ravindra Kumar Kundu
No, 401.
Suraj Das
Okay. And 353 is the slippages.
Ravindra Kumar Kundu
So 353 was the previous quarter. I’m just comparing it is 40 crore 50 crore up.
Suraj Das
Okay sure. Understood sir. Thank you so much.
Nischint Chawathe
Kunal Shah from city. Kunal you go next.
Ravindra Kumar Kundu
Yeah. Mr.
Kunal Shah
Hi. So the first question was on home loan credit cost not a significant number in absolute term on the base where it is. But if we look at it in terms of the credit cost in home loans that has gone up so, so anything to read into it. Was there any one off out there which has led to slightly higher credit cost and the second question was on csail. So now we have started to see the improvement on the disbursement side. So there was a decent traction on a quarter on quarter basis on the disbursements.
So going forward maybe last time also you indicated that the stress has picked out in csl. So should we see now significant improvement in CSL and where should the credit cost stabilize compared to 6.4%.
Ravindra Kumar Kundu
Yeah yeah just to start with the home loan and this is one of quarter for the home loan in terms of their NCL what they did is that the non surface report which working on and they got into the stage where the collection is visible through the legal now they have contacted or tied up with the ARC and given up 65 crore of their stage three wherein they book the NCL upfront. So the NCL hit is in the line of HL P&L is around 35 crore for the 65 crore book which is basically they removed and the income line is actually slightly elevated because of the whole deal has gone up by 23 so the PNDL line is actually not much gap.
Therefore you you can see that the ROAS remain 4.2% so that’s because of the you know we take NCL 9 NCL not like in in some of the players we have seen that they do it slightly differently and see they basically take it income also into the NCL line and keep the NCL better but we have not done that and we have also created a little bit extra provision because now we are going to get this money collected through the ARC. So we have not taken entire benefit 56 crore extra incl we have taken so net net.
What I’m saying is that this and even in the past we said that because the NBFC like Chola doesn’t have the non surface for for less than 20 lakh rupee for Sbpl and C cell and Svpl and HL and for lab also they have a small lab time to time when we get get into these situation where we are quite confident that in such room if we can collect money then we will route it through ARC and get it done and that is what is going to the process even in the future. Once in a while it will be done and but at ROA level if you see that they are at very high level 4.2% and they will continue to do that and their target of ROA of 4.5% pre tax ROA Prashad has been always saying that he will deliver it so we should actually rely on his coming now coming to the C cell.
Kunal Shah
Sorry so one thing so sorry on this. So there was a sale to ARC during the quarter and we had taken the provisioning knock of 35 odd crores on that transaction. Is that the right interpretation?
Ravindra Kumar Kundu
Yeah NCL line. No, no no I think accounting line let you understand from our CFO.
Arul Selvan
No let me explain. So there is a 65 crores of assets sold and when you sell you have to write it off in the book and the income that comes is coming in income right. This is as per the in so it’s not like the whole thing has been removed from the book as assets and you have brought the income whatever the the provision which had been carried would have got reversed. Net impact is around 35 crores. NCLI
Kunal Shah
Ggot it, got it.
Vellayan Subbiah
65 Bips of the 1.1% so if it wasn’t for this it would have been 1.45.
Ravindra Kumar Kundu
Yeah and our overall NCL also would have been better for the company but this is the right thing for the organization. That is what we have done it now coming to the C cell C cell NCL actually moving right direction. In quarter one it was 6.7. Now quarter two was 7% and now it has come down to 6.4 and in absolute value. Also NCS are coming down because of the rundown of the partnership and also we are seeing the overall NCL of the traditional NC cell which is like a on ground DSA DST business which is done unsecured personal loan, business loan and professional loan there also the absolute value and sales are coming down.
So we are expecting the 6.4% of NCL of December quarter to further go down in quarter four and that trajectory will be maintained in next year. Also you will see that because they have cut down their almost 500 crore disbursement per month from this financial year and now they are reaching to the same level of disbursement what they used to hit it last year. From the next year they will get the benefit of base and then disbursement look very high. So once the disbursements start picking up and nils are going to go down and even in the case of nc ncl I would like to tell you what we have done into the DSADST business where we segregated the entire portfolio into four category and gold, silver and branch.
And every quarter we have removed branch, silver and gold. And now we are only sourcing the diamond quality of the portfolio which has got the very lower NCL as of now. But the NCL overall NCL because of the new portfolio will start appearing after one year. So we are moving in that direction. By doing that we have also successfully maintained our disbursement group at the same level and now we will start growing the disbursement with the better quality of sourcing. So the quality of sourcing is improving, disbursement growth is improving and portfolio quality is improving in terms of ncl.
So this is the good news from the CCL side.
Kunal Shah
Yeah. So the question was where should it settle ideally compared to 6.4 after doing this if we are sourcing diamond category 4 quarters down the line what should be the steady state NCL in csl?
Ravindra Kumar Kundu
That’s what I said that you know this entire book of diamond will be accumulated in next two to three years time and ideally by that time we should go up, we should improve the number significantly. That is the number. So at, at this juncture I don’t want to commit any number but 6.4 is very high and it can come down definitely below 5% in next financial year.
Kunal Shah
Thanks. Thanks, that’s helpful.
Nischint Chawathe
Yeah. Next is Piran engineer from clsa. P can ask a question.
Piran Engineer
Thank you and congrats on the quarter. Just firstly you know in the MNH CV segment we are seeing demand migration towards large fleet operators and that’s being then tapped by the banks. How is it in the case of LCVs and SCVs and is that a risk you foresee for this segment also?
Ravindra Kumar Kundu
No. First of all Viran, if you see in our HCV for last two, three years we away from HCV and therefore when the Costa fund started coming down we started getting benefit to we start acquiring more HC customer. So some numbers are very very you know surprising to you. That industry grew by 20% but Chola grew by 56% in heavy commercial vehicle. But in the case of light commercial vehicle we were already high. So therefore our growth and market growth are more or less same. In the case of small commercial vehicle the market is actually growing at the rate of say 16%.
We grew by 28% which is a high yield book. So in the commercial vehicle segment, in the new segment, overall disbursement growth is coming because of market share as well as the industry. So we are not seeing that the banks and banks are always there in the, you know, the large and captive customer. We were always, you know, into the srto. SRTO were away from the market because they were not seeing the capacity utilization after the GST cut with the cost of vehicle has come down and also EMI burden has come down because of the both interest rate cut and also total loan has come down because of the vehicle price coming down.
The SRTOs are now getting into that. So our disbursement growth is not depending on whether bank is aggressive or not. It is depending on whether our sector, our segment is coming to the market to buy the vehicle or not. So we are seeing that now that is happening as HCV and small commercial vehicle started growing and we are maintaining, maintaining our market share at a similar level at the light commercial vehicle. You want to come?
Piran Engineer
Yeah, but I. No, so my question was.
Vellayan Subbiah
This question is different.
Piran Engineer
My question is different. It’s more on like the market structure, right? Like is the LCV market also heavily like towards fleet operators or is it more fragmented towards SRTOs? Which is why you all can still continue to. That’s my question.
Ravindra Kumar Kundu
LCV is more into the SRTO and less into the fleet. HCV is more into the fleet and less into the srt.
Piran Engineer
Okay, okay. And that will continue like this you feel?
Ravindra Kumar Kundu
Yeah, yeah. Because in light commercial vehicle it starts from 3.5 ton GVW to say 19 ton GBW. So therefore the range is large. As of now the banks are concentrating in a high tonnage vehicle which is like 10 ton plus the lower ton vehicle is still is actually getting sold in the tier 3, tier 4, tier 5 town where the people applying for transporting vegetable at all, they are mainly the market load operator where the MBC is only financing to add on the retail operators be it in light commercial vehicle, I.e. iM LCV, Indian segment and MNDHC.
We are seeing a strong traction of retail operators which is Chola’s set of customers coming in from November, December and that trend is continuing the month of January.
Piran Engineer
So when you have like, you know, the Amazons and all the E commerce players which need that last mile distribution, do they end up outsourcing that to smaller transport operators? I would assume that, you know, this segment also gets more and more formalized with the proliferation of E Commerce.
Ravindra Kumar Kundu
That is what I said. No in any case that was there earlier and they were actually being funded by bank. What I’m saying is that.
Vellayan Subbiah
No, no. His question is on the E Commerce shift. Right? So the E Commerce shift. Yes. So your question. The E commerce players will prefer to contract with people that have a larger fleet. And you do see some people getting into fleets for traditionally. So if you take the percentage that has gone to fleet in terms of these businesses, it is much, much less than heavy commercial vehicle. So every commercial has always been larger fleets. Here you see it getting a bit more formalized. But Piran, it’s only that the E commerce segment that basically demands that.
Right. Which is kind of this large level of formalization from their supply base, correct?
Piran Engineer
Yeah, yeah.
Vellayan Subbiah
Besides that there’s not happening guys.
Ravindra Kumar Kundu
And also this is there for now for quite some time. So post. You know Covid, we are seeing this, you know like E commerce buying the vehicle being funded by the banks are already there. It is not that this year it is getting changed. The electric vehicle is getting more funded by the banks because those are getting actually purchased by the large operator. So if the EVs are going to go up, then you will see the shift in that in terms of the mix between the banks and mgmc.
Piran Engineer
Got it, Got it. My next question is on yields. Now when I look at say SME yields over the last nine months they’ve been the same as it was in March 25th despite 100bps of repo rate cut. Have we pruned low yielding business or why hasn’t the transmission happened? And likewise even in lap and I’m just taking a longer time frame here if I look versus pre Covid and today LAP yields are actually higher today. And it’s counterintuitive given how much of you know, SME MSME competition we’ve seen in the last five years. So just your comments on how we’ve been able to sustain yields in both.
Unidentified Speaker
These segments on the app side. So post Covid we have also introduced. Small app, the higher rate of interest and the business mix issue. The business mix which is kind of helping us in sustaining. We understood this is going to be a challenge and we changed the strategy. To immediately after the COVID Okay.
Vellayan Subbiah
And in both situations it’s a business mix issue. So if you take a like for like product you will see yields coming down. But things we consciously are looking at is if we have to maintain then kind of we do look at at changing the mix as well.
Ravindra Kumar Kundu
Our lab has introduced a small lab and that small app is now started getting the momentum. So the amount of volume they are generating like 6,000 8,000 crore. In that around 20 is coming from small lab which has got high and therefore they are able to maintain the E. At the same time SME has given up the supply chain finance and they have reduced their disbursement by 600 crore what they used to do it. And also they have introduced the
Vellayan Subbiah
Increase of equipment finance which is like our equipment finance business has gone up which is a shorter term and a higher rate of interest genset business. So that is helping us to improve our.
Piran Engineer
Got it. Good. Okay. This explains it. Yeah. Thank you and I wish you all the best.
Ravindra Kumar Kundu
Thank you.
Nischint Chawathe
Next is Next in line is Shubransha Mishra from Philip Capital.
Shubhranshu Mishra
Hi, good morning. Congratulations on a great set of numbers and thanks for the opportunity. The first question is around the growth itself. We’re looking at a stellar growth which is coming because the GST rate cut. Are we in discuss questions with various OEMs. Is there any RM inflation which is. To be passed which could more likely offset the GST rate cut benefits that we have seen. CAFE norms are still in a discussion paper. Are we going to see any kind. Of rate and hikes by OEMs there? Second is if we can speak about various OEMs, what kind of market shares do we enjoy there and what are we looking at in terms of market share increases say the larger OEMs like Maruti, Tata Motors, Mahindra, Ashok, Leland, the larger ones. The next question is a bit strategic in nature. When do, what is our aspiration or maybe when do we hit a thousand crore pat on an annual basis in each of the three businesses, new businesses that we’ve started which is sbpl, SME and cscl. And the third is just a data keeping question.
What would be our FEMI in the personal loans? Thanks.
Ravindra Kumar Kundu
Lot of questions.
Vellayan Subbiah
So why don’t you go on the OEMS and then FEMI you’ll give .
Unidentified Speaker
For vehicle finance as far as the OEMs are concerned, I mean two things. What has happened from October, November, December across the segment be it small commercial vehicle, light commercial vehicle, ILCV M&HCV passenger cuts, all the market share we have grown and as you know we have our market share in Tata worldwide share. These have all grown and most of it are in double digits. Maruti, we have gained substantial market share across small commercial vehicle also we have grown. So in fact two wheelers, we have grown our market share in Royal Enfield, in Honda and of course in Hero also because we are focusing in these three manufacturers mainly.
So to your question that across the board our market shares have gone up and the growth has been higher than the market growth and the trend has continued in the month of January. We hope this will continue for this quarter and going forward.
Arul Selvan
Yeah. What is the question on FEMI currently? Femi like I know it for the FEMI rate it used to be peaked at 3.90 percentage but over the last three months it has come down to 3.1, 3.2 types. So that is what. But now I would like to tell you that FEMI is never a no indicator for, for any of your no metrics because it requires what you call the registration, Nash registration with the bank.
All those things are a no as a indicator. So I would say it has come down but it is never a indicator. From my past experience I am saying.
Shubhranshu Mishra
just one clarification on the market share. This is on volumes we are speaking of, right?
Arul Selvan
Yeah. Market share is numbers. Yeah.
Shubhranshu Mishra
Okay. Sure, sure. The last part. Thousand crore.
Vellayan Subbiah
Yeah. I think the broad guidance has always been this right. Which is like when we get into some of the newer businesses the growth rates will be higher than the growth rates in some of our traditional. But we obviously, you know we don’t want to give guidance on when each of them are going to give a thousand crores impact. So just I mean I think that so, so I, I yeah. So I don’t think we give specific guidance on that.
Ravindra Kumar Kundu
Subu actually if you see that the C cell now the ROA 1.4% and what we have been discussing between me and such that he will deliver 3.5% ROA which is normally we you know targeted in the next financial year. Both Vijay Kinis which had put together driving the season business. So most important thing is the ROA. In the case of SV Pilzo if you take one by one new businesses it’s already delivering PBT ROA more than 7% and SME started delivering more than 2%. So they are all moving towards the direction what we have set in the beginning in terms of profit.
Shubhranshu Mishra
Understood this was very helpful and look forward to 1000 crore PAT in each of these businesses. Best of luck.
Ravindra Kumar Kundu
Thank you.
Nischint Chawathe
The next question comes from Raghav Karg from Ambit Capital. Guys, just a request to all participants. We have a long queue so maybe you can just keep your questions short and probably restrict to one question per participant. Over to you.
Raghav Garg
Thanks. Hi and thanks for the opportunity. I have two questions. One I just wanted to go back to the Vehicle finance asset quality bit. See when I look at your asset quality trends on this portfolio and compare it to peers, your trends seem to be a little inferior. Say for example the Q& Q drop in credit cost is lower, the yoy trend is higher and even when I look at the net accretion to vehicle finance NPs it’s on the higher side versus peers. So I just wanted to understand specifically with respect to your customer segment in the sense that why is he finding it difficult to repay you versus you know what we’ve seen for other auto NBFCs, is there you know some customer specific color to this or you know any vehicle type color to this? That’s my first question.
Ravindra Kumar Kundu
No, in our vehicle finance if you know that the. Our mix is not towards the one segment alone. It is actually distributed across all segments. That means we are. We have been financing heavy commercial vehicle, light commercial, small commercial building, new. Suppose you come up with any finance company which is more towards the use. The used is not so so much deteriorated during last two years. The small commercial vehicle and light commercial vehicle plus tractor has deteriorated and in the. In last two years because of the. You know, two years back when the slightly monsoon deficit was there and then capacity utilization got impacted during last two, two years in.
During the first half. Having said that, what I mentioned in the beginning of the call in the today itself that our vehicle finance stage two has come down from 3.96 to 3.61%. Whenever the stage three goes up like we it was 4.11 in September quarter. Now it is 4.17 same seven level first stage two and early default and non starters start coming down and then subsequently you start seeing the you know, results coming improvement coming in stage three as well. So the trajectory looking very good in terms of vehicle finance. You, you. You’re asking why it has gone up.
I have said that it’s because of the mix of both new and used. Not that either new or. Or used. We are doing it. We are doing all product and that is the reason things it started, you know, looking slightly high in the stage three. But the trajectory is looking good from the early default and non starter point of view. And you’ll see the result in quarter four and going forward.
Raghav Garg
Understood, Thanks a lot.
Ravindra Kumar Kundu
The market, market and product is concerned product and market across the geography. We do not have any concentration in terms of any particular market or any particular product is basically doing very bad. It is all you know, distributed across.
Raghav Garg
Understood. My second question is I heard your commentary on early starter or you know, non starter those metrics showing improvement. So my question is that say for example if we see 100 rupees of credit cost in the vehicle finance portfolio, how much of this would you attribute to this specific bucket of early starter or non starter? And then if we see this number as percentage of say two or four quarter lakh disbursements, would that be the right way to look at it?
Ravindra Kumar Kundu
Majority of the NCL is coming from stage two. Stage two is obviously much lower as I mentioned. So stage three also we have not that we have one single provisioning in the stage three as the question is.
Vellayan Subbiah
He’S saying ED and non starter contribute to what percentage of.
Ravindra Kumar Kundu
Is a part. Of the stage
Vellayan Subbiah
Percentage of our NCL over time. So from a cohort perspective how much of it flows into the sec? So I think that’s your question.
Raghav Garg
Yes, that’s what I trying to ask.
Arul Selvan
The behavior of this, the behavior of these two parameters indicates the business of the portfolio. So if it is coming down then it means that the current portfolio is behaving better. So the impact of this will be seen over the next four or three quarters. Because this is that means if there is a lesser of early default and non status then what happens is at a given point in time the equity of the customer becomes larger so he will not move out. That’s the, that’s the you know, sort of the attribute we’re looking towards as we move or keep reducing this.
Raghav Garg
See my only point behind asking this question is because we don’t get segment wise stage two or even the next slippage on a segment wise basis. You know, just getting some color, you know as to how much of, of the credit cost in the vehicle finance is coming from the early bucket would just help in modeling the numbers better. That was the only objective behind asking. This question.
Vellayan Subbiah
Understood. So we can get back with that data.
Raghav Garg
Sure, that’ll be helpful. I have one more question. Can I ask?
Ravindra Kumar Kundu
Yeah.
Raghav Garg
Sorry. In the affordable HL I think you mentioned 65 crores of principal has been sold to OARC. Is that right? Is that understanding right?
Ravindra Kumar Kundu
Yeah.
Raghav Garg
And, and despite that the GNP has. Come down only from 376 to 358 which means that there have been some slippages here too. Is that understanding? Okay. Yes. So any specific or geographical color to this?
Unidentified Speaker
No. Basically only the non surface you pool there is a slightly increase in delinquencies which we, we do all the legal means to collect out of that. So it is only the non surface SE pool slightly grown up. It is not about any geographies. Geographies in fact every the infant delinquencies are coming down and Q4 we’ll see this has started coming down everywhere so we’ll maintain the NCL as 0.5 going forward.
Raghav Garg
Okay, thanks a lot for all those answers. Thanks.
Nischint Chawathe
Thank you. Next is Shreya Shrivani from Nomura.
Shreya Shivani
Hi. I hope I’m audible. Thank you for the opportunity. I have two questions. My first question is on the vehicle book. So in December and probably end of November probably there were two cyclones that hit southern part of India and can you help us understand what has been the impact of these cyclones on our customer base? Is there some stress that can show up in the 4Q numbers because of this pool? My second question is on the growth outlook for some of the for the non vehicle book we’ve backed out from the fintech portion and we are going to scale up direct digital and consumer durable loans.
Can you help us understand how much time will it take for you to set up the infrastructure for these two segments and then the growth can kick in for you. So is the growth like 4/4 away or 3/4 away in these segments which are basically replacing your fintech book? Those are my two questions. Thank you.
Unidentified Speaker
So to answer the question as far as the south zone is concerned for the vehicle finance last four months south zone had the collection across all matrixes they have done well for the month of Jan also in spite of the highest holidays in a year in south zone happens in the month of January with Pongal, Magra, Sankarati, all this happening. So we have done extremely well in south zone for the month till January. So we we are not facing or we have not seen any kind of pressure or stress as far as the cyclone and it has been very very very marginal.
So there’s not much of impact finance book in south zone for Chola.
Ravindra Kumar Kundu
And as far as the C cell is Concerned there are two segment of C cell one is the DSA DST business which we are now doing 704 per month and then CDN now digital lending group which we are doing 300 crore per month. So close to thousand crore per month our peak was 1200 crore per month but quarter one of this financial was only 2000 crore. So if we do even thousand crore we will do 3000 crore from the quarter one you will see significant growth coming up.
So and as I mentioned in the call also what are the correction corrective measure we have taken in order to improve the quality of CCL traditional in terms of removing the three segment of the portfolio which we are actually causing the concern in terms of the NCL and still growing at the rate of 700 crore per month which is going to grow the disbursement from quarter one at the rate of 25% plus.
Shreya Shivani
Right. And in the, in the digital lens, consumer durable, you said 300 crore. I’m assuming that majority would be digital because consumer durable, the infrastructure as in partnering with all these, all the stores etc would take time. Right. So with the 300 crore may be more digital, is that understanding correct?
Ravindra Kumar Kundu
Digital is actually 100 crore and 150 crore is around, you know Samsung and then around 50 crore is the CD business which we are doing so around 300 crore and so 200 crore CD, 100 crore digital still cities higher than the city is only going to go.
Vellayan Subbiah
Yeah, so we have the, we have the type in Samsung Finance plus. So already the infrastructure is all set as far as the platform is concerned. So we are distributing or our distribution is based on the Samsung Finance plus platform itself. We’re able to acquire more customers across the country. So I think from a time like perspective that has been taken care of.
Shreya Shivani
Okay, interesting. So but you will be looking for more tie ups in the cd right? I mean this must be your first. Yeah. All right. Okay. Okay.
Unidentified Speaker
How many tabs? We already have about nine types. We have already covered about 75% of the entire mobile market. So we are actually working on distribution on the open market platform for CP in addition to.
Vellayan Subbiah
And that is fair. We just moved out of mobile into household appliance segments as well. We also this is going to, it’s going to kind of grow in different tiers over time. Right. So the first part is going to be mobile and then the second part is going to be non, non mobile other household appliances.
Shreya Shivani
Got it, got it. This is very useful. Thank you and all the best.
Vellayan Subbiah
Thank you.
Ravindra Kumar Kundu
Thank you.
Nischint Chawathe
Next comes in Virat Shah from ifl. You can ask a question.
Viral Shah
Hello. Yeah, am I audible?
Nischint Chawathe
Yes.
Viral Shah
Yeah, good morning. Thank you for the opportunity. So I had two questions primarily. One is I was looking at your comments with regards to within the vehicle finance industry and therein you have mentioned that the used vehicle finance prices saw good demand with replacement cycle kicking in or expected to kick in and prices declining. So over here just wanted to understand first of all two parts to it, which sub segment of this I would say within vehicle the used segment is seeing a demand pickup because of replacement. And secondly what is the extent of the Used CV prices declining and if at all you see any concerns with regard to asset quality over there, I’ll ask the second question after this.
Unidentified Speaker
See there are, there are two things and see immediately after the GST price was a GST reduction was announced. There was a lull for almost 15 days. Subsequent to that the market got corrected and the initial spurt in demand happened in the M and HCV segment. At the retail operator level the real movement in and subsequently it has flown towards the ILCV segment. So M and HCV to ILCV segment and in the M and HCV segment also in the used business the initial was on the haulage segment and from January we are seeing attraction coming up in the tipper segment also because lot of contracts have been released and the usage for the secondary segment there is a demand for tipper also coming in.
So this is where it stands. See at the small commercial vehicle segment and all we are yet to see a huge but it’s more or less BAU as far as the small commercial vehicle segment is concerned. In used business ILCV we are seeing attraction coming up. M and HCV started from college, it has moved to TIPAs. This is what the current scenario is.
Ravindra Kumar Kundu
So just to continue viral, this is also linked with the new HCV and new LCV sale. As the HCV market is growing, the replacement cycle also kicking up for the use. The people who are buying the vehicle, they are not only adding the vehicle but they’re also sometime, you know, you know, replacing the vehicle, what they have.
So when they sell their existing fleet and you know, buy the new vehicle, new vehicle sales picks up and old vehicle sales also picking. So both are going to get benefited because when the existing customer having the vehicle are selling and that vehicle comes in the market, quality of the vehicles are good and that vehicle gives better price than the vehicle which comes through the repo, you know, repo sale and all. So the now the quality of the used vehicle coming in the market after say December or say after November, quality wise better little bit drop is there in terms of, you know, valuation of the vehicle which is hardly 5% but it doesn’t matter because at the end of the day if someone wants to buy new vehicle, wants to sell the vehicle, he need it for his replacement customer needed for their deployment.
So that is not important. Important is that the vehicle is available for us to finance and therefore our used business is going up from December onward which is likely to go up further in quarter four.
Viral Shah
Right. And how long sir, do you see this replacement cycle playing out. Is this something that you expect over the next few quarters or is it just 4Q.
Ravindra Kumar Kundu
Yeah, so it is simple. Last two years there were there has been lull in the new vehicle say so new vehicles say now only it started picking up commercial vehicle did not pick up immediately after the GST card. It started only in December. In fact December was very low January I’m seeing the is coming and the passenger vehicle whatever we have seen in the you know Q3 that that is that is it remains same it’s not going up. So now the disbursements are driven by the new vehicle sale of commercial vehicle side which is going to also support the used vehicle side.
Suppose new vehicle is continuously I’m talking about the heavy commercial vehicle and light commercial vehicle is continue to grow at the rate of say 15% or even 10 to 15%. Obviously to that extent they use vehicle is also going to come in terms of unit. Now when you are financing it the GV value is actually matter for financing. So if that is the case 10 to 15% in the unit number it convert into the value it comes to 20% plus and it can continue for till such time new vehicle sales continued.
Viral Shah
Got it. And secondly so the question was more for Arul sir, sir, how do you see now the cost of fund trajectory for you given how the bond yield movements have been especially not just today but I would say over the last three, six months as well we have barely seen any reduction in the G Sec rates. So how should we think about it and consequently the margins also going ahead.
Arul Selvan
You’re right there has been no tightness in the liquidity as well as on the rate. So but I think but the good part is our we have a mix which is also partly fixed rate borrowings. They still there is steam left in in that to reduce more on the NCG side on the market borrowings and the MCLS side on the bank borrowings. These two will still give us another 5 to 10 basis points on the cost of fund reduction in next quarter is is which should you know at least to a large extent flow through the to the NIM
Viral Shah
And so beyond that.
Arul Selvan
Beyond that I don’t think there is
Vellayan Subbiah
I think only
Ravindra Kumar Kundu
Beyond that we need to the name through business only. So in the quarter four obviously due to better collection your other income goes up and you have seen that last year if you take the investor presentation you able to see quarter four names are always higher. So we are going to expect that also in this in this quarter.
Viral Shah
Got it sir. Thank you very much. I’ll come back in the queue. I have just one more question if it is there.
Ravindra Kumar Kundu
Please, please.
Nischint Chawathe
Next comes in, a question comes in from the line of Akshay Jain from Autonomous.
Akshay Jain
Hi sir, thank you for the opportunity. So my first question is again on margins. So while you have indicated that you know next quarter the margins will go up because of two impacts, one cost of funds will come down and number two other income being pretty well in 4Q. So currently the NIMs are around 8% odd. And maybe next quarter it given your guidance or given your outlook it can go up to say 8.1, 8.2 range. But how should you look at F27 like should we expect this margins to be held around similar levels 8.1 ish 8.2 ish levels or how should we think about NIMS incrementally? And what will be your incremental cost of funds in this quarter?
Arul Selvan
First of all I said 5 to 10 basis points, you took it to 20 basis points.
Akshay Jain
No, no. So I included the other income.
Arul Selvan
No, no, all put together only income. So the 8.8.1 would be the quarter four number. So overall we should end the year with shade less than the 7.9 we are talking here. I expect it to hold next year to a large extent unless there is some drastic increase. I don’t see any reduction coming through beyond current levels. So. But, but I, I also I hope under there are some no macro issues cropping up that should not be increased also. So we should hold at the current.
Akshay Jain
Understood. And on the AUM growth while you have guided for a wide range of 2025 percent and given the strong Q3 and your comments on continued strong January. So should we expect the AUM to grow, you know at the higher end of this range?
Arul Selvan
No. See it is the same thing in the reverse way when we drop disbursement dropped in Q1 Q2AMD didn’t drop that far. So same way when in one or two quarters of disbursement, you know peaking AM will also not react so fast. So still we hold the 20 to 22% a.m. growth for the current year. Yes, we will look at opportunities to improve but I don’t want to give any guidance beyond that.
Akshay Jain
Understood. And any guidance on the credit cost front also because for this year you had mentioned around 1.6 percentage and 4Q is expected to be strong for Chola.
Arul Selvan
So the third question, so should I skip it?
Akshay Jain
It’s fine sir, like if you can answer it, it will be great. Hello Am I audible?
Nischint Chawathe
Yeah. You have any other questions?
Akshay Jain
No, it’s fine. Okay, thank you.
Nischint Chawathe
Thanks. Next question comes from the line of Arvind. Arvind, Ravi Chandran from Sundaram.
Aravind Ravichandran
Hi, can you hear me? Yeah, yeah, yeah. So my question is most of my questions were answered but one question is on like you know, is BPL business? I. We are seeing like you know, continuous increase in you know, NCL and SBPL business. Uh, uh, like I understand it’s a, it’s on the low base like the, so the growth is still coming through. But do we see any risk to that growth in that particular business? And similarly in lab business should we expect you know, margins to, I mean like spreads to hold largely considering like a mix is shifting towards small ticket lab. These are my two questions.
Nischint Chawathe
Yeah, I request the management to answer this. There’s no response from the line. Probably just hold on a minute.
Aravind Ravichandran
Oh sure.
Nischint Chawathe
The management should just be connecting with us any moment.
Ravindra Kumar Kundu
Hello nation. Hello. Yeah, yeah, you connect here. Can you connect on this?
Nischint Chawathe
Yeah, you are on the. Sir, you are actually on the, on the, you know, on the zoom call. You can answer your questions. Yeah, all right. Yeah.
Ravindra Kumar Kundu
Okay. Can you hear us now?
Nischint Chawathe
Yeah, you can. So, so you can. So probably. Arvind, you can ask a question once again.
Aravind Ravichandran
Yeah, yeah, yeah, sure. Yeah. Thank you, thank you for the opportunity. So my question is on SBBL business where like you know, net credit cost is like moving up continuously for the past few quarters. So do we any see any risks to growth there like you know, in the near term into indented business and are we comfortable with this level of credit cost? That is my first question. And second question is on lab business like you know, should we consider then like you know, spreads and margins to hold largely like despite rate cuts which has come through because of the mix change which is happening continuously.
And if I can ask one more question like you know, in affordable housing segment, should we start to see again the disbursements, growth picking up?
Vellayan Subbiah
Yeah, for SBPL the credit cost for Q3 may look higher but it, it has basically reached a peak. We don’t see any more damage as far as credit cost is concerned. In fact actually if you go geographically, two of our zones have already started improving in December and January. It will reflect in Q4 end or Q1. Definitely you’ll see stabilization of that and further to that it will start moving down.
Ravindra Kumar Kundu
And also we mentioned that in the past that you know, SBPL is entirely a non surface epoch. So the collection is through a traditional way of Doing a you know legal and also the follow up on ground. So traditional way of doing legal means that means it takes you know two to three years time. It require a cycle of you know resolution of the cases which is there in the pipeline. So now we started getting resolution through legal in some market and some market we had to get it. So that’s the reason RCS is commenting that the NCLs are picking up now here and from there we can actually expect that the angel will go down.
And also in the case of SBPL we will time to time we will see that how we can actually do some, you know, ARC sale and introduce the stage three that is also in the pipeline. Their Pvt RO is quite, you know good at a very high level at 7.3% and they will continue to deliver this. In the case of hl, in case.
Vellayan Subbiah
Of lab if you cut it last year to current year there’s a 20 basis points increase in the margin. But we this is primarily as I mentioned earlier also it’s primarily because of the you know product makes. We are continue to expand our high higher interest product. But equally also we are, we are expanding our go to the tier 3, tier 4 which is also helping us in sustaining our yields. Now the this E the NIM would be about at the same range. We will continue to hold it at the same levels and that could be a slight increase in the.
If you look at the Q3 OpEx is about 1.8% and the YTD OpEx is 1.7. It will again be at the same range bound 1.7 to 1.8. I think there should not be any. Material impact on the overall ROE if at all that could be a, you know, 10 basis points maximum. Otherwise it could be it will be at the same range.
Ravindra Kumar Kundu
And for HL growth side we have seen a good quarter and we hope to see. We have always maintained that the book growth, the AUM growth will be around 28 to 30% and we see that coming for next two years.
Aravind Ravichandran
Thank you so much.
Nischint Chawathe
Thank you so much. Next we have Nadesh Chel from Investec.
Nidhesh Jain
Thanks for the opportunity. So my question is on growth and asset quality. So if I look at segmental data in home loans our GNP has been increasing. If I add the ARC transaction in SBPL also our GNP has been increasing. There is slight increase in SME also. So what give us confidence in growing these segments? In the C cell segment when the GNP is increasing we have slowed down the growth. But in these segments we are Continuing to push growth. So what is giving us confidence to continue to grow despite increasing gnpa.
Ravindra Kumar Kundu
So we have seen that in the case of hl LAB and svpl, even in the SME there are two type of customers who are getting into this stage three. One are they we can be resolved by the surface and one is a non surface surface cases are getting resolved because in the these property business, mortgage business, when you have a property you will get the money because they appreciating asset. So there is no point that you’re going to lose money unless you have a problem in the property itself. So we are confident that the, you know, underlying security is in place.
It’s just a matter of time. Either service 9 to 9 months to 12 months or non service it takes 2 to 3 years. So that’s the reason we have done the deal in the case of non surface in HL group and we are seeing that even after doing all this thing in the HL the steady state NCL going to be 05 point to 0.6% and their ROA going to be point PBTRO going to be 4.5%. Similarly in the case of LAB they are committing that they will be continue to deliver 3.7 to 3.8% and in the case of SBPL again they are delivering 7% plus PBTR.
In the case of SME as we mentioned that since the the term loan book which is actually again with the mortgage of the property of the customer which takes time because here the entire book is surface but it is a corporate customer where the surface takes little bit more time because of the customer contest little, you know, for a longer period. And that’s the reason surfaces cycle in the SME it takes one and a half years and we are seeing that some results have started coming in the month of December which is going to continue in quarter four and quarter four onwards.
You will see with a better result in the SME in terms of the Stage 3 reduction and NCL types.
Nidhesh Jain
Sure sir. Okay, thank you. That’s it for myself.
Nischint Chawathe
Yeah, thanks. Next question comes from Sonal Gandhi of amsec.
Sonal Gandhi
Yeah, thanks for the opportunity. So my question was more on the PBT rota. So for a long time we’ve been guiding, you know that we’ll be closer to 3.5%. Obviously we understand there is issue with credit cost but you know, going ahead maybe when we are also you know, talking about consumer durable business. Okay, so that’s, that’s a high, you know, infra heavy business probably ROAS would not come until you reach a scale. So how do you see OPEX and how do you see PBT router for CSAIL and overall business say for FY27 and FY28 and second one was on the impact of new labor code.
So are we done with the entire, I mean have you taken the entire impact in this quarter? Is there anything remaining for the Q4?
Arul Selvan
Labor? A little bit lost? Yeah. The season still is a very small percentage of the overall AO, around 7% of the overall and we as we scale up, we will certainly make sure that it starts contributing at the same or a similar expectation levels of about 3% rota and progressively build thereon from table. So that should not be a change. The larger impact would be once we correct the vehicle finance business and then the other businesses coming in with the expected levels of Rota that those two will be the contributing factors to reach the 3.5% pre tax rota.
And with regard to the labor code, yes, we have provided for the gratuity fully for all the past period based on the actual valuation that’s been completely covered. The rest will not will be only on a month, on month basis changing. So there may be a slight difference in the salary cost as we do some corrections with regard to the wage definition per se, but I don’t see that as a big game changer.
Sonal Gandhi
Sure. Thank you sir.
Abhijit Tibrewal
We now just, we take the last question from the line of Abhijit from Motila. Thanks Nishin Ravi sir, just, just two questions. One is, I mean if you look at this financial year’s FY25, 26, right. I would say, I mean difficult years from March 24 to now, I mean we’ve discussed in the past, right. That infrastructure spending has actually been very slow. I think I heard in the fall earlier today that GST cards and we are seeing very good momentum in Q3, expecting that to continue into Q4. But if you look at the asset quality, right, I mean from March 24th to now, right. I mean just just one direction, things have kept deteriorating. Do you think this is just to do? I mean with the weak macro that we are seeing and for a significant improvement because obviously we are in Q4, we could look at a better Q4, but then we again head into the seasonally weaker first half of the next fiscal year.
So I mean do. What do you think we really need, right, as. As an industry at Chola, right. For things to substantially start improving from here in terms of asset quality? And the other thing is in, in Terms of non interest income. Are there any initiatives that we are taking to improve the the fee income or the the non interest side of things? Non interest income side? Those two questions. Thank you.
Ravindra Kumar Kundu
So so. Good morning Abhijit. See for last one and a half years starting as you mentioned two 2024 immediately after the election or from the election year itself that quarter itself we started seeing that there is a problem in terms of vehicle finance in terms of the ncls are going up and then it is coupled with.
So in our business we have eight business line out of eight business line we have only two business line where the NCLs are high. One is vehicle finance. The C. So vehicle finance is is entirely due to the macro and C cell is because of the partnership business has gone slightly higher. That is one reason. So it is not related to macro. I say it is because of the segment. And also in the case of Cecil Traditional which is unsecured we want the professional personal and the business loan. It is because of the type of you know process it is being adopted by entire industry that you know at that point in time the multiple fundings were happening.
Customer, you know, number of loans being given by given to one customer where high number of inquiries were high. And that is the reason in that segment the NCL went up which is because the number of players suddenly went up. And then the DSA I think I can say the little advantage they have taken and therefore that segment got impacted. Otherwise when that segment was done a few that problem was not there there. So if you see C and we have VM business where 600 crore and 300 crore put together 900 crore NCL is coming quarter.
I am expecting that that number will start significantly going down because the capacity utilization vehicle has improved significantly. And as you mentioned that you know stage two is coming down. That means you know collection efficiency is improved. That is going to start showing up in the NCL Also from the quarter four now coming to the future the seasonality effect is going to be there. There has been two problem in vehicle seasonality and cyclicity. So I am expecting that the cyclicity problem is going to get resolved if the vehicle demand is continued to be there from now onwards till next three, four years.
As we have seen that the cycles are actually four years up and one and a half years down. So that’s legal finance. The good news if the cyclicity get results and seasonality impact is going to be there and that is the effort we need to put it on ground. Which I think because during the cyclicity we improve the collection feet on the street on ground more then after the cyclicity problem get resolved or collection efficiency improves significantly. So vehicle finance is going to be better. Significantly better from quarter one. If the cyclicity problem is not there, seasonality is there.
Now coming to the C cell as I mentioned, the indication is that where numbers are looking better. Because the partnership book has already come down from 3,000 crore to 600 crore. So the partnership book NCL is completely getting eliminated from next financial year. And traditional C cell business, their roa, their NCL is also started coming down. So both put together their NCL will look better. As we mentioned that they can go down as low as 5%. So both the side we have benefited in time to come.
Abhijit Tibrewal
Thank you, sir. And the last thing on the non interest income side. Are we taking any initiatives there improve
Ravindra Kumar Kundu
Access in our business is not much the fee income. What we do it by doing the. You know, protecting the asset and the life of the customer. What we do income is coming. And then other income is coming from the additional finance charges. And all three collected. So what is going to happen in the time when the collection improves? I mean this is very specific to vehicle finance. Whenever collection improve their other income goes out. And that is the reason the fee income or other income, whatever you say, that is going to go up in the quarter four.
And if that continued as I mentioned, if the cyclicity is improved in quarter one onward and their collection is improving. Stage three is coming down during that period for short period for at least one year. You will see that their overall income will be high.
Abhijit Tibrewal
Got it. Sir. This is. This is all from my side. Thank you so much. And I wish you and your team the very best.
Ravindra Kumar Kundu
Thank you. Thank you so much.
Nischint Chawathe
Thank you very much. This concludes the call. Thank you participants for joining us today. And thanks a lot to the management. For giving us an opportunity.
Vellayan Subbiah
Thank you. Thank you. Nishant.