Cholamandalam Investment and Finance Company Ltd (NSE: CHOLAFIN) Q4 2025 Earnings Call dated Apr. 28, 2025
Corporate Participants:
Unidentified Speaker
Vellayan Subbiah — Chairman
Ravindra Kundu — Managing Director
Arul Selvan — Chief Financial Officer
Nischint Chawathe — Investor Relation
Prasanth VP — Senior Assistant Vice President
Analysts:
Unidentified Participant
Dhaval Gada — Analyst
Raghav Garg — Analyst
Abhijit Tibrewal — Analyst
Avinash Singh — Analyst
Harshit Toshniwal — Analyst
Kunal Shah — Analyst
Nidhesh Jain — Analyst
Viral Shah — Analyst
Piran Engineer — Analyst
Pranuj — Analyst
Rajiv Mehta — Analyst
Shubhranshu Mishra — Analyst
Shreepal Doshi — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Q4FY25 earnings conference call of Chola Mandalam Investment and Finance Co. Ltd. Hosted by Kotak securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance joining the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nishin Sawate from Kotak Securities. Thank you. And over to you, Nishin.
Nischint Chawathe — Investor Relation
Good morning everyone. Welcome to the earnings conference call of Chola Mandalam Investment and Finance Co. Ltd. We have the senior management with us today to discuss the 4Q FY25 performance of Chola and share industry and business updates. Let me welcome Mr. Velayan Subaya, Chairman and Non Executive Director. Mr. Ravindra Kundu, Managing Director and CEO and Mr. Arun Salwan, Chief Financial Officer. I would now like to hand over the call to Velayan for his opening comments. After which we’ll take the Q&As.
Vellayan Subbiah — Chairman
Vishen, thanks so much and good morning everybody. We’ll just go through. Results for the quarter and the year ended 31st March 2025. Disbursements were at 26,417 crores for the quarter which is up by 7% and 1, 869 crores for the year which is up by 14% year on year. The total AUM stood at 1 99,876 crores which is up by 30% year on year. The net income for the quarter was at 3758 crores which is up by 29%. And for the year it’s at 13570 crores which is up by 36% year on year. The PAT is at 1267 crores for the quarter which is up by 20% and 4259 crores for the year which is up by 24%.
Just to give you some quick performance highlights. The vehicle finance disbursements were at 14,430 crores in Q4 as against 12,962 in Q4 FY24 which is a growth of 11%. And disbursements for the year were at 53,922 as against 48,348 in the previous year which is a growth of 12%. For lapsed loan against property, we dispersed 5539 crores in the quarter as against 4273 which is a gross of 30% and for the year disbursements were at 17,913 as against 13,554 which is a growth of 32%. The home loan business dispersed 1983 crores for the quarter as against 1747 which is a growth of 14% and for the year it’s at 7404 as against 6362 which is a growth of 16%.
SME dispersed 1733 as against 2136 and the disbursements for the year were At 7763 as against 8106. The drop in disbursement is due to conscious decision to slow down on lower rota products such as supply chain finance, consumer and small enterprise dispersed 2328 as against 3301 and for the year it was at 12,552 as against 11,281 which is a growth of 11%. And the drop in disbursement is due again to our decision to progressively exit from some of our partnership led volumes. The secured business and personal loans dispersed 404 crores as against 366 which is a growth of 10% and for the year it was 1,316 which is a 23% growth over 1,074 crores.
In the FY2,324 AUM stood at 1 99,876 as compared to 1 53,718 which is a growth of 30%. PBT growth in Q4 was at 19% and for FY24 25 was at 25% and PPT ROA was at 3.6% for the quarter and for the year it’s at 3.3, ROE was at 22.2 and that for the year was at 19.8. The company continues to hold a strong liquidity position with 15,267 crores of cash balance including 5,866 crores held at HQLA for LCR purposes and shown under investment. The total Liquidity position was 15,712 including undrawn consortium lines. The ALM is comfortable with no negative cumulative mismatches across all time buckets.
Our consolidated PBT for Q4 was at 1,698 as against 1,428 in the quarter which is a growth of 19% and for the year it’s at 5,741 as against 4,600 which is a growth of 25%. We are also launching the gold loan business in select geographies. Our gross stage 3 assets representing 90 plus dues decreased to 2.81% as of March 25 from 2.91% as of the end of December 24. GNP as per RBI norms decreased to 3.97% as against 4% in December 24. The NNPA as part BI norms also decreased to 2.63 which is well below the threshold of 6% described by RPI as the threshold for PCA.
The capital adequacy of the company was at 19.75% as against regulatory requirement of 15% and tier 1 capital was at 14.41 and tier 2 capital is at 5.34%. The board has recommended a final dividend of 70 paise per share subject to approval of the members of the company at the ensuing AGM. This is in addition to the interim dividend of rupees 130 per share for the financial year 2425 declared by the company on 31st January 2025. So Nishant, I’ll stop with that and be happy to turn it over to the audience for questions. Thank you.
Questions and Answers:
operator
Thank you very much sir. We will now begin with a question answer session. Anyone who wishes to ask questions may press Star and one on their Touchstone phone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Also, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow up question, please rejoin the queue.
Thank you. The first question is from the line of DHAVIL from DSP Mutual Funds. Please go ahead.
Dhaval Gada
Hi. Thanks for the opportunity and congratulations on good performance. I had two questions. First relates to overall growth. Could you just highlight the growth expectation for next year? Last time you had mentioned 25% for next year as well as medium term. Could you just re highlight that? And also specifically if you can touch upon the home loan business growth. Earlier you commented that we sort of accelerate, stabilize and again accelerate on this business. So we’ve seen a 16% growth in disbursement this year whereas the capacity growth is much Higher. So should we expect significantly better, better growth in FY26 and any comment around that would be useful.
And the second question relates to credit cost on the newer businesses. We’ve seen an increase in all the three businesses, the CSL as well as SVPL and SME business. Could you highlight are these at peakish levels and we should see improvement across all businesses or any comment around credit cost in the newer businesses for FY26 would be useful. Thank you.
Vellayan Subbiah
Okay, so maybe in terms of overall growth AUM at the AUM level we still believe, you know we’ve always guided in the 20 to 25 range and we still believe that that will basically hold in home loans in specific. I’ll let Prashant take that question and then credit also will get, you know.
Prasanth VP
For home loans we are seeing around 15 to 20% growth. That is on businessman side and book will be growing at the rate of 30% plus for next two years. Yeah, credit cost we have delivered 1.4% and in the case of vehicle finance we are at 1.6. So vehicle finance will reduce the credit cost in the coming year. So if they reduce it by 20 basis points the company will get benefited by 10 basis points because they have 55% of the overall book. In terms of the Cesar and you know SME these, these businesses will reduce the credit cost by the year end.
And we need to basically factor Q1, Q2 where the credit cost goes up and then Q3, Q4 credit cost goes down. So what I’m talking about the full year you our expectation in terms of SME and CSL if they come down by 50 basis points and they are 10% of the book so they can actually reduce it for the company’s 0.5% and for HL and Lab which is a, which is basically at rock bottom level. We need to both you know all three businesses, BPL, HL and Lab, if they go up, goes up by 10 baseline at their 35% of the group they can, they can actually increase it by 0.35.
So net net what? You know SME and CCL reduction can get adjusted against the SVPL and LAP and HM and then the vehicle finance reduction can actually reduce the credit cost by at least 10 basis points for the company. So we are expecting 1.4 to go down to 1.3 in the next year as well as the credit cost is concerned as, as the overall growth is concerned. As the boss said that we are targeting 20 to 25% always. We have mentioned that for that we need to achieve the 30% growth in non vehicle and 20% growth in vehicle.
30% growth in non vehicle is actually possible now. Will you try your vehicle to deliver?
Dhaval Gada
Hello. Sorry. Sorry. Just. Sorry. Kundiswa. Just one follow up on the growth question. If you could talk a little bit around these newer segments that are getting added should in the medium term, should this be additive to the overall growth profile of 20, 25% or this should help us sustain these levels of growth. Any comment around that would be useful, thank you.
Vellayan Subbiah
Yeah, I would say from a guidance perspective, you know we always said that range, you know of 25%. So that includes the new segment. Right. So basically we’ll manage the mix within that. But that’s what we will get to kind of as in as a delivered number for the company.
Dhaval Gada
Got it. Thanks. Thanks. And I wish you all the very best. Thank you.
Vellayan Subbiah
Thank you.
operator
Thank you. We’ll take the next question from the line of Raghav Garg from Ambit Capital. Please go ahead sir.
Raghav Garg
Hi, good morning and thanks for the opportunity and congrats on the fourthly performance. I have a few questions. One just for clarification purposes. Did you say that AU1 growth for retail finance will be 30% in SR26? Is that what you said? Oh, sorry, I may have misordered.
Vellayan Subbiah
No vehicle finance asset growth, we said 20% and non vehicle so that 25% can be achieved. But this 25% is at higher level. Our stand is that we will be targeting 20 to 25% growth. You know, all depends on how monsoon takes place. Because the last year monsoon was good. And post that things have started improving. This year in vehicle finance we have dispersed almost 12% for the year and we likely to increase the dispersion from 12 to 15% to 17%. So it depends on the second half. And that’s the reason we are slightly conservative in terms of dispersion growth that we and this has been our stand that we for the company it will be 20 to 25%.
Raghav Garg
Understood. And sir, I was looking at your 4Q numbers generally for the vehicle finance segment. There seems to be some seasonality in the vehicle finance deals. In fourth quarter it tends to increase about 30 to 40 basis points quarter on quarter every time in fourth Q. Fourth quarter. Why is that?
Vellayan Subbiah
No, I didn’t understand. Once again Repeat it.
Arul Selvan
So Q4 you’re saying that the disbursement is higher?
Raghav Garg
No, I am saying that in the fourth quarter your vehicle finance yield tends to increase quarter on quarter by 30 to 40 basis. Points and then you know, in the following quarter, which is the first quarter it comes down. Why is that? This is as per the data that you report on the segmental information. Hello. Hello. IT.
operator
Ladies and gentlemen, thank you for patiently holding the line for the management has been reconnected. Thank you. And so you may continue now.
Vellayan Subbiah
Yeah.
Raghav Garg
Okay.
Vellayan Subbiah
Point is that the Q4 overall income goes up like you know from Q3 level it has gone up to say 15.2 to say 15.6. Last year it went up from 15.1 to 15.4. This is related to the collection efficiency because in the last quarter always our collection efficiency improved and that improves the all collection including the EMI collection, like recovery collection, HCVC collection, other charges collection. So that includes the income and that increases the income in the Q4.
Raghav Garg
Understood. And sir, just one of the last questions from my side. Has the cost of hedging on foreign borrowings gone up in recent months generally? What is your observation on cost of hedging on foreign borrowing? Has it gone up generally for.
Vellayan Subbiah
It’s sort of in Q1 now but it was good in Q4. We managed to get good deals in Q4 but we will be always selectively watching and doing deals. So we could, we could start deals in Q4 at very fine rates.
Raghav Garg
That’s all from my side. Thank you.
operator
Thank you. The next question is from the line of Abhijit Chibriwal from Muthilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Good morning everyone and thank you for taking my question. This is two questions trying to understand. First thing from Arun. Sir, this year how are we looking at our post of borrowings getting repriced with the assumption of maybe one or two more rate cuts in the coming quarters, how would you look at cost of borrowings coming down? And to that end given our home loan lap and SME book are floating rate, what proportion of it is passed on eventually? What margin expansion can one build in this fiscal year? And the second question is for Ravishwar, just trying to understand, I mean very, very clearly there is tightness in terms of collections which is evident also showing up in credit costs.
This year, all 4/4 credit costs in absolute terms were in a very tight range. So when we say next year the credit costs will be lower, what has to change from where we are today, what we saw last year and what has led us to where we are today. So from here what has to change for the environment to improve and credit costs to come down next year? These are the two things I wanted to understand. And I’ll Just switch in. One last question. We have already announced the launch of our gold loan business. If you could give some color around how are we approaching the gold loan businesses which geographies we target and also the ticket sizes that we’ll be looking at and eventually in the next one or two years what proportion of the loan mix can gold loans become?
Vellayan Subbiah
Okay, let me address the first question on the cost of borrowings. See the cost of around 20% of our borrowings are linked directly to the either the repo or the trustee bill so that we are seeing the benefit coming through as and when there are reductions. A large part of our borrowings which is around 50% plus is linked to banks and until and unless NCLR comes down there would be a bit of a, you know we have to wait for those NCLR elections to come for this benefit to pass through. However marginal borrowings we are able to negotiate a final raise more both from market as well as from the banks considering the reductions that are coming into play.
So we should see overall for the full year around 10 to 15 basis points reduction net of what we need to pass on to the in the floating rate book for us. So nim should improve around 10bps is what I would right now consider.
Prasanth VP
And regarding the credit cost, as I mentioned earlier also see there are three areas where the credit cost has to be improved. One is vehicle finance. Second is CSL and the SME. Now CSL credit cost will come down by running down the fintech where the proportion the credit cost is higher than the traditional book and that will happen, that will start happening from the third quarter onwards. So first two quarter we need to bear with the credit cost whatever they are, you know delivering and book is also going down. In fact in the beginning the percentage will look higher and then after that once the book is completely run down that much credit cost which is coming from the partnership book will go down and therefore the NCL for the ends C cell will start showing up production in the SME it is a term load which is similar to LAB where the surface is there on many cases going on and the progress is very good and likely to basically get the result again in the second half and that will start reducing as LAP has reduced over the time.
In the case of vehicle finance we are depending on monsoon. We are depending on good performance and capacity utilization of small commercial vehicle light commercial vehicles. We have seen that this has improved from quarter four onwards and quarter three also the NCL didn’t go up. So if that gets continued and we Get a good monsoon this year also again we will see the NCL of vehicle finance from 1.8% level to go down which will impact which will improve the overall NCL of the company. As far as the gold loan is concerned, we have studied not only gold loan consumer durable.
We have studied that our customers which is 45 lakh customers are actually taking gold loan from the market close to 1,000 crore per month and almost thousand crore disbursement is happening from the consumer durable. So both the product we have initiated in the beginning we will be very slow and cautious and we wanted to do it much advanced manner. And therefore we are taking the benefit of the technology available to ensure that the goals are secured and those things are getting developed. At the beginning we are launching 120 branches and is basically in south and east.
And we are kind of, you know having a plan to basically pilot it and see that how it is working. And maybe in this financial year or maybe one and a half years time we will try to achieve 2000 crore and see the performance of good loan how it is working as against the plan. Once it is doing very well then obviously we need to reach out to our customers who are actually going there and taking the loans.
Abhijit Tibrewal
Got it sir, this is all from my side. Thank you and wish you.
Vellayan Subbiah
Thank you.
operator
Thank you sir. I request to all the participants to kindly limit their questions to one per participant as we have others waiting for their turn. Thank you. The next question is from the line of Avinash Singh from MK Global. Please go ahead.
Avinash Singh
Yeah. Hi, good morning. Thanks for the opportunity. My question is on OPEX. I mean in this Q4 if we see OPEX has kind of the growth of OPEX has materially slowed down. I mean that is a bit typical of Q4. So what are the reasons? And going ahead with some part of OPEX seeing increase with launch of gold finance and all. How do you see OPEX to trend over the next year? Thanks.
Arul Selvan
See generally actually OPEX increases a bit in Q4 this year. We have kept it under control primarily because you know we have been behind. We have moved all the costs relating to the new businesses which we introduced over the last years. Most of it had been completed. As we move into the next year we will see a little bit of OPEX coming because of the gold loan. But beyond that there should not be any further increases. Target is to keep it in the 3.3.12 asset ratio. We will endeavor to follow that trend.
Avinash Singh
Okay, thanks.
operator
Thank you. The next question is from the line of Harshit Toshnival from Premg Invest. Please go ahead.
Harshit Toshniwal
Yeah, hi sir. Am I audible?
operator
Yes, sir, please.
Harshit Toshniwal
Yeah, sir, this is on the assignment income. So I think we had that last quarter and we also have it this quarter. Just wanted to check that is this now a consistent strategy going forward that we’ll do some assignments because this is something which we have been doing only last two quarters.
Vellayan Subbiah
Yeah, we had some opportunities and there have been some slowdown in the securitization, you know, market because most of the banks have sort of got saturated with the securitization requirements. So we had kept certain assets available and we thought we should continue with that program. So most probably we’ll do one or two more deals. Post that we will again slow down depending on market. But basically there should be some income coming through either the securitization or the assignment route, some disposal of assets or state of assets that we will target. So accordingly we’ll plan as we move forward into the current finance.
Harshit Toshniwal
Got it, Got it. Sure. Answer on the vehicle finance. I think the guidance you mentioned that we would want to increase the disbursement flow to maybe 15 to 20% from the 12% we saw this year. But if you can give some color as to what segments you want to focus this year. Where do you see the green shoots and in the context of economic recovery also, do you. Are we building some of that into our guidance?
Arul Selvan
So first, just to clarify, 15% disbursement growth, 20% asset growth which we are targeting this year. And this will happen only when, you know, the, you know, like commercial vehicle and small commercial vehicle picks up. And we continue to do what we are doing in terms of used and passenger vehicle and other products. The monsoon has been good last year. Therefore tractor and two wheeler sales has also. We have also done the disbursement. But still some scope is there to do more tractor and more two wheelers. So across all product segment, we are focusing across the country to achieve 15% disbursement growth which will take us to 20% asset growth in terms of agriculture.
Harshit Toshniwal
Sure. Got it. Okay, sir, thanks a lot.
operator
Thank you. We’ll take the next question from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah. First just to check on the home loan, we indicated that the growth should improve both in terms of disbursements as well as AUM. Almost like 15, 20% disbursements. So what ideally would lead to that kind of an improvement? Maybe this year the overall disbursements in home loan has not been that great. And secondly on lab when we look at it, in fact it’s been growing quite well. So would we some kind of a normalization coming in LEP or maybe the growth traction in LEP should still continue?
Vellayan Subbiah
No. First of all, what Prashant said that the 15% disbursement growth will take him to 30% asset growth which is at a similar level where we are as of now in the home loan business. In the case of home loan when we do 15% disbursement it comes to 30% because we have grown in the new geography east, west and north and around 60% of the disbursement of home loan is still coming from south. But we are cautiously increasing the disbursement and this is enough for achieving 30% growth. That is also one reason so we will continue to.
What he said is that we will continue to have this 15% disbursement and 30% asset growth. But after some time we need to do more than 15% to achieve 30%. By the time we will learn newer market very well and we will get established there as the home loan department has done it in south. As far as the lap is concerned, they are now almost expanded across the country and therefore the disbursement growth and asset growth are almost at same level. Almost 25% asset growth. At 30% disbursement and 30% asset growth. Maybe you know in.
In the coming year we are targeting between 25 to 30% disaster which will be enough to deliver 30% asset growth. And I I mentioned that, you know non vehicle will try to deliver.
Kunal Shah
Yeah. So particular lab you are still saying it might continue with 25 to 30 odd percent. There are still like maybe the opportunities available and the levers available to continue at that pace. Okay. And on new businesses when do we start seeing the pickup? Maybe would it be after the first half where we will see maybe the credit cost also normalizing or maybe now that is also almost bottomed out in terms of growth and we are getting confident particularly on the SME and the other segments because otherwise disbursement growth this quarter has not been that great. In the new businesses
Vellayan Subbiah
see 1B. Disbursement growth is not there because we have taken some decision in terms of CSL where we have come out from the fintech partnership business and that gets compensated through the consumer durable and our traditional PLBL business as well as our in house digital lending business. But that is not possible to completely reduce it, compensate it immediately. So over the period that will get Compensated. In the case of cecl our asset growth is slightly lower for this financial year and but will that catch up next year? As far as the credit cost is concerned since the asset rundown in terms of fintech book is very fast but the net credit cost in absolute value remains as it is.
So first half this will basically remain at the same level and only in the third quarter, maybe fourth quarter we will see that NCL will start coming down. As far as the SME is concerned, we have again taken one decision that supply chain finance will be reduced because the ROE in the supply chain finance is very low. And in that place we will actually do the small term loan and equipment finance. So again that product which we are doing it is getting good traction and this year we will basically see that the disbursement also in the case of SME COSA and there the because of the term loans are longer 10 up book, 30% asset growth is possible and we are trying, we will try to do that.
In the case of the SME the debt credit cost is higher because the cases which have gone into stage three are in surface C and likely to get resolved into quarter three. And therefore we said that, you know, in the case of SME also we are expecting their NCL to go down in this financial year.
Kunal Shah
Perfect. Yeah, that helps. Thank you.
operator
Thank you. We’ll take the next question from the line of Nitesh Jain from Investec. Please go ahead.
Nidhesh Jain
Thanks for the opportunities. Firstly, in the new initiative, if you look at three businesses, all three have shown deterioration in asset quality, slowdown in growth, some recalibration in terms of a strategy. So what has actually, what has actually gone wrong in terms of strategy in that business? In all three of them we are seeing a bit of similar trends.
Vellayan Subbiah
No, it’s not like that. SVPL has delivered 7.6 ROA in quarter four and for the full year also they have delivered 7.6% ROA and their growth has been good. They are growing very highly 70% just because of the small base. So the SBPL is one book which is doing very well. Now coming to the SME. As I mentioned in the SME book by nature if the term loan goes into the NPA it is, it takes one year time to reduce the ncl. We have seen that in the case of LAP also in the past that initially it goes up and then once the surface starts solving the problem then automatically the reversal start happening.
So this SME book is also growing at the rate of 33% for the full year. And their net credit cost is at 1% which will go down. Our targeted rota in this business is 2.5%. We have delivered 1.9. It is just a chance difference of 0.5%, 0.6% which is going to be coming from the NCL which we are very, very, you know, confident about delivering it next financial year. Now in the case of C Cell alone where we have done two businesses, one is that in house dst, dsa, PLBL business and fintech business. In the case of fintech business only, we have seen that there is a delinquency high and that delinquency also went up because the FLDG rule has got changed.
And after that the amount of FLDG we were getting it earlier, we were not getting it and therefore we decided not to pursue that business. And that is the reason there is a draw increase in the NCL and we are drop in the business in the case of cc. So I will accept that. Csl, when we started, you know, doing fintech business, this fldg norm of 5% cap was not there. And when it got introduced, not only for us, for the entire industry, it has become a problem. And therefore we have also decided to go slow.
And finally we decided to exit from the fintech digital business. As against that we have developed our in house digital lending group which is doing very well. Their ROA standalone is actually more than 6% so we will slowly grow that business.
Nidhesh Jain
Sure. Thanks for the explanation. What share of our CSAL book will be fintech as of March 25?
Vellayan Subbiah
That is very low. Basically overall around 8% it will come down.
Nidhesh Jain
Okay, got. And secondly on the gold business, do we have standalone branches specifically on gold only or the gold will also be offered through the same branches from which we have been doing vehicle finance, etc.
Vellayan Subbiah
No, gold loan will be a standalone branch. We are planning to roll out 120 gold loan branch in this quarter and we have already created infrastructure. It’s just a matter of some more time. It will get rolled out.
Nidhesh Jain
Okay, so thank you. That’s it for myself.
Vellayan Subbiah
Thank you.
operator
Thank you. We’ll take the next question from the line of viral shah from IIFL Capital. Please go ahead.
Viral Shah
Yeah, hi. Thank you for the opportunity. So just follow up on the previous question. You mentioned that you will be rolling. Out a separate branch for Gold loan. Can you just explain the rationale behind that? Because until now the other businesses that we have been scaling up, we have. Tried to utilize the existing network and. Also some of our peers have been. Using existing branches to do the Gold Loan business. There’s a thought process there.
Vellayan Subbiah
No, in the Gold Loan you need to have a separate vault, separated rfid. And we are also basically introducing some more control where who is entering inside the branch, who is, you know, taking out role. All those things are getting tracked for our head office that is possible only when you get the, you know, standalone Gold Loan branch. And Gold Loan branch is also required specific, you know, location to operate from. And that is also another in the requirement. So this 2 requirement can be fulfilled only when we go for standalone Gold Loan branches.
Viral Shah
Okay. And sir, just as a corollary to. That, the OPEX guidance that rules are gave, it kind of bakes in all the this branch expansion that you will be doing and also some bit of pickup in the disbursements that will happen. In the overall business. Right. Because you are saying that in vehicle finance that the disbursement will pick up so so will our incentives. So just wanted to get a sense on that.
Arul Selvan
They should. We are still endeavoring to keep it in the 3 to 3.1% will hold it because the count of Gold Loan branches will not be very high in the first year.
Viral Shah
Okay, sir, got it. Thank you so much and all the best.
Vellayan Subbiah
Thank you.
operator
Thank you. We’ll take the next question from the line of parent engineer from clsa. Please go ahead.
Piran Engineer
Yeah. Hi sir. Congrats on the quarter in these turbulent times. One I just wanted a clarification on SME sort of plans mentioned. We’ve slowed down in.
operator
Sorry to interrupt you sir. Your audio is not clear. There is a breakage when you’re talking.
Piran Engineer
Okay.
operator
So please use your handset if possible and come.
Piran Engineer
I’m on my handset. Yeah.
operator
Okay, sir.
Piran Engineer
Yeah. Yeah. Okay. Yeah. So just wanted to get a sense more quantitatively on what could be the disbursement growth in SME lending next year. Because while this quarter was down because we slowed down in supply chain, if I look at the last five, six quarters, it’s been flattish. So just wanted to get a sense on that. And then the next question is what is like the TAM in terms of number of branches you can do LAP and home loans from like we’re already at almost 800 branches in LAP and 700 odd in home loans. Would that go up further or.
Now growth will be a function of improving branch productivity rather than branch expansion?
Vellayan Subbiah
Yes. First of all, this SME the businessman will be again even for this financial year also it is going to be a flat only we are not going to increase disbustment significantly because we have brought two products. One is small term loan and also equipment finance as against the, you know, supply chain finance. Supply chain finance was a big chunk which we have cut down. So therefore initially the disbursement is not going to go up but we will maintain the asset growth which is at a 30% level. It is going to be there because of the disbursement we are doing in the case of term loan and which is a long tenor book and therefore asset growth is not a problem as far as the LAP natural is concerned.
As I mentioned NHL they are already into three zone where they are operating only for last three years and and their disbursement of three zone put together is lower than south zone because of the productivity and because they have introduced only three years back. So they are continuously improving the productivity and operating expenses and likely to increase also little bit. So both LAFF and HL will continue to do that. But the number of branches expansion is not very high in the current financial year. Current financial year is the productivity focus by labanical is high and then subsequent year maybe LAP and Hill will think about putting it going to another hundred branches.
Piran Engineer
Okay. Okay, that answers my question. So thank you and wish you all the best.
Unidentified Speaker
Thank you. Thank you.
operator
Thank you. The next question is from the line of Ranish from ICICI securities. Please go ahead.
Unidentified Participant
Yeah. Hi sir, just one question from my side on this Tamil Nadu Bay, you know with sort of table or do we can and given you know our major exposure so how confident we are about sort of sustaining the growth rates or even credit cost and maybe if you can just tell us the reality at ground, you know this day I know it’s too early but what is your assessment?
Vellayan Subbiah
Actually the similar thing is there in Karnataka, Telangana, Andhra Pradesh and this is more related to you know private lender and also micro finance. And this was actually going on in many places and you know that you know we are quite compliant in terms of our collection approach to the market. And therefore we don’t see any impact coming on vehicle finance or which is actually deep rooted in Tamil Nadu as well as the is very clearly mentioned legislation will not apply to banks, non banking finance companies. Yes. And it is also not applicable to us registered with RBA cooperative banks and cooperative societies.
Unidentified Participant
Yeah, correct. But in Karnataka we have still seen a sort of players getting impacted because you know it takes time at borrower level to fully understand the bill etc. I know MFI or maybe a small ticket loans will be more Vulnerable. But do you think, I mean in your portfolio any of the product is vulnerable?
Vellayan Subbiah
No, no, no, nothing like that. Actually we are, you know, we are also, you know, approaching the market in terms of collection very peacefully. So therefore across the country our approach has been very soft. We have been following up but not harassing customers.
Unidentified Participant
Okay. Okay. That is for myself. Thank you.
Vellayan Subbiah
Thank you.
operator
Thank you. We’ll take the next question from the line of Pranuj from JP Morgan. Please go ahead.
Pranuj
Hello. Thank you for taking my question. So just One question on HL, the delinquency rate has risen up to 0.6%. So is there any concern out over here? And second is a clarification. Arun. Sir, that 3 to 3.1% opex, that is opex to assets, right?
Arul Selvan
Yeah, it is OPEX to assets. And on the delinquency you want to.
Prasanth VP
Yeah. Do you want to say something? So as far as delinquencies are concerned, we are maintaining at 0.40 for the year. If you compare with the last quarter this quarter it was last year there was a release in terms of stage two. Stage two this year we are maintaining at 0.40. And going forward we foresee that it. Will be at similar levels already on. Stage two, Stage three below the much in good shape. And that’s what we are focusing on the fresh bucket to ensure that the same level of delinquencies continues with increase in the book size. And also as I mentioned in the beginning itself that LAP and SL are basically very tightly maintaining their net credit cost. So if at all they increase 10 basis points that will only impact on 0.35 as against the SME and C cell going to reduce it by 50 basis point will release 0.5. So we’ll get netted off and vehicle finance will basically, you know, reduce it which will improve the credit score by 10 basis point.
Now HL as I mentioned, they do not have surfacing. So their resolution takes time and they do it through mostly through arbitration because small ticket size loan less than 20 lakh rupees. Therefore resolution take time. So those cases which has gone into the NPA last year will get start getting resolution by the end of the year.
Pranuj
Understood. So on a full year basis you still expect to maintain that 0.4% for FY26
Arul Selvan
.04 to 0.5%.
Pranuj
Understood. Thank you sir.
operator
Thank you. The next question is from the line of Shweta from Elara Capital. Please go ahead.
Unidentified Participant
Thank you sir. For the opportunity in the vertical finance portfolio, have you seen any Write off and if you could provide any color on the sub segments that you might be closely monitoring or seeing vulnerability.
Vellayan Subbiah
We haven’t. I mean the normal levels of write off it is relating to reports of vehicles and the sale of vehicle that has continued and there has been no different change in the in the trend. So we will continue to have this. As you know there’s a little bit of a higher proportion of used vehicles etc. To that extent there would be some stimulus but other than that there will not be any high levels of write offs in.
Prasanth VP
So the write off has not been done only the requisition and sale of vehicle only been done.
Unidentified Participant
Okay and how about bounce rates and early early on delinquencies for TDPD book in the vehicle finance. How is that faring? Thank you.
Vellayan Subbiah
Pound startup is actually lower than the last year. March. March 24th to March 25th. The non starter has come down. The earlier default also has come down over the December and September quarter but it is still higher than the March 25th. Slightly higher
Arul Selvan
but non starter is much.Lower than the last.
Vellayan Subbiah
That is the trend that we are improving our portfolio quality but it require better monsoon even this year also and then only we can see better ncme.
Unidentified Participant
Very excellent. Best luck. Thank you.
Vellayan Subbiah
Thank you. Thank you.
operator
Thank you. Sir, we’ll take the next question from the line of Maruk from Nuvama. Please go ahead.
Unidentified Participant
Yeah. Good morning sir.
Vellayan Subbiah
230. 240 crore of per quarter NCL will go down. This 240 is on the 8% of the Cecil go.
Unidentified Speaker
Yeah, yeah, yeah yeah. No that’s fair sir. Yeah. Okay. And. And sir in this quarter you have done some extra provisioning in csail. Could you give that number?
Unidentified Speaker
Okay. Okay. Got it sir. Thank you.
Vellayan Subbiah
Is actually 220.
Unidentified Participant
Yeah.
Vellayan Subbiah
Actually similar to quarter three. Quarter three was also 210. Now it is 220 and we have created another 35 crore 36 crore which is actually taken up to 256. This number in absolute value will remain as it is for another two quarter and once the book gets run down then there the corresponding NCL will go up and then the percentage will go down.
Unidentified Participant
Got it sir. Okay. Thank you.
Vellayan Subbiah
Thank you.
operator
Thank you. The next question is from the line of Rajiv Mehta from yes securities. Please go ahead.
Rajiv Mehta
Yeah. Hi, good morning. Just one question on vehicle finance. So there is a clear pickup in new LCV and HCV financing in the past two quarters. So if you can comment on that. And second when I look at your growth in Car and UV financing. Also you are significantly outperforming the underlying industry sales. So what is driving this? Have we tied up with more OEMs or otherwise? For more more models
Vellayan Subbiah
see Chola growth of light commercial vehicle has been 4% as against the industry growth of 3%. This is there in the page number 37. And in the case of small commercial vehicle the growth is basically slightly lower than the industry. Industry degrow by 9%. We degrow by 60%. Yes, frankly conservative is called conscious call. We are conservative small commercial vehicle and reduced our market share. In the case of light commercial vehicle we have increased our market share slightly higher than the industry. Slightly. But in terms of heavy commercial vehicle our growth is better than the industry.
That is because now the customer as we maintain in the beginning that initially the capped user and big fleet operator, medium fleet operator will buy and then slowly the retail customer will come into the market. So now this our customer segment is started buying heavy commercial vehicle and therefore our HCV sales has gone up and it has increased our market share from 2.9 to 3.5. So slight increase in terms of growth in terms of unit is the higher looking higher. It is there in page number 38. Industry degrow by 3% we grew by 21%.
Arul Selvan
And in passenger vehicle we have grown. We have grown in terms of market share. Our reach of having larger number of branches in Tire 3 type 4 cities are helping us. And in fact our market share in Maruti has gone up substantially. So in passenger vehicle it’s we have been able to grab our market share, increase our market share especially in the Maruti segment.
Rajiv Mehta
Yeah, that’s it for myself. Thank you.
Vellayan Subbiah
Thank you.
operator
Thank you. The next question is from the line of Shubranshu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Hi, good morning Kumbu. Sir, two or three questions. The first part is on the number of people we deploy in collections across businesses. And if you can split that into soft bucket and hard bucket, that’s second is that I saw a notes to account which says Chola Home Finance. So for clarity we are running the home loan business in that subsidiary. And third is that the lap is growing at a strong level of 25, 30% and that’s the guidance as well. Do we foresee seasoning? And in that seasoning we will also see higher credit cards.
Here are the three questions. Thanks.
Vellayan Subbiah
So in the case of headcount we have 30,700 people in sales and 22,000 people in collector and almost 10,000 people in credit ops and 1600 people are our business nebula sitting at head office. In the case of loan against property, I think Suresh is your plan.
Unidentified Speaker
So if you look at LAP, we have improved our number of branches to 800 branches and we are significantly invested on the people side as well. And that is what has resulted us in the growth for the last few years where we are consistently growing our. Disbursement as well as book. And we still feel there’s a lot of market opportunity. But the key focus for the current year is our improvement in the efficiency on the existing manpower. And we are pretty confident and we are convinced that with the market opportunity available we can continue to grow at this level of 25 to 30% of disbursement growth resulting in about 35% of book growth. And we definitely see the opportunity in India for the SME segment, especially for the lab segment. And with all these manpower and the branch structure in place, we are pretty confident that we will continue like this.
Arul Selvan
Finance is concerned. We don’t have anything in that.
Vellayan Subbiah
Yeah, actually the Chola home finance we created thinking that we can move and create a home finance company. The arbitrage between home finance domain and NBSP has narrowed down significantly. So we have already decided not to pursue this course and keep the home loans in the main company itself. And we have renamed the company as Sola Leasing company so that they will start looking at leasing operations within the various products we have. But that’s in a very nascent stage right now. So we will look at it as we move into the next financial year or thereafter.
Shubhranshu Mishra
My first question remains unanswered. How many people in collections, business wise.
Vellayan Subbiah
Business wise collections we will not be able to share that is, you know we have given you the overall numbers at the business level individually. Collections of each of these are not publicly available information and we keep it within the company.
Shubhranshu Mishra
Sure, I will come back and with your facts.
Vellayan Subbiah
Thank you.
operator
Thank you. The next question is from the line of Dhaval from DSP Mutual Funds. Please go ahead.
Dhaval Gada
Yeah, thanks for the follow up. Just a quick one on the profitability. So overall what we’re seeing is for FY26 we are expecting margin improvement, OPEX improvement and credit cost improvement which should basically mean that that 3.5% PVT rota that we were guiding to should be a target for us. And. And if yes then is that a sustainable level from there on or we further invest back in the business and therefore we’ll see some bit of volatility in coming years on the PVT rotor like just directionally. With this change in the business model, diversification, etc.
Is the 3.5% now a sustainable number or not? That’s what I wanted to get through. Thank you.
Vellayan Subbiah
We will be working towards a 3.4 conservatively to look at it in the coming year and then move on to 3.5 because we still have gold loan related OPEX coming up in the current year and we will have to also look at how all of these will pan out. So I don’t want to right now count the chickens. Let us wait for it to move on. Let’s cross the first half and then we will know because that’s a crucial part when mon monsoon reality of the monsoon becomes more certain. So we will do it as we move on right now conservatively.
We will keep it. We will improve from the current level, but certainly there will be improvement. But whether we reach all of the 3.5 or somewhere midpoint is what we need to see as we move into the current year.
Dhaval Gada
Got it. And just a clarification, in terms of new businesses, apart from gold loan and consumer durable lending, what other sizable opportunities do you think we can tap in the next few years? Directionally would the consumer side of the business be big focus? I’m just trying to understand where the investments would be incrementally in the coming years.
Vellayan Subbiah
We continue to focus on this existing and new business. Whatever we have rolled out for near term, I mean three to four years, we don’t see we can go beyond cold loan and consumer delivery because SVPL CSAIL itself is basically even SME. Also there are five new businesses we have rolled out during this post Covid. So all five need to be groomed and we have to make it as big as Vehicle Finance Lab and actually in time to come. So we’ll focus on this only.
Dhaval Gada
Got it sir. Thank you and wish you all the very best. Thank you.
Vellayan Subbiah
Thank you.
operator
Thank you. Ladies and gentlemen. We’ll take the last question for today from the line of Sripal Doshi from Equator securities. Please go ahead. Mr. Doshi, I have unmuted your line. Please proceed with your question. Sir.
Shreepal Doshi
Hi. Sorry. Thank you sir for giving me the opportunity. So my question was on what why have we why we moderated our growth in the supply chain financing. Is there anything that the regulator has that the regulator has indicated or anything of that?
Arul Selvan
No, no, it is not. Actually it is not by the regulator. It is primarily a low rotor product. And here what we see is that is a much faster churn. So many times it is less than a month that the asset stays on the book. So you have large disbursements but it really does not come to your AEM and real income that comes into so OPEX becomes a burden. So with a very low yield it becomes sort of a non not our targeted level of expectations. And that’s the reason.
Shreepal Doshi
Most of my other questions have been answered. Thank you and good luck.
Vellayan Subbiah
Thank you.
Unidentified Speaker
Thank you.
operator
Thank you. As that was the last question for today, I would now like to hand the conference over to Mr. Nishin Sabate for closing comments. Thank you. And over to Nishin
Nischint Chawathe
everyone for joining us today. We thank the management for providing us an opportunity to host the call.
operator
Thank you members of the management on behalf of of Kotak Securities. That concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.
Vellayan Subbiah
Thank you.
Unidentified Speaker
Thank you.