M. Ramesh

Chennai, Dec. 2 Cholamandalam DBS Finance Ltd pleased its shareholders by announcing a nearly four-fold increase in net profit for the second quarter of the year — to Rs 18.02 crore from Rs 4.77 crore in the same period last year.

A close look shows that the growth has come from scale-up of operations in two high-margin segments — consumer (personal) loans, and loans for purchase of used trucks.

Enthused by this, the Chennai-based non banking finance company is now gearing up to further step up lendings in these segments.

Chola DBS began giving away consumer loans in January 2006, months after DBS of Singapore took a stake in June 2005 in the erstwhile Cholamandalam Investment and Finance Company of the Murugappa group.

Over the two-year period, the consumer-loan book has grown to Rs 1,800 crore, thanks to the expertise and technology platform of DBS. The company expects to add another Rs 600 crore to this book before the close of the year.

Gross margins in this business are around 10 per cent, leaving a comfortable cushion even after allowing for bad loans, acquisition, and administration costs.

With 86 dedicated branches and a system where the branch could take decisions on loan sanctions, Chola DBS feels it has the infrastructure to step up lending. A scale-up of operations would result in acquisition and administration overheads.

At present, over three-fourths of the loans given has gone to self-employed persons. Now, the company would like to target the salaried employees. “Structured loans linked to salaries” is how Mr Atul Pande, Managing Director, Chola DBS, describes it.

Over time, the company intends to get into card-based lending. It would be a smart card, loaded with credit, and the cardholder may use up the credit as and when he needs it. “Eventually, all personal lendings end in a card,” says Mr Pande. He told Business Line that even a test-launch of the cash-card venture was at least a year away.

Chola DBS’s vehicle loans portfolio is about Rs 2,800 crore, of which loans given for buying used trucks are about Rs 900 crore. This segment, again, is growing at 30 per cent. Used vehicles financing is growing at over 70 per cent.

Mr Pande says that the company plans to spend on television ads to expand this business and intends to open 40 more branches for vehicle financing in the Northern and Eastern regions.

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