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Emkay Global
Cholamandalam Inv (Buy)
Target: ₹512
CMP: ₹465
Cholamandalam Investment & Finance Company (CIFC) has reported normalcy in disbursements in Q3 with vehicle finance recording ₹2,000 crore average monthly disbursement along with consistency in the home finance business.
Overall disbursement rose nearly 6 per cent y-o-y (22.8 per cent q-o-q) to ₹7,930 crore, aided by ₹1,500 crore in ECLGS disbursements. AUM growth was stable at about 13.1 per cent y-o-y with normalisation of repayments.
Calculated NIMs surged to about 8 per cent, highest in past 16 quarters, due to a sharp decline in cost of funds (-60bps sequentially). The company has recently raised equity of ₹1,200 crore, which also supported margins. Opex during Q3 declined by about 13.1 per cent y-o-y (+3.9 per cent q-o-q), resulting in healthy Cost to Average Assets at around 2.2 per cent.
The company has reported Gross Stage 3 assets at ₹2,480 crore (without standstill) against ₹1,900 crore as of Sept’20. This is a steep sequential rise, mainly contributed by moratorium customers. However, management remains confident of future recoveries amid improved collection efficiency at 98 per cent in December 20.
We like CIFC due to its diversified product portfolio, strong liability franchise and efficient underwriting practices.
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