The ratings agency, Fitch, has assigned a long term rating to Cholamandalam Investment & Finance Co Ltd (BSE: 511243) that stands for ‘stable’. The affirmation reflects CIFCL's stable operating performance and established franchise in its core business of commercial vehicle financing.
Fitch notes that Cholamandalam Investment’s funding profile has improved from better matching of assets and liabilities and greater diversification among wholesale creditors. Credit costs have been steady through cycles in the core commercial vehicle loans segment (2011-12: 73% of assets under management (AUM)). Gross non-performing loan ratio has been satisfactory (Q1 2012-13: about 0.9% on AUM).
Fitch notes that although the company depends upon financial institutions (mostly banks) for its funding requirements, concentration risks are mitigated by its funding facilities being spread over several banks. Also, borrowings are mostly of a long tenure and assets and liability tenures are largely matched. However, a sizeable proportion of longer tenure assets (loan against property) create material asset-liability mismatches in medium-term buckets.
CIFCL is one of India's largest non-banking asset finance company (2011-12: AUM Rs 14,590 crore). “It has carved a niche for itself in financing small and light commercial vehicles, which is the fastest-growing commercial vehicles segment characterised by the limited presence of banks,” says Fitch.
On the BSE today, the Cholamandalam share closed at Rs 212, which was Rs 1.40 higher than the previous close.