Cholamandalam Investment Pins Auto Loan Demand Growth Hopes On Festive Season

Auto loan demand is set to see a spike during the upcoming festive season, giving a major boost to Cholamandalam Investment and Finance Ltd.’s third quarter numbers, according to the company’s President and Chief Financial Officer Arul Selvan.

“Most festivals are in Q3. That’s when we expect the demand to zoom, including that for passenger vehicles, two-wheelers and tractors,” he told NDTV Profit.

Monsoons have been favourable this year, but the prolonged rains in September could negatively impact rural demand, Selvan said.

Second quarter numbers are expected to be similar to first quarter, said the Cholamandalam Investment chief executive, where the non-banking finance company clocked a net interest margin of around 6%.

Auto loans represent 60% of Cholamandalam Investment and Finance’s loan book. However, the NBFC is now looking to focus more on mortgage (loan against property) and home loans, the top executive added.

Cholamandalam Investment and Finance Ltd. plans to achieve this targeted growth through geographical and customer base expansion. 

“When you look at the overall AUM (assets under management), the share of AUM in vehicle finance will progressively come down in the next few years to 50% levels. Mortgage book, both LAP and home loan, will grow to 30-35%,” Selvan said, sharing his company’s broad outlook for the future.

The rest of the loan book will comprise personal loans and new portfolios. 

Cholamandalam Investment and Finance aims to benefit from a possible repo rate cut from the Reserve Bank of India. However, Selvan did not expect any such action from the central bank anytime soon.

“We will benefit from the rate cut. However, the external rate cut is to be decided after we know how much the RBI is willing to forego on that side,” he said.

“As an immediate effect, we can say a 25 basis points rate cut will mean that 10 bps are coming on to NIMs (net interest margins),” he said. 

On the lending side, 60% of the NBFC’s book is fixed and the balance is floating, Selvan revealed.