Cholamandalam Investment - Morphing Into An Enviable Franchise: Motilal Oswal

Motilal Oswal Report

Cholamandalam Investment and Finance Company Ltd. will continue to grow faster than its peers over the medium term, aided by a diversified product suite and a gradual improvement in market share.

Given its focus on diversification, we believe Cholamandalam could enter new retail product segments in the near-to-medium term.

With its ability to deliver industry-leading loan growth, its strong asset quality (estimated credit cost of ~1.2% over FY25-26) and healthy return on equity of ~21-22%, we believe Cholamandalam would continue to command premium valuations relative to its non-banking financial company peers. Reiterate our 'Buy' rating with a target price of Rs 1420 (4.3 times Sep-25E book value per share).

Key Risks:

• near-term asset quality deterioration in CSEL (partnerships), and

• vulnerability to cyclicality inherent in an auto demand cycle since the proportion of vehicle finance (more than 50%) in the loan mix will remain dominant even by FY26.

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