"Cholamandalam Investment & Finance Company

Limited Q1 FY-23 Earnings Conference Call hosted by

Kotak Securities Limited"

August 1, 2022

MANAGEMENT: MR. VELLAYAN SUBBIAH - CHAIRMAN & NON-

EXECUTIVE DIRECTOR

MR. RAVINDRA KUNDU - EXECUTIVE DIRECTOR

MR. ARUL SELVAN - PRESIDENT & CFO

MODERATOR: MR. MAHESH - KOTAK SECURITIES

Page 1 of 18

Cholamandalam Investment & Finance Company Limited

August 1, 2022

Moderator:

Ladies and gentlemen, good day, and welcome to the Cholamandalam Investment & Finance

Company Limited Q1 FY23 Earnings Conference Call hosted by Kotak Securities Limited. As

a reminder, all participant lines will be in the listen-only mode and there will be an opportunity

for you to ask questions after the presentation concludes. Should you need assistance during the

conference call, please signal an operator by pressing '*' then '0' on your touchtone phone.

Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh

from Kotak Securities. Thank you and over to you, sir.

Mahesh:

Thank you, Ranju, and good morning to all who have joined the call today. We welcome you all

to the Earnings Conference Call of Cholamandalam Investment & Finance Company Limited.

Your usual moderator Nischint has had to step out today, and I shall handle today's session.

To discuss the first quarter's performance of Chola and share industry and business updates, we have the senior management with us today. We have Mr. Vellayan Subbiah, the Chairman and Non-Executive Director, Mr. Ravindra Kundu who is the Executive Director, Mr. Arul Selvan

  • the President and CFO. I would now like to hand over the call to Mr. Vellayan for his opening comments, after which we shall take the Q&A. Over to you, sir.

Vellayan Subbiah: Thanks, Mahesh, and good morning, everybody. So, just quickly jumping into quarter results, disbursements for the quarter were at Rs.13,329 crores, which is up obviously by 267% just because of the base effect from the last year. Total AUM is at Rs.86,703 crores up by 14% YoY. NIM, net income margin is up at Rs.1,640 crores, which is up 19% year-on-year, and the PAT is at Rs.566 crores, which is up 73% year-on-year.

Overall, consumer confidence continues to improve with the Indian economy growing at 14 to 15% in spite of higher-than-expected inflation and tightening of monetary policy by RBI and Chola delivered its best ever first quarter disbursals, collections and profitability with domestic auto sales zooming by 55% in the current quarter albeit on a low base and sustained growth momentum in residential unit sales.

Like we said disbursements are at Rs.13,329 crores and Q1 FY22 was impacted by COVID which is why it was lower in that quarter. But getting into the individual businesses, Vehicle Finance disbursements were at Rs.8,562 crores in Q1FY23 as against Rs.2,846 crores in Q1FY22, which is a growth of 201%.

Loan Against Property including Affordable LAP disbursed Rs.2,169 crores in Q1FY23 as against Rs.386 crores in Q1FY22, which is a growth of 462%. The Home Loan business basically disbursed Rs.478 crores in Q1FY23 as against Rs.199 crores in Q1FY22, which is a growth of 140%. SME disbursed Rs.1,030 crores in Q1FY23 as against Rs.204 crores in Q1FY22. Our new businesses, which are Consumer and Small Enterprise Loans and Secured Business and Personal Loans registered disbursements of Rs.1,055 crores and Rs.36 crores respectively in Q1 FY23.

Page 2 of 18

Cholamandalam Investment & Finance Company Limited

August 1, 2022

AUM stood at Rs.86,703 in Q1FY23 crores as compared to Rs.75,763 crores in Q1FY22 and PAT like I mentioned was at Rs.566 crores in Q1FY23 compared to Rs.327 crores in Q1FY22 a growth of 73%. The PBT ROA for Q1FY23 was at 3.7% as against 2.5% of the same period

last year and ROE for Q1FY23 was at 18.9% as against 13.5% of previous year.

The company continues to hold a strong liquidity position with Rs.5,113 crores as cash balance

as at the end of June 2022 (including Rs.1,500 crores and Rs.200 crores invested in GSEC and

T-Bill, which are shown under investments) with a total liquidity position of Rs.11,324 crores

(including undrawn sanction lines). The ALM is comfortable with no negative cumulative

mismatches across all time buckets.

Consolidated PAT for the quarter was at Rs.562 crores in Q1FY23 as against Rs.329 crores,

which is a growth of 71%.

In terms of asset quality, at the end of June 2022, Stage-3 assets stood at 4.16% with a provision

coverage of 40.69% as against 4.37% as at the end of March 2022 with a provision coverage of

39.67%. Total provisions currently carried against the overall book is 2.92% as against the

normal provision levels of 1.75% carried prior to the COVID-19 pandemic.

Management overlay is now at Rs.528 crores in terms of provisions carried on the books.

As per the revised RBI norms, the November 12th circular of last year, the GNPA and NNPA

percentages at the end of June 2022 stood at 6.31% and 4.35% respectively. We carry Rs.736

crores higher provisions under Ind-AS over IRAC. As per prevailing IRAC norms, the GNPA

will be similar to the Stage-3 numbers given above. The details of stagewise assets are available

as part of the overall release.

The Capital Adequacy Ratio for the company was at 19.15% as against a regulatory requirement

of 15% and Tier I capital was at 16.3% as against the regulatory norm of 10%.

So, Mahesh, I will stop with that. We'll be happy to take questions from our side.

Mahesh:

We can open the floor for questions now.

Moderator:

Thank you. We will now begin the question-and-answer session. The first question is from the

line of Shreepal Doshi from Equirus. Please go ahead, sir.

Shreepal Doshi:

So, first, we wanted to understand what is the outstanding restructured book now?

Arul Selvan:

The outstanding book stands at around Rs.3,400 crores which was at around Rs.5,800 crores

earlier when we did initially. It is down Rs.3,400 crores now.

Shreepal Doshi:

Just the second question on the same line. So, what would be the write offs that we would have

taken from the restructured book during this quarter?

Page 3 of 18

Cholamandalam Investment & Finance Company Limited

August 1, 2022

Arul Selvan:

See the restructured book has shown no stress and is similar to the normal pool. It is progressing

in the same way. As you know that we have discussed this earlier also, the moratorium given in

the restructured books are very small ranging predominantly to one month to three months at

most. So, all these we started tracking as part of our normal book itself and so the Stage-3

numbers which are already there corresponds with whatever is in the restructured book also.

Shreepal Doshi:

It has been guided for less than 4% net NPA number for the year end. So, keeping that in mind,

what will be the credit cost that we will be building for the year?

Arul Selvan:

Credit cost which is, currently, we are seeing it around 1.2% will be the level. So, as I have told

even in today's morning call, we will range anywhere between 1 to 1.5% over the cycle and we

should be at the pre-pandemic levels now.

Moderator:

Thank you. Next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go

ahead.

Abhijit Tibrewal:

My first question is to Ravi sir. Sir, if I kind of look at the texture of the vehicle finance

disbursement, so, basically, I'm looking at the different sub-segments. So, pre-owned vehicles,

SUVs and construction equipment are the three segments whereas we are sequentially declining.

Again, I understand there is the seasonality expected. Not really fair to compare Q4 to Q1, but,

I mean, having said that, I just wanted to understand that these 3 product segments, used vehicles,

SUVs and construction equipment, are they seeing a lot of aggression from banks and some of

the other registered NBFCs? And how should we kind of read this? That's my first question to

you, sir.

And second question is, I mean, how is the demand in tractors right now? There are a few other

your peer NBFCs were suggesting that the demand will cut. That is very, very strong while when

we talk to some of the auto guys, they don't kind of suggest the same thing. So, if you can just

kind of give some color on the tractor demand?

Ravindra Kundu:

Heavy commercial vehicle and construction equipment, the strategy customer or group customer

or top of the pyramid customer or large fleet operator customers are always being funded by

banks only. We were always financing the retail customer, and that's the reason if you see that

heavy commercial vehicle and construction equipment, our market share has been small as

compared to the light commercial vehicle and used. So, when the strategic customer or large

fleet operator purchase the vehicle, the banks are funding it only, and at this juncture the majority

of the sale which is happening is because of the replacement demand coming out from the

strategic customer or large fleet operator.

So, the banks are operating, but after some time when the freight availability and capacity

utilization of the retail customer improves, then the retail customer also will come, which will

further drive the growth, because initial drive of the commercial vehicle or construction

Page 4 of 18

Cholamandalam Investment & Finance Company Limited

August 1, 2022

equipment growth comes from the large fleet operator followed by the retail customer, and that

point in time, we also get into that.

Having said that, we also see that our market share has gone up in heavy commercial vehicle

and construction equipment because our customer segment also, you know, some parts of the

country started actually participating in purchase. That is from HCV and construction

equipment.

In the case of used vehicle, the used vehicle business is actually growing much faster because

even the strategic customer or large fleet operator who are actually buying the vehicle are not

adding the fleet but replacing the fleet. So, they are continuously selling their existing vehicle

and retail customers are buying, and that's the reason retail customers are not buying a new

vehicle. So, till such time you will see that, you know, used business is going to grow and we

are expecting that this year used business will continue to grow.

Now, coming to the tractor, tractor, monsoon has been good and as overall average, it is higher

than the 100%, but Bengal, Jharkhand, Bihar and Uttar Pradesh are not having that kind of

monsoon. It is slightly deficit. So, we need to wait for that because these are the larger market

for the tractor. Once that monsoon is actually completed by say August, September end, we will

be in position to say that how much demand strongness is there. However, as of now, the last

quarter we saw 16% growth and is driven by Madhya Pradesh, Rajasthan and some of the market

where monsoon has been very good. We are hoping that, you know, the rest of the four states

where tractor sales have been good in the past or they are actually producing more Kharif will

also have a better monsoon and that will further grow, will drive the tractor growth in this

financial year.

Abhijit Tibrewal:

So, my last question is for Arul sir. If I kind of look at the runoff that you are seeing in the loan

book, you have suggested kind of in last quarter that it will be mean elevated for the next two

quarters which is predominantly H1 of this fiscal year and then it should revert back to the

normalized levels. We have already seen that normalized or kind of come down in this quarter.

So, how should we kind of think about it? I mean, that's how it will progress that it will remain

slightly elevated for the second quarter and then start normalizing in the second half of this fiscal

year.

And sir, secondly, if I look at the write offs, what was the quantum of write offs and the

recalculated write offs, I mean, it looks like slightly elevated, nothing alarming, slightly elevated

compared to, let's say, the pre-COVID levels. So, how should we kind of think about it? Those

are the two questions.

Arul Selvan:

Yes, the runoff will be there for one more quarter for vehicle finance and it will be actually not

even visible in the LAP as well because the write-offs has been higher both in Q4, but in Q1, it

has not been there for vehicle finance other than the repo sales related. So, those are normal

quarter-on-quarter levels. The 1.2% on the credit cost, we are conservatively saying that those

Page 5 of 18

This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

Cholamandalam Investment and Finance Company Limited published this content on 05 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 August 2022 10:00:01 UTC.