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Motilal Oswal Report
Cholamandalam Investment and Finance Company Ltd.'s profit after tax grew 24% YoY to Rs 8.5 billion, while net interest income grew 29% YoY to Rs 17.6 billion in Q4 FY23. FY23 PAT rose 24% YoY to ~Rs 26.7 billion.
Opex increased 21% YoY to Rs 7.9 billion (5% lower than estimates) and the cost to-income ratio declined 340 bp YoY to ~38%. Pre-provision operating profit grew 40% YoY to Rs 12.7 billion (14% beat).
Net interest income/core spreads were sequentially stable at 7.0%/6.7%, with an increase in borrowing costs offset by an expansion in yields. Gros stage-III/net stage-III improved ~50 bps/45 bps QoQ to 3.0%/1.7%. Provision coverage ratio on S3 rose ~5% to ~46%. Credit costs stood at 0.5% (annualised) versus 0.7% QoQ and -0.1% YoY.
New businesses contributed ~21% to the disbursement mix in FY23. New businesses spawned by Cholamandalam will continue to see an improvement in the disbursement run rate and contribute ~12% to the AUM mix by end-FY24.
While Cholamandalam will continue to invest in expanding the team and the distribution in new businesses, we expect these businesses to be return on asset accretive and help Cholamandalam sustainably deliver the guided pre-tax return on total assets of 3.5%.
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