Cholamandalam Investment rallies 15% in two days on strong Q2 results

The company reported 16 per cent year-on-year growth in its assets under management (AUM) at Rs 74,471 crore.

Shares of Cholamandalam Investment and Finance Company moved higher by 12 per cent to Rs 280 on the BSE on Friday, thereby surging 15 per cent in two days after the company reported better-than-expected results for the quarter ended September 2020 (Q2FY21).

The company’s profit after tax (PAT) increased 41 per cent at Rs 432 crore on improvement in net income margin and lower operational expenses. It had posted a profit of Rs 307 crore in the corresponding quarter of previous fiscal.

The non-banking housing company reported 16 per cent year-on-year (YoY) growth in its assets under management (AUM) at Rs 74,471 crore. Net interest income (interest earned minus interest expended) rose 23 per cent YoY at Rs 1,255 crore, while net interest margin (NIM) improved 60 basis points YoY to 7.3 per cent during the quarter.

The gross non-performing loans (GNPL) ratio improved by 60bp QoQ to 2.8 per cent. 95 per cent of moratorium customers have paid at least one installment. Disbursal and AUM growth is much better than listed peers. The company has been gaining market share, especially in tractors. The brokerage firm Angel Broking has a ‘buy’ recommendation on the stock owing to stable asset quality, focussed management, diversified AUM, and the ability to raise funds at competitive rates.

Meanwhile, the company said it intends to maintain a strong focus on financing of tractors given the positive industry trends. More than 80 per cent of its branches are present in the rural areas, towns, and semi-urban areas which give a clear advantage to capitalize on the uptick in rural demand. The company is one of the leading players in this segment. Any improvement in the demand for three-wheeler and small commercial vehicles will help it in augmenting greater market share due to presence in rural and semi urban markets.

At 03:07 pm, the stock was trading 9 per cent higher at Rs 273 on the BSE, against a 0.45 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped over 10-fold with a combined 24 million equity shares changing hands on the NSE and BSE.