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As is the case with most non-banking financial companies (NBFCs), the stock of Cholamandalam Investment and Finance Company (Chola) has fallen sharply because of the Covid-19 outbreak and its expected implications on business. At 1.5 times FY21 estimated earnings, the stock is now trading at a 49 per cent discount to its long-term one-year forward valuation mean. Though low valuation offers comfort, turning many analysts positive on the stock, higher asset quality pain is a key downside risk that investors should not ignore.
Chola’s March 2020 quarter (Q4) results, announced last week, show 76 per cent of its customers (over 70
