Street shrugs off likely credit cost pain for Cholamandalam Investment

While the management believes it has made adequate Covid-19 provisioning, analysts are skeptical

With a 14 per cent gain in August, so far, the stock of Cholamandalam Investment and Finance Company (Cholamandalam) has outperformed the 2.5 per cent rise in the Nifty Financial Services index. While the extension of the partial credit guarantee scheme (PCGS) by the government on Monday partly supported the stock, investors have taken a host of other factors into account. These include better-than-expected disbursements, some progress in moratorium repayment, and the management’s commentary, which asserted the Covid-19 credit cost (provisioning as a percentage of loan book) would not be excessive.

In the June 2020 quarter (Q1), Cholamandalam did not provide