Buy Cholamandalam Investment & Finance Company, target price Rs 1100: Sharekhan by BNP Paribas

Sharekhan by BNP Paribas has buy call on Cholamandalam Investment & Finance Company with a target price of Rs 1100. The current market price of Cholamandalam Investment & Finance Company is Rs 1000.3.

Cholamandalam Investment & Finance Company, incorporated in the year 1978, is a Large Cap company (having a market cap of Rs 82142.38 Crore) operating in NBFC sector.

Cholamandalam Investment & Finance Company key Products/Revenue Segments include Interest, Fees & Commission Income, Sale of services and Income From Sale Of Share & Securities for the year ending 31-Mar-2022.

Financials
For the quarter ended 31-03-2023, the company has reported a Consolidated Total Income of Rs 3834.57 Crore, up 12.51 % from last quarter Total Income of Rs 3408.09 Crore and up 44.34 % from last year same quarter Total Income of Rs 2656.63 Crore. Company has reported net profit after tax of Rs 855.19 Crore in latest quarter.

The company’s top management includes Mr.Vellayan Subbiah, Mr.Ravindra Kumar Kundu, Mr.M A M Arunachalam, Mr.Ashok Kumar Barat, Mr.N Ramesh Rajan, Mr.Rohan Verma, Ms.Bhama Krishnamurthy, Mr.Anand Kumar, Mr.Bharath Vasudevan. Company has Sundaram & Srinivasan as its auditors. As on 31-03-2023, the company has a total of 82 Crore shares outstanding.

Investment Rationale
CIFC is likely to sustain rich valuations onaccount of higher growth potential and steady return ratios. The company is likely to deliver a consistently sustainable RoE of 18-20%. Healthy AUM growth, bottoming-out of margins in the next few quarters, moderation in opex growth, and lower credit cost should translate into a healthy earnings trajectory going ahead.

The new business is still in a nascent stage, with asset-quality performance untested; however, the brokerage takes some comfort from the company’s historic execution track record. In the past business cycles, the company has performed well, which provides comfort in the quality of its high growth. The company has stated that its current focus is on strong collections and superior underwriting in the new business.

Promoter/FII Holdings
Promoters held 51.47 per cent stake in the company as of 31-Mar-2023, while FIIs owned 19.63 per cent, DIIs 21.45 per cent.