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Spark Capital: Q3FY13 Result Reviews of Cholamandalam Finance




Spark Capital Advisors(India) Private Limited


27 Jan 2013





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Cholamandalam Finance - Numbers in line with investment thesis: Maintain BUY Cholamandalam Investment and Finance (CIFC) reported results for 3QFY13 were in line with our expectations. CIFC continued to deliver numbers largely consistent with our thesis of improving product towards higher yielding segment, gaining operating efficiencies and lowering of funding costs. Disbursement mix skewed towards high yield Used CV and tractors portfolio with 39% of 9MFY13 disbursements going towards these segments compared to 33% in FY12. C/I ratio has come down on qoq basis to 47% compared to 52% in corresponding quarter. Liabilities cost have started trending down albeit marginally partially helped from securitization transaction that CIFC was able to do during the quarter. We expect return profile of CIFC to improve by 40 bps in FY14 over FY13 led by margin improvement , higher operating leverage partially muted by increase in provisioning costs. Further, the imminent capital raise of Rs. 3bn can bump-up the book value. We retain our BUY rating on the stock with a TP of Rs. 342 valuing the business at 2.2XFY14E ABV.

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