Cholamandalam Inv & Fin
BSE SENSEX
36,257
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
10,831
CIFC IN
156
177 / 2.5
1761 / 1039
-8/-16/-11
488
46.9
31 January 2019
3QFY19 Results Update | Sector: Financials
CMP: INR1,174
TP: INR1,525 (+30%)
Buy
Margins stable, AUM growth steady across segments
Cholamandalam Investment and Finance (CIFC) reported 3QFY19 PAT of
INR3.04b (+39% YoY), largely in line with our estimate. This was driven by a
stable sequential NIM and cost control.
Disbursements grew at a steady pace of 13% YoY to INR76.5b.
VF
disbursements grew by 11% YoY, largely driven by LCV (+11% YoY) and
3W&SCV (+67% YoY). HE disbursements picked up to 19% YoY. Overall,
AUM growth remained robust at 29% YoY.
Spreads remained stable on a YoY basis, while increasing on a sequential
basis by 20bp to 6.7%.
This was driven by higher share of LCVs and used
vehicles and lower share of HCVs in the product mix, which led to yield
expansion of 50bp QoQ.
However, cost of funds increased 40bp QoQ.
Costs were managed well, which led to an opex growth of 12% YoY. Given
opex growth was slower than income growth, it led to C/I ratio decline of
300bp YoY. Also, credit costs were lower by 20bp YoY to 0.8%.
Valuation and view:
CIFC has a diversified portfolio, both geographically and in
terms of products. It is expanding into new segments like home loans and
MSME financing. With strong branch expansion, focus on new products, and
improvement in the broader economy, we expect high-teens AUM CAGR over
the medium term. However, we look to closely monitor margin trajectory and
asset quality. We maintain our FY19/20E EPS estimates with a
target price of
INR1,525 (2.8x Dec 2020E BVPS). Maintain Buy.
FY19E
4Q
1Q
2Q
3Q
4QE
15,622
16,174
16,716
18,307
15,221
53,953
66,417
7,198
7,989
8,609
9,561
10,415
23,079
36,575
8,424
8,185
8,107
8,746
4,805
30,875
29,842
27.8
23.3
16.8
22.1
-43.0
28.5
-3.3
2
2
1
1
4,102
304
4,106
8,427
8,187
8,108
8,747
8,907
31,179
33,948
26.5
23.4
16.8
22.1
5.7
28.3
8.9
3,779
2,816
2,901
3,158
3,111
12,895
11,986
4,647
5,370
5,207
5,588
5,797
18,284
21,962
19.0
24.3
22.9
28.6
24.7
29.1
20.1
116
983
612
953
902
3,451
3,449
4,532
4,388
4,595
4,635
4,895
14,833
18,513
1,531
1,535
1,549
1,591
1,758
5,092
6,433
3,001
2,853
3,047
3,044
3,137
9,741
12,080
36.7
36.0
49.4
38.7
4.5
35.5
24.0
25.5
29.5
30.9
29.3
21.4
25.5
21.4
8.2
7.4
7.0
7.1
3.8
8.1
7.1
44.8
34.4
35.8
36.1
34.9
41.4
35.3
33.8
35.0
33.7
34.3
35.9
34.3
34.8
di fferent wa y of reporti ng fi na nci a l nos ; FY19 numbers under Ind-AS
(INR Million)
FY2018
FY2019E
Financials & Valuations (INR b)
Y/E March
2019E 2020E
Total Income
34.4
39.7
PPP
22.2
25.9
Adj. PAT
12.2
13.8
EPS (INR)
78.1
88.4
EPS Gr. (%)
25.4
13.2
BV (INR)
394
473
BVPS Gr. (%)
22
20
RoAA (%)
2.5
2.3
RoE (%)
21.8
20.4
Valuations
P/E (x)
15.0
13.2
P/BV (x)
3.0
2.5
Div. Yield (%)
0.6
0.6
2021E
44.2
28.9
15.4
98.4
11.3
562
19
2.2
19.0
11.9
2.1
0.7
FY18
1Q
2Q
3Q
Income from Opera ti ons
12,962
13,503
13,894
Interes t Expens es
6,326
6,562
6,730
Net Interest Income
6,636
6,942
7,164
YoY Growth (%)
19.9
18.4
18.6
Other Op. a nd Other Income
1
1
1
Net Operating Income
6,637
6,942
7,165
YoY Growth (%)
18.4
17.0
17.5
Opera ti ng Expens es
2,315
2,706
2,820
Operating Profit
4,322
4,236
4,345
YoY Growth (%)
29.4
24.4
23.7
Provi s i ons & Loa n Los s es
1,080
1,135
969
Profit before Tax
3,242
3,102
3,376
Ta x Provi s i ons
1,145
1,062
1,182
Net Profit
2,097
2,040
2,194
YoY Growth (%)
26.5
19.3
35.0
AUM Growth (%)
13.5
14.3
19.3
NIM on AUM (%)
7.7
7.8
7.6
Cos t to Income Ra ti o (%)
34.9
39.0
39.4
Ta x Ra te (%)
35.3
34.2
35.0
E: MOSL Es ti ma tes ; * Qua terl y nos a nd ful l yea r nos wi l l not ta l l y due to
CIFC: Quarterly Performance
Y/E March
Research Analyst: Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
| Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);+91 22 6129 1526
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542|Shubhranshu
Mishra
(Shubhranshu.Mishra@MotilalOswal.com); +91 22 6129 1540
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
Exhibit 1: Quarterly performance v/s our estimates
Y/E March
Net Income
% Change (Y-o-Y)
Other Income
Total Net Income
Operating Expenses
Operating Profit
Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (Y-o-Y)
E: MOSt Estimates
3QFY19A
8,746
22.1
1
8,747
3,158
5,588
953
4,635
1,591
3,044
38.7
3QFY19E
7,772
-1.1
1,001
8,773
3,044
5,730
950
4,780
1,673
3,107
24.7
Var (%)
13
Comments
Higher share of LCV and used vehicle leads to beat
0
4
-2
0
-3
-5
-2
Cost control led to in-line op. profit
In-line
Source: MOSL, Company
Disbursement growth
steady at 13% YoY
Disbursements and AUM growth steady
Disbursements were up 13% YoY to INR76.5b, driven by 11% YoY growth in VF
and 19% YoY growth in HE. We note lower share of HCVs.
As a result, AUM growth in vehicle finance remained robust at 34% YoY, while
that in home equity picked up to 14% YoY.
Share of vehicle finance in total AUM has increased from 72% to 74% YoY, while
that of home equity has declined from 25% to 22% YoY.
Management has indicated that it will increase LCV disbursements compared to
HCVs, due to higher yields and tepid demand in HCVs.
Spreads remained stable on a YoY basis, while increasing on a sequential basis
by 20bp to 6.7%.
This was driven by higher share of LCVs and used vehicles and lower share of
HCVs in product mix, leading to yield expansion of 50bp QoQ.
As borrowing mix remained largely unchanged on a sequential basis, cost of
funds escalated by only 10bp QoQ.
The GNPL/NNPL ratio improved to 2.7%/1.5% v/s 3.7%/2.3% in 3QFY18.
Overall credit costs for the quarter declined 20bp on a YoY basis (as per Ind-AS)
to 0.8%.
Management indicated recoveries of INR500m in 1HFY19 and 36 resolutions of
INR350m in 3QFY19.
CIFC has a well-diversified portfolio, both geographically and in terms of
products. It is further expanding into newer segments like home loans and
MSME financing.
Over the past three years, CIFC has delivered 25% disbursement CAGR, 19%
AUM CAGR and 31% PAT CAGR. RoE has improved meaningfully from 16% to
21% over the same time frame.
CIFC’s premium valuation as compared to peers reflects optimism about the
evolving growth conditions and the improved outlook for the vehicle finance
business. Its valuation reflects the successful scaling up of its key businesses and
the robust profitability delivered by the company through revenue
diversification and higher operating efficiency.
Margins remained stable on
a YoY basis
Margins remained stable on a YoY basis
Reversals of provisions and
recoveries have been
meaningful
Asset quality stable
Valuation and view
31 January 2019
2
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
We maintain our FY19E/FY20E estimates.
We use a Residual Income model to value the company with Rf: 7.5%, CoE:
13.0%, Terminal growth rate: 5.0% and arrive at a price target of INR 1,525 (2.8x
Dec-20E BVPS).
BUY.
Old Est.
FY19
FY20
33.9
38.9
33.9
38.9
12.0
13.6
22.0
25.3
3.4
4.5
18.5
20.8
6.4
7.3
12.1
13.5
2.4
2.3
21.5
20.0
520.7
605.2
New Est.
FY19
FY20
34.4
39.7
34.4
39.7
12.2
13.8
22.2
25.9
3.5
4.6
18.7
21.3
6.5
7.4
12.2
13.8
2.5
2.3
21.8
20.4
534.7
631.8
% change
FY19
FY20
1.3
2.1
1.3
2.1
1.7
1.7
1.0
2.3
0.5
2.2
1.1
2.4
1.1
2.4
1.1
2.4
Exhibit 2: Maintaining estimates for FY19E/FY20E
INR B
NII (incl. Sec. Inc.)
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
RoA on AUM
RoE
AUM
2.7
4.4
Source: MOSL, Company
Concall highlights
Business
Incremental yield increased by 40bp on marginal disbursements
Incremental cost of funds increased by 30bp
HE portfolio yield improved as increased funding costs could be passed on to
customers
INR300m of assignment income in 3QFY19
HCV is de-growing and yields are lower, so CIFC will go slow in this segment
Opportunity to gain market share as smaller players exiting
Balance transfers have slowed down so NIM should improve
HE being offered at 116 active branches
Pre-buying due to BS6 should help CV, so FY20 will be a good year
No change in LTV in VF during 3QFY19
Securitization of INR5.5b and assignment of INR7.5b during 3QFY19
Spread is 100-150bp lower than cost of funds
Off-balance sheet at INR15b is 100% assignment
Provision reversals happening
Recoveries of INR500m in 1HFY19, 36 resolutions of INR350m in 3QFY19
Gross stage 3 assets: HE INR6.5b; VF INR8.22b
VF 30dpd+ has declined to 7.1% from 9.2% YoY
20% growth in AUM in FY20 with HE growth at 15-16%
3.9-4% of ROTA in FY20
Liquidity
Asset Quality
Guidance
31 January 2019
3
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
Exhibit 3: Quarterly Snapshot
FY18
1Q
Profit and Loss (INR m)
Interest Income
Interest Expenses
Net Interest Income
2Q
13,503
6,562
6,942
1
6,942
2,706
1,311
1,395
4,236
1,135
3,102
1,062
2,040
3Q
13,894
6,730
7,164
1
7,165
2,820
1,333
1,487
4,345
969
3,376
1,182
2,194
4Q
15,622
7,198
8,424
2
8,427
3,779
1,558
2,222
4,647
116
4,532
1,531
3,001
1Q
16,174
7,989
8,185
2
8,187
2,816
1,413
1,403
5,370
983
4,388
1,535
2,853
FY19
2Q
16,716
8,609
8,107
1
8,108
2,901
1,342
1,559
5,207
612
4,595
1,549
3,047
3Q
18,307
9,561
8,746
1
8,747
3,158
1,417
1,742
5,588
953
4,635
1,591
3,044
Variation (%)
QoQ
YoY
10
11
8
10
8
9
6
12
7
56
1
3
0
32
42
22
38
22
12
6
17
29
-2
37
35
39
Other income
Total Income
Operating Expenses
Employee
Others
Operating Profits
Provisions & Loan losses
PBT
Taxes
PAT
Asset Quality (%)
12,962
6,326
6,636
1
6,637
2,315
1,167
1,148
4,322
1,080
3,242
1,145
2,097
Gross NPAs (%)
Net NPAs (%)
PCR (Calculated, %)
Ratios (%)
Cost to Income
Provision to operating profit
Tax Rate
Total CAR
Margins Reported - Cumulative (%)
Cost of Funds
NIMs
Business (INR b)
4.7
3.2
31.9
34.9
25.0
35.3
19.4
8.2
7.7
4.5
2.9
35.2
39.0
26.8
34.2
19.3
8.2
7.8
3.7
2.3
36.8
39.4
22.3
35.0
18.5
8.0
7.6
2.9
1.7
44
44.8
2.5
33.8
18.4
7.9
3.0
1.7
42.8
34.4
18.3
35.0
18.2
8.0
7.4
2.8
1.6
42.9
35.8
11.7
33.7
18.3
7.8
7.0
2.7
1.5
44.4
36.1
17.1
34.3
17.8
8.2
7.1
8
366
62
381
73
23
3.2
80
68
8
3.8
38.1
6.0
30.4
9.1
873
35
16
5
52
0
18
(47)
28
100
35
On book Loans
Off book (Securitisation)
Total Borrowings
AUM Mix (%)
Vehicle Finance
Home equity
Others
Disbursements Details (INR b)
Total
Vehicle Finance
Home equity
Others
Total Borrowing Mix (%)
Bank Loans
CP
Debentures
Sub Debt & PDI
Other Details
Branches
Employees
341
9
312
70
27
3
49
38
7
3
26.9
8.5
33.4
9.9
703
17,800
357
8
326
70
26
3
55
43
8
4
27.7
10.0
34.9
9.9
725
18,500
382
7
347
72
25
3
68
56
8
4
27.1
10.4
35.0
9.1
858
19,500
443
10
413
74
23
3
70
57
9
4
40.1
11.3
25.6
8.8
883
468
10
466
74
22
3
69
55
9
4
44.0
10.0
25.0
8.0
885
489
15
468
74
22
3
76
62
10
5
45.0
10.0
24.0
8.0
891
21,900
11
13
5
13
11
19
Source: Company, MOSL
31 January 2019
4
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
Story in charts
Exhibit 4: PAT growth remains robust
PAT (INR b)
50
42
42
27
12
1.9
1.7
1.7
1.6
14
2.2
2.1
19
2.0
2.2
3.0
2.9
3.0
3.0
PAT growth %
49
35
37
36
39
14
5.5
17
5.9
12
6.0
10
6.6
20
18
6.9
19
7.2
28
23
17
8.1
22
Exhibit 5: Some uptick in NII
NII (INR b)
Growth %
6.6
8.4
8.2
8.7
Source: Company, MOSL
Source: Company, MOSL
Exhibit 6: AUM growth steady
Total AUM
16
18
19
17
15
14
Growth %
14
19
25
30
31
29
Exhibit 7: Disbursement growth has slowed
Disbursements (INR b)
55
30
21
3
46
44
44
24
5
6
54
Growth %
45
26
13
297 308 319 327 342 350 365 390 429 453 477 504
52
49
55
68
80
70
69
76
Source: Company, MOSL
Source: Company, MOSL
Exhibit 8: AUM mix trending towards vehicle finance (%)
VE
5
22
7
20
6
14
5
10
6
15
7
15
HE
5
12
Others
5
10
6
13
6
13
6
12
Exhibit 9: Asset quality stable (%)
GNPL ratio
4.7 4.7 4.5
3.6 3.6 3.5 3.8
2.1 2.1 2.0 2.3
3.2 3.2
3.7
2.9
2.3
2.9 3.0 2.8 2.7
1.7 1.7 1.6 1.5
NNPL ratio
73
73
80
85
79
78
83
85
81
80
82
Source: Company, MOSL
Source: Company, MOSL; CIFC moved to 90dpd in 4QFY17
31 January 2019
5
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
Exhibit 10: Financials: Valuation metrics
66
Rating
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
FB
DCBB
SIB
Equitas
RBL
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
Public Aggregate
Banks Aggregate
HDFC*
LICHF
IHFL
PNBHF
REPCO
Housing Finance
SHTF
MMFS
BAF
CIFC
SCUF
LTFH
MUTH
MAS
FY20E
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
Neutral
Buy
Neutral
Neutral
CMP
Mcap
EPS (INR)
P/E (x)
BV (INR)
P/BV (x)
RoA (%)
RoE (%)
(INR) (USDb) FY19E FY20E FY19E FY20E FY19E FY20E FY19E FY20E FY19E FY20E FY19E FY20E
365
33.1
7.7
20.2 34.2 13.0
166
181
1.6
1.4
0.5
1.2
4.7
11.8
2,033 77.7
79.8 95.9 25.5 21.2
543
621
3.7
3.3
1.8
1.8
16.7 16.5
691
25.0
18.5 39.6 37.3 17.5
266
301
2.6
2.3
0.6
1.2
7.2
13.9
1,222 32.8
37.9 46.1 32.2 26.5
303
348
4.0
3.5
1.7
1.7
12.1 13.3
199
6.5
18.5 22.6 10.8
8.8
126
145
1.6
1.4
1.2
1.2
15.5 16.7
1,476 12.5
68.8 100.2 21.5 14.7
441
556
3.3
2.7
1.7
2.1
16.5 20.2
86
2.4
6.1
8.9
14.1
9.7
67
75
1.3
1.1
0.8
1.0
9.5
12.5
177
0.8
10.2 13.2 17.5 13.4
96
109
1.8
1.6
0.9
1.0
11.6 13.4
13
0.3
1.7
2.7
8.0
4.9
29
31
0.5
0.4
0.3
0.5
5.6
8.6
119
0.6
6.3
8.4
19.0 14.1
73
80
1.6
1.5
1.3
1.4
9.0
11.1
562
3.4
20.6 28.0 27.2 20.1
176
199
3.2
2.8
1.2
1.3
12.3 14.9
288
77
99
114
250
81
36.1
3.3
2.4
4.2
2.6
1.3
8.7
-17.7
-24.4
8.9
17.0
4.5
32.3
8.0
3.7
15.7
42.3
12.8
29.0
-4.3
-4.1
12.8
14.7
18.1
8.2
9.7
26.6
7.2
5.9
6.3
249
109
127
165
448
235
276
117
128
179
484
245
1.0
0.7
0.8
0.7
0.6
0.3
1.0
0.7
0.8
0.6
0.5
0.3
0.1
-0.7
-0.9
0.3
0.2
0.1
0.7
0.4
0.2
0.5
0.4
0.3
2.7
-13.8
-15.0
5.3
3.5
2.1
12.3
6.8
2.7
8.8
8.2
5.5
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
1,886
434
674
932
398
1,015
404
2,596
1,132
1,734
133
501
538
44.4
3.1
4.0
2.2
0.3
3.2
3.5
21.0
2.5
1.6
3.7
2.8
0.4
42.8
45.9
95.6
66.0
40.0
49.6
56.1
109.7
78.0
45.1
19.9
9.5
7.1
14.1
10.0
9.3
18.7
38.0
14.7
12.0
11.5
10.0
19.0
17.1
7.7
6.1
11.9
8.8
7.6
15.0
29.1
13.1
11.0
10.0
8.6
16.5
307
325
395
435
245
693
172
329
393
949
66
229
154
343
371
446
496
287
808
191
408
470
1,089
78
270
179
2.8
1.3
1.7
2.1
1.6
1.5
2.4
7.9
2.9
1.8
2.0
2.2
3.5
2.5
1.2
1.5
1.9
1.4
1.3
2.1
6.4
2.4
1.6
1.7
1.9
3.0
1.8
1.4
3.1
1.5
2.4
2.4
2.3
3.8
2.4
3.5
2.3
5.8
4.9
1.9
1.5
3.1
1.4
2.4
2.7
2.3
3.7
2.3
3.6
2.2
5.9
4.6
15.6
15.0
25.6
16.1
17.7
16.8
13.2
22.8
21.5
16.3
18.8
23.8
19.8
15.3
16.1
26.1
16.8
17.0
17.8
14.9
24.2
20.0
15.5
18.5
23.3
19.6
108.7 133.3
21.7 27.0
68.3 89.1
77.2 86.4
144.2 158.0
11.5 13.3
50.3 58.0
28.4 32.6
UR=Under Review*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in
subsidiaries
Source: MOSL, Company
31 January 2019
6
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
Financials and valuations
Income Statement
Y/E March
Total Income
Change (%)
Total Operating Expenses
Change (%)
Operating Profit
Change (%)
Total Provisions
% of Operating Profit
PBT
Tax Provisions
PAT
Change (%)
Proposed Dividend
2014
14,399
29.2
6,582
15.6
7,817
43.5
2,833
36.2
4,984
1,862
3,122
13.0
501
2015
16,700
16.0
7,489
13.8
9,212
17.8
3,247
35.3
5,964
2,221
3,744
19.9
503
2016
20,872
25.0
8,449
12.8
12,422
34.9
4,272
34.4
8,150
3,023
5,127
36.9
703
2017
24,295
16.4
10,133
19.9
14,162
14.0
3,106
21.9
11,056
3,868
7,187
40.2
860
2018
31,179
28.3
12,895
27.3
18,284
29.1
3,451
18.9
14,833
5,092
9,741
35.5
1,017
2019E
34,383
10.3
12,193
-5.4
22,190
21.4
3,468
15.6
18,722
6,506
12,216
25.4
1,095
2020E
39,682
15.4
13,797
13.2
25,885
16.6
4,616
17.8
21,268
7,444
13,824
13.2
1,173
(INR M)
2021E
44,157
11.3
15,269
10.7
28,888
11.6
5,213
18.0
23,675
8,286
15,389
11.3
1,251
Balance Sheet
Y/E March
Share Capital
Reserves & Surplus
Net Worth for Equity Shareholders
Borrowings
Change (%)
Total Liabilities
Investments
Change (%)
Loans
Change (%)
Net Fixed Assets
Total Assets
E: MOSL Estimates
2014
1,432
21,514
22,947
180,932
18.3
203,879
824
-63.3
194,973
16.9
729
203,879
2015
1,437
30,296
31,733
194,752
7.6
226,486
675
-18.1
222,422
14.1
683
226,486
2016
1,562
35,012
36,574
225,762
15.9
262,336
666
-1.3
259,732
16.8
1,113
262,336
2017
1,563
40,907
42,470
242,068
7.2
284,538
2,385
258.3
285,124
9.8
1,401
284,538
2018
1,564
49,121
50,685
381,358
57.5
432,043
3,190
33.7
422,082
48.0
1,608
432,043
2019E
1,564
60,023
61,587
491,912
29.0
553,499
29,515
825.3
513,269
21.6
1,851
553,499
2020E
1,564
72,440
74,004
593,874
20.7
667,878
35,632
20.7
605,037
17.9
2,039
667,878
(INR M)
2021E
1,564
86,327
87,891
668,625
12.6
756,516
40,118
12.6
687,205
13.6
2,166
756,516
31 January 2019
7
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield on Loans
Avg Cost of Funds
Int. Spread on Financing Portfolio
NIM (on AUM)
NIM (on loans)
Profitability Ratios (%)
RoE
RoA
Int. Expended / Int.Earned
Other Inc. / Net Income
Efficiency Ratios (%)
Op. Exps. / Net Income
Empl. Cost/Op. Exps.
Asset-Liability Profile (%)
Loans/Borrowings Ratio
Net NPAs to Net Adv.
Assets/Equity
2014
16.9
10.6
6.3
6.7
7.1
2015
16.6
10.4
6.1
6.7
7.2
2016
16.2
9.8
6.5
7.5
7.7
2017
16.0
9.5
6.5
7.4
7.9
2018
14.1
7.4
6.7
8.1
7.6
2019E
14.7
8.3
6.4
7.1
6.9
2020E
15.1
8.6
6.5
6.8
6.8
2021E
15.0
8.7
6.3
6.5
6.5
17.1
1.9
57.9
2.2
15.9
2.0
56.7
1.6
16.6
2.3
52.4
0.8
18.2
2.6
51.0
1.1
20.9
2.7
46.3
2.1
21.8
2.5
52.9
0.0
20.4
2.3
55.0
0.0
19.0
2.2
56.5
0.0
45.7
28.5
44.8
29.6
40.5
30.1
41.7
39.7
41.4
40.9
35.5
46.3
34.8
46.2
34.6
46.0
107.8
0.8
8.9
2014
160.2
16.7
25.4
18.7
3.5
114.2
2.0
7.1
2015
203.1
26.8
30.3
19.2
3.5
115.0
2.1
7.2
2016
233.9
15.2
36.4
20.1
4.5
117.8
3.2
6.7
2017
271.6
16.1
4.3
46.0
26.3
25.4
5.5
0.5
110.7
1.5
8.5
2018
324.1
19.3
3.6
62.3
35.5
18.8
6.5
0.6
104.3
1.4
9.0
2019E
393.8
21.5
3.0
78.1
25.4
15.0
7.0
0.6
101.9
1.4
9.0
2020E
473.2
20.2
2.5
88.4
13.2
13.2
7.5
0.6
102.8
1.4
8.6
2021E
562.0
18.8
2.1
98.4
11.3
11.9
8.0
0.7
Valuations
Book Value (INR)
BV Growth (%)
Price-BV (x)
EPS (INR)
EPS Growth (%)
Price-Earnings (x)
Dividend per share
Dividend Yield (%)
E: MOSL Estimates
31 January 2019
8
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
Corporate profile: Cholamandalam Investment and Finance
Company description
CIFC was founded in 1978 as the financial services
arm of the Murugappa Group of companies. The
promoters have ~53% stake in the company. CIFC
commenced its business as an equipment financing
company and has now emerged as a
comprehensive financial services provider offering
vehicle finance, home loans, home equity loans,
SME loans, investment advisory services, stock
broking other financial services to customers. As of
Dec 2019, the company had an outstanding AUM
of over INR500b.
Exhibit 11: Shareholding pattern (%)
Dec-18
Promoter
DII
FII
Others
53.1
16.1
19.4
11.5
Sep-18
53.1
15.9
20.5
10.6
Dec-17
53.1
17.1
19.3
10.5
Exhibit 19: Sensex rebased
Exhibit 12: Top holders
Holder Name
Cartica Capital Ltd
Oppenheimer Developing Markets Fund
Hdfc Trustee Company Ltd A/C - Hdfc Childrens Gift
F d IBirla Sun Life Trustee Private Ltd. A/C Aditya
Pl
Aditya
Bi l S Lif R
I di F
Sbi Magnum Midcap Fund
d S i
1
% Holding
4.9
4.4
4.0
3.0
2.8
Note: FII Includes depository receipts
Exhibit 13: Top management
Name
M B N Rao
N Srinivasan
P Sujatha
Designation
Chairman & Independent Directo
Vice Chairman & M.D.
Company Secretary
Exhibit 14: Directors
Name
Arun Alagappan
Ashok Kumar Barat
Name
Bharati Rao
V Srinivas Rangan
*Independent
Exhibit 15: Auditors
Name
R Sridharan & Associates
S R Batliboi & Associates LLP
Type
Secretarial Audit
Statutory
Exhibit 16: MOSL forecast v/s consensus
EPS
(INR)
FY19
FY20
FY21
MOSL
forecast
78.1
88.4
98.4
Consensus
forecast
74.6
90.9
109.2
Variation
(%)
4.7
-2.7
-9.9
31 January 2019
9
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
NOTES
31 January 2019
10
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the inconsistency,
take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL)* is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a
subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock
Exchange Limited (BSE), Multi Commodity Exchange of India (MCX) & National Commodity & Derivatives Exchange Ltd. (NCDEX) for its stock broking activities & is Depository
participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for
distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy
or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though
there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should
be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant
banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Securities Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from
MOSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or
use would be contrary to law, regulation or which would subject MOSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong
Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with
the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment
services provided by MOSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to
"Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This
document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only
available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the
U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct
business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International
Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in
respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of
which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
****************************************************************
****************************************************************
31 January 2019
11
 Motilal Oswal Financial Services
Cholamandalam Inv & Fin
The associates of MOSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOSL also earns DP income from clients
which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may
not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of
MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The
information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation
of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is
prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for
the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by
virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed,
in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report
constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities
discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives,
financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document
should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including
the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be
suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial
risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions
contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and
alternations to this statement as may be required from time to time without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect
or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment
banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and
independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other
person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL
to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of
investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees,
agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in
connection with the use of the information.
The person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all
responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL or
any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and
delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com.
Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer:
Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-38281085.
Registration details: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412.
AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual
Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd. is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. *Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate
products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench. The existing registration no(s) of MOSL would be used until receipt of new MOFSL registration numbers.
31 January 2019
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