At a Glance
Backed by the 100+ year-old Murugappa Group, Chola Finance has built a ₹1.3 lakh Cr NBFC empire — lending to truckers, home buyers, and everyone in between. With 32% PAT CAGR over 5 years and ROE at 20%, it’s a steady compounding machine. The only thing hotter than its growth? Its valuation. 🥵
🏦 What Does Chola Actually Do?
It’s not flashy like Paytm or crypto-bros.
Chola’s business is good old lending:
- 🛻 Vehicle Finance (core business)
- 🏠 Home Loans & LAP (Loan Against Property)
- 📈 SME Lending, Secured Business Loans
- 📲 Consumer & Digital Loans (small but rising)
🧠 Think of it as your uncle’s friendly NBFC — but with ₹2 lakh Cr in assets and AI underwriting.
📈 5-Year Financial Growth (FY20–FY25)
| Metric | FY20 | FY25 | CAGR |
|---|---|---|---|
| Revenue (₹ Cr) | 8,712 | 25,846 | 24.3% |
| Net Profit (₹ Cr) | 1,054 | 4,263 | 32.2% |
| EPS (₹) | 12.86 | 50.69 | 31.8% |
| Borrowings (₹ Cr) | 55,000 | 1,75,000 | 24.7% |
| ROE (%) | 15% | 20% | ✨ Strong |
| Net NPA (%) | <1% | <1% | Clean book |
👑 This is what long-term compounding looks like without tamasha.
🔥 Q4 FY25 Snapshot
- 🔼 Revenue: ₹7,046 Cr (+30% YoY)
- 💰 Net Profit: ₹1,260 Cr (+47% YoY)
- 🧮 EPS: ₹14.98 (best ever)
- ⚙️ Financing Margin: 24% (up from 21% in Q3)
Oh and guess what?
NPAs remain comfortably low despite surging disbursements.
💼 Backing: The Murugappa Seal of Stability™
- Old-school conglomerate. No corporate drama.
- Group businesses include Tube Investments, Carborundum, Coromandel, etc.
- Promoter stake: 49.9%
- FIIs LOVE it: from 18% in 2022 to 28% in 2025
This is the Reliance of South India, minus the Bollywood cameos.
💸 What’s Driving Growth?
- 🚛 Used Commercial Vehicle Loans – Chola’s specialty
- 🧱 Affordable Housing – rising exposure, safe LTVs
- 📱 Digital SME Loans – faster TAT, growing 30%+
- 🧾 Diversified Book – no overexposure to one asset class
Also, cost of borrowing is efficiently managed with AAA credit ratings.
😬 Risks (Because No One’s Perfect)
- 🔻 Valuation:
- P/E: 30.7x (steep for NBFC)
- P/B: 5.5x
- ⚠️ Interest Coverage is low (because of funding-heavy model)
- 💡 Loan Book is still secured-heavy (less tech leverage than fintechs)
- 🧯 NCDs worth ₹1,750 Cr raised recently — refinancing cycle continues
🧮 Fair Value (FV) Range: ₹1,300–₹1,450
- EPS TTM = ₹50.69
- Reasonable NBFC P/E for quality lending: 25–28.5x
- FV = 50.69 × 25 = ₹1,267
- Upper FV = 50.69 × 28.5 = ₹1,445
💸 CMP = ₹1,558
So Chola is ~7.7% above upper fair value range — not crazy expensive, but no longer cheap.
📊 Peer Comparison
| Company | P/E | ROE (%) | Market Cap (₹ Cr) | Profit (Qtr) |
|---|---|---|---|---|
| Bajaj Finance | 33.8 | 18% | ₹5.6 L Cr | ₹4,546 Cr |
| Chola Fin | 30.7 | 20% | ₹1.3 L Cr | ₹1,260 Cr |
| Shriram Fin | 15.1 | 14% | ₹1.25 L Cr | ₹2,143 Cr |
| Muthoot | 19.6 | 16% | ₹1.04 L Cr | ₹1,444 Cr |
| L&T Finance | 17.9 | 12% | ₹47,463 Cr | ₹636 Cr |
Chola might not be the biggest, but its ROE and growth combo is punching above weight.
📉 Cash Flow Concerns?
Operating cash flow = -₹32,413 Cr in FY25
(yes, negative – as with most NBFCs)
Why?
Because loan disbursements are cash outflows — and NBFCs survive on constant borrowing. Not a red flag unless NPAs rise.
🧠 Edu Take
“Chola is what happens when a conservative South Indian NBFC meets ruthless compounding. No drama, just ₹₹₹.”
If you’re tired of fancy FinTechs burning VC money, Chola is your antidote:
🟢 Profitable
🟢 Clean books
🟢 Promoter-led
🟢 FIIs obsessed
Just don’t expect 5X from here — unless Murugappa 2.0 goes IPO and launches a UPI app.
Tags: Cholamandalam Finance, NBFC Stocks India, Murugappa Group, Vehicle Loans, Indian Financial Services, EduInvesting
✍️ Written by Prashant | 📅 June 22, 2025
