📌 At a glance:
Cholamandalam Investment & Finance Company Ltd (CHOLAFIN) has tripled its revenue and nearly 3x’d net profit over the last 5 years. Backed by the Murugappa Group and booming NBFC demand, it’s become one of India’s most aggressive financiers — with ₹1.75 lakh crore in borrowings and zero signs of brake-pumping. Let’s break down the 5-year growth blitz.

🏦 About the Company

• Name: Cholamandalam Investment and Finance Company Ltd (CHOLAFIN)
• Sector: NBFC – Vehicle finance, LAP (Loan Against Property), Home Loans
• Parentage: Murugappa Group (Founded 1900; $9.3 billion biz)
• Footprint: Pan-India with 1,200+ branches and expanding into digital lending
• Clients: Mostly Tier 2/3 retail borrowers and SMEs – classic Bharat lending

👨‍💼 Key Managerial Personnel (KMP)

🧠 Murugappa Group is known for tight capital discipline — and CHOLAFIN is its crown jewel in terms of growth and margins.

📊 Financial Performance (FY21–FY25)

📈 CAGR Stats:

• Revenue CAGR (5Y): 24%
• Profit CAGR (5Y): 32%
• EPS CAGR (5Y): 28.5%
• Borrowing CAGR (5Y): 24.5%

In short: They’re growing faster than your EMIs.

🧮 Forward-Looking Fair Value Estimate (EduInvesting FV Range)

• Industry PE Avg (NBFC): ~22x
• Trailing EPS: ₹50.7
• Assumed EPS Growth Next 2 Years: 20% CAGR → FY27E EPS = ₹73

🎯 EduInvesting FV Range (FY27E):
₹1,400 – ₹1,650 (conservative)
₹1,800 – ₹2,100 (aggressive with PE rerating)

👉 Current Price (₹1,645) is baked-in for growth, but leaves limited margin of safety.

🔎 Business Mix: Where Does the Money Come From?

Cholamandalam makes money by borrowing cheap and lending expensive (classic NBFC magic).

🧾 Lending Segments:

• Vehicle Finance (~60%)
  • 2Ws, Used CVs, and Tractor finance dominate
  • Rural and semi-urban base = high spreads
• LAP + SME Loans (~25%)
  • Higher ticket, higher NIMs, but riskier
• Home Loans (~15%)
  • Gradually scaling this low-risk vertical

🏗️ They’ve also been expanding into consumer loans via digital apps — quietly building a Bajaj-Finance-light avatar.

🏦 Balance Sheet Deep Dive

• Total Assets FY25: ₹2.01 lakh Cr
• Reserves: ₹23,500 Cr → ~10x jump from FY14
• Borrowings: ₹1.75 lakh Cr — funded primarily via NCDs, Banks, and MFs
• Net NPA / Gross NPA: Not explicitly shown, but low default profile expected given profit stability

🔔 NBFCs thrive on asset-liability management. CHOLAFIN has maintained a low credit cost and strong capital adequacy despite growing its AUM like it’s on Red Bull.

📈 Stock Performance: Your Money’s Journey

• 5Y Price CAGR: 59%
• 1Y Return: 19%
• 52W High/Low: ₹1,684 / ₹1,168

💹 This stock has outperformed the Nifty 500 by a mile. Even better than Shriram, Sundaram & L&T Finance on consistency.

🧠 EduInvesting Take

If Murugappa was a Bollywood dynasty, CHOLAFIN is its Ranbir Kapoor. Not as flashy as Bajaj Finance, but rock solid, clean governance, profitable, and deeply entrenched in Bharat’s credit ecosystem.

But… valuations aren’t cheap anymore.

• At 32.5x PE, it’s priced for perfection
• Borrowings are ballooning → debt-to-equity needs watching
• ROE is excellent (20%) but flatlined, suggesting efficiency saturation

That said, Cholamandalam is a compounding machine. If India’s credit demand stays strong, it’ll keep delivering — just don’t expect multibagger returns from here unless there’s a big leg up in margins or new segment (like digital lending or insurance broking).

⚠️ Risks & Red Flags

• Interest Rate Cycles: NBFCs get squeezed during RBI hikes
• ALM Mismatches: A rising risk for all lenders
• Valuation Risk: PE near 5-year high. Any miss = derating
• FIIs Rising, Promoters Falling: Promoter holding dropped from 51.5% to 49.9% in 2 years

🏁 Final Verdict

“Chola is what you buy when you want to sleep peacefully. But if you’re dreaming of 5x in 3 years, this train’s already at full speed.”

Tags: Cholamandalam Investment, Murugappa Group, NBFC Stocks India, CHOLAFIN share analysis, best NBFC stock 2025, long-term compounders, vehicle finance India, financial services multibagger

Author: Prashant Marathe
Date: June 9, 2025