At a Glance

Cholamandalam Investment & Finance (Chola), the Murugappa Group NBFC darling, reported Q1 FY26 profit of ₹1,138 Cr, up 20% YoY, on revenue of ₹7,267 Cr. While vehicle finance keeps the wheels turning, a massive ₹55,000 Cr NCD plan hints at aggressive growth (or just love for leverage). Stock trades at ₹1,439 (P/E 27), slightly on the expensive side.

Introduction

If NBFCs were Bollywood stars, Bajaj Finance is Shah Rukh Khan, and Chola is that underrated actor who quietly bags awards. For decades, Chola has mastered vehicle loans, LAPs, and now housing finance, while maintaining a Murugappa-brand conservatism. Yet Q1FY26 tells a different story: higher borrowings, solid growth, but valuation testing patience.

Business Model (WTF Do They Even Do?)

• Vehicle Finance (Core): Cars, CVs, two-wheelers – the bread and butter.
• Home Loans & LAP: Expanding into secured retail.
• SME Lending: Growing segment, riskier but high-yield.
• Other Services: Insurance tie-ups, fee-based income.

With 1,200+ branches and strong rural presence, Chola thrives where banks hesitate.

Financials Overview

Q1 FY26:

• Revenue: ₹7,267 Cr (+25% YoY)
• Net Profit: ₹1,138 Cr (+20% YoY)
• EPS: ₹13.5
• NII: ₹3,468 Cr (interest keeps eating margin)

FY25:

• Revenue: ₹25,846 Cr
• PAT: ₹4,263 Cr
• ROE: 19.7%
• ROCE: 10.3%

Commentary: Solid top-line growth, stable margins (~21%), consistent PAT growth. But cost of funds rising.

Valuation

• P/E: 27.2
• P/B: 5.1
• ROE: 19.7%

Fair Value Estimate:

1. P/E Method: EPS FY26E ~₹55; fair P/E 22–25 → ₹1,200–₹1,375
2. P/B Method: Book ₹281; fair P/B 4.2–4.5 → ₹1,180–₹1,265
3. DCF: Aggressive loan book growth, discount rate 12% → ₹1,250

Fair Value Range: ₹1,200–₹1,300 (Current ₹1,439 slightly overheated)

What’s Cooking – News, Triggers, Drama

• ₹55,000 Cr NCD Issue: Massive debt raise – expansion or refinancing?
• Promoter Stake Dip: Marginally below 50% – FII party on the other side.
• Loan Growth: Aggressive, but watch asset quality.
• Analyst Buzz: Earnings call scheduled Aug 1, 2025.

Balance Sheet

Auditor Comment: “More leverage than a teenager at a gaming café, but asset quality keeps us calm.”

Cash Flow – Sab Number Game Hai

Takeaway: NBFC cash flows are like magic shows – borrow to lend, lend to earn.

Ratios – Sexy or Stressy?

Observation: High ROE, but leverage is doing the heavy lifting.

P&L Breakdown – Show Me the Money

Commentary: Consistent profit growth; Murugappa DNA shines.

Peer Comparison

Roast: Priced like Bajaj, growing like Shriram – investors better hope it keeps running.

Miscellaneous – Shareholding, Promoters

• Promoters: 49.9% (down from 51.5%)
• FIIs: 28% (party animals)
• DIIs: 16%
• Public: 6%
• Buzz: ESOP allotment + NCD raise.

EduInvesting Verdict™

Cholamandalam remains a top-tier NBFC: consistent growth, Murugappa governance, and strong ROE. However, valuation is stretched, and high leverage could backfire in a rising rate environment.

SWOT

• Strengths: Diversified lending, strong brand, stable asset quality.
• Weaknesses: High leverage, low interest coverage.
• Opportunities: Expansion in SME & housing, digital lending push.
• Threats: NPA shocks, regulatory changes, cost of funds.

Final Take: A fundamentally strong NBFC, but at ₹1,439, there’s not much margin of safety. Investors need to ride carefully.

Written by EduInvesting Team | 31 July 2025
SEO Tags: Cholamandalam Finance, NBFC Stocks, Murugappa Group