Cholamandalam Investment and Finance Company’s diversification beyond vehicle finance into areas like mortgage loans and consumer lending is driving the disbursement growth, besides helping offset the impact of a slowdown in vehicle sales, president and chief financial officer Arul Selvan said.
The Murugappa Group’s financial services arm reported a 13% year-on-year rise in disbursements in Q2FY25 to Rs 24,314 crore, following a 22% increase in the first quarter. Vehicle financing, its core segment, grew modestly by 5% to Rs 12,336 crore.
In contrast, newer segments outpaced the core segment. Disbursements in mortgage products like loan against property grew 35% YoY to Rs 4,295 crore while home loans grew 16% to Rs 1,823 crore. Consumer and small enterprise loans, its second-largest portfolio, expanded 26% to Rs 3,588 crore.
“That is the point of our diversification,” Selvan noted, adding that the company wants to avoid the cyclical nature of automobiles, which is more volatile than other segments.
Vehicle sales across categories, including commercial, passenger and construction equipment, experienced a muted or negative growth in Q2FY25. Domestic light commercial vehicle sales, for instance, were down by 7% YoY to 113,697 units while small commercial vehicle sales fell 14% to 40,743 units.
According to Selvan, vehicle financing would gain momentum in the second half of the fiscal, as favorable monsoon and harvest could boost rural incomes, driving vehicle demand across categories. “We are a rural-focused NBFC. If rural demand picks up, our vehicle finance portfolio will see growth.”
As of Q2FY25, Cholamandalam’s vehicle finance portfolio stood at Rs 92,012 crore, with used vehicle financing accounting for the largest share at 28%. Selvan said consumers still prefer vehicles with BSIV as costs associated with BSVI-compliant models are higher. Demand for used vehicles currently surpasses new vehicle sales, a trend likely to continue as long as BSIV models remain available. “We are adapting to that market to grow.”
As of September-end, Cholamandalam’s total assets stood at Rs 1.65 lakh crore. Vehicle financing accounted for 56% of total assets, followed by mortgage businesses at 30% and new businesses like consumer lending and secured business loans at 15%. The company aims to reduce vehicle finance’s share to 50% of total assets within two-three years.
