Mortgage businesses, such as loan against property (LAP) and home loans, are expected to be major growth drivers for Cholamandalam Investment and Finance Company. According to the company’s president and CFO, Arul Selvan, these segments will contribute over 35% of total assets in the next three years.

Speaking to FE, Arul Selvan said: “In 2-3 years, the share of vehicle finance in total assets will drop to 50%, while mortgage businesses like LAP, home loans, and secured business & personal loans will constitute around 35-37%. The balance will be SME and Consumer & Small Enterprises Loans (CESL).

Chola provides financing for commercial vehicles, passenger vehicles, two-wheelers, tractors, and construction equipment in both the new and used segments. Vehicle finance accounted for 69% of total assets in FY22, but its share has decreased to 57% as of Q1 FY25. Despite this decline, it remains the largest portfolio with total assets of Rs 88,638 crore, followed by loans against property (LAP) at Rs 32,135 crore and home loans at Rs 14,565 crore.

Selvan asserted that vehicle financing is and will continue to be the mainstay for the company. “We are adding more new businesses. So, when the pie gets bigger, the share of the existing business (vehicle finance) will appear to go down sharply in percentage terms,” he added.

He pointed out that the company’s vehicle finance disbursements grew at a CAGR of 38% over the last three years, reaching Rs 48,348 crore in FY24. In Q1 FY25, vehicle finance disbursements increased by 13% year-on-year to Rs 12,766 crore, while loans against property (LAP) and home loan disbursements grew at much higher rates of 45% and 22%, respectively, to Rs 3,874 crore and Rs 1,778 crore.

Selvan said mortgage businesses were earlier concentrated in the South and now the company is moving to northern, eastern, and western markets. “They (mortgage business) are riding on our vehicle finance branches. The LAP and home loan teams will be housed in vehicle finance branches but run by a separate team in these geographies,” he added.

Further, he said that since home loans and LAPs have longer tenures than vehicle loans, their contribution to overall assets will continue growing even as the vehicle financing share declines.

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Chola’s total disbursements in FY24 stood at Rs 88,725 crore with a total AUM of Rs 1.46 trillion. Selvan said the company is maintaining its earlier projection of 20% year-on-year growth in disbursements and 25% growth in AUM.

On the borrowing side, he said the company is not facing any liquidity challenges and banks are ready to fund. “We are able to garner bank loans because most of our lending is to the priority sector and banks are willing to lend to us, which helps them meet their priority sector lending norms,” he added.

Chola’s outstanding liabilities as of Q1FY25 stood at Rs 1.5 trillion, with bank loans contributing the largest chunk at 46%, followed by securitisation (17%) and debentures (11%).