Cholamandalam Investment and Finance Company (Chola), the financial services arm of the Murugappa Group, has said it expects a disbursement growth of 20-25% in FY23 on the back of demand revival. The company has plans to increase its total borrowings in the coming quarters to somewhere between Rs 82,000-Rs 85,000 crore from Rs 73,929 crore it clocked in Q1FY23.
Arul Selvan D, president & CFO, Chola, told FE that the growth in disbursements in first quarter of FY23 needs to be viewed in the context of low-base effect during the same quarter last fiscal, owing to lockdowns.
“The numbers are not strictly comparable, all we have to do is to continue with good disbursements. But I can tell you if you compare with our competitors we have done better on profitability, growth and NPA. We are hopeful that FY23 would be better than the previous year,” he said.
The aggregate disbursements of Chola in Q1 FY23 were at Rs 13,329 crore as against Rs 3,635 crore in Q1 FY22, a growth of 267%. Q1 FY22 was impacted by Covid second wave, resulting in lower disbursements and profitability.
He said in normal circumstances, Q1 would be a muted one in terms of disbursements due to the push from Q4 of the previous year. But the company had good disbursements in Q1 FY23 and it hopes to have robust disbursements throughout the current fiscal.
“For the full year, I think we will have a disbursement growth of somewhere between 20% to 25%. I am giving a wider band because, there is a lot of volatility in the market, including the semi-conductor issues,” he said.
On the other side, replacements of vehicles had not happened since the outbreak of Covid, there could be the inflow of aspirational buyers in the coming quarters. “Since replacements had not taken place for the last two to three years, there will be demand for vehicle loans,” he said. Chola’s vehicle finance disbursements were at Rs 8,562 crore as against Rs 2,846 crore in Q1 FY23, logging a growth of 201%. Currently, the vehicle finance business accounts for around 69 % of the disbursements book.
Chola’s new businesses consumer & small enterprise loans and secured business & personal loans have registered disbursements of Rs 1,055 crore and Rs 36 crore respectively in Q1 FY23. “Currently, these new businesses account for 2% of the book and we look to grow this to 5%, over a period of time. The new businesses are doing good and that too with minimal NPAs,” he said.
The company’s asset quality as of end of June 2022, represented by Stage 3 assets stood at 4.16% with a provision coverage of 40.69%, as against 4.37% as of end of March 2022 with a provision coverage of 39.67%. “We hope to bring down the Stage 3 assets to 3 and 3.5% by the end of this year from the current 4.16%,” he said.
On the borrowing, Selvan said currently, the company has borrowings over Rs 73,000 crore and with its growth plans, it has to borrow Rs 10,000 crore more. “We are slightly moving away from banks to markets, on this front. Now, that Sebi has mandated that 25% of the borrowings should be done through markets, we may have to raise money through NCDs and others, apart from the normal borrowings from the banks,” he added.