Cholamandalam Investment and Finance Company (Chola), the financial services arm of the Murugappa Group, said the company expects its new businesses to contribute 12-13% to the total assets under management (AUM) by the end of FY24.
New businesses accounted for 7% of the AUM and 22% of the overall disbursement mix in Q3FY23. Chola last year launched three new business divisions – consumer and small enterprise loan (CSEL), secured business and personal loan (SBPL) and SME loan (SME).
Arul Selvan D, president and CFO, told FE new businesses grew to around Rs 2,600 crore in the third quarter, compared with around Rs 600 crore in the year-ago period. CSEL disbursed Rs 1,868 crore for the quarter while SBPL disbursed Rs 137 crore.
“The new businesses account for around 7% of the overall AUM. These businesses are having a good run and the growth may look a little higher because of a small base. That is the whole purpose of bringing in a diversified portfolio. If you focus only on auto loans, which is very cyclical in nautre, we have to ride the down cycle and that is why we have been building other portfolios,” he said.
According to Selvan, the company has kept customer profiles different for new businesses so that same customers are not serviced for different loans of the firm. “If the traction in new businesses grows at this pace, they would be contributing not more than 12% to 13% to the overall AUM in FY24. Other businesses of the company would also be growing at a similar pace.”
He said vehicle finance is the strength of the company and it will continue to grow the segment. “We are not moving away from it.”
Chola’s total AUM crossed the milestone of Rs 1 trillion in Q3FY23, up by 31% year-on-year. “This has been the target for a while, but we could not achieve it earlier because of Covid,” Selvan said.
Chola believes that sale of commercial vehicles is expected to come close to the pre-pandemic peak of over one million units this fiscal due to improved fleet utilisation, strong replacement demand and a pick-up in road construction projects. Despite high inflation and high interest rates, strong festive season sales and the workforce returning to the metro cities have helped drive the growth. The housing market has also been very strong.