In This Article:
Release Date: February 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Cholamandalam Financial Holdings Ltd (BOM:504973) reported a 15% increase in disbursements for the quarter, indicating strong growth momentum.
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The company's total assets under management (AUM) grew by 34% year-on-year, reflecting robust business expansion.
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Net income for the quarter rose by 37% year-on-year, showcasing improved profitability.
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The company maintains a strong liquidity position with a cash balance of 15,159 crores at the end of December 2024.
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Cholamandalam Financial Holdings Ltd (BOM:504973) declared an interim dividend of 65%, indicating confidence in its financial health and commitment to shareholder returns.
Negative Points
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Asset quality concerns were highlighted with stage three levels increasing to 2.91% as of December 2024 from 2.83% in September 2024.
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Gross Non-Performing Assets (GNPA) increased to 4% from 3.78%, indicating rising stress in the loan portfolio.
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The company is experiencing elevated credit costs, particularly in vehicle finance and new business segments.
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There is a noted deterioration in asset quality in newer business segments, which could impact future profitability.
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Operational expenses have increased, partly due to higher collection efforts, which may pressure margins in the short term.
Q & A Highlights
Q: Can you provide insights into the asset quality, particularly regarding stage three assets and credit cost expectations for the newer businesses? A: (Unidentified_5) We anticipated flat performance from Q2 to Q3, with slight improvement in vehicle finance. However, newer businesses showed higher non-performing assets (NPA) due to partnerships. We are exiting these partnerships, which should reduce NPAs over time. For SME, reversals are expected as resolutions occur, improving credit costs in the next financial year.
Q: What are the expectations for growth, particularly in the medium term? A: (Unidentified_5) We maintain a 25% growth expectation for the medium term and are confident in delivering this growth in the next financial year.
Q: How are net interest margins and asset quality expected to trend, especially if interest rates peak or decline? A: (Unidentified_8) Borrowing costs are stable, and any rate cuts will reflect with a lag. Asset quality typically improves in Q4 due to better collection efficiency, but this year's improvement may be slower than last year due to macroeconomic factors.