Tag - Vehicle finance

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08 Mar

Disbursement growth will be higher than AUM growth– CHOLAFIN

Update on the Indian Equity Market:

 

On Monday, Nifty closed 0.1% higher at 14,956. Within NIFTY50, UPL (+7.1%), GAIL (+4.3%), and LT (+3.4%) were the top gainers, while INDUSINDBK (-2.2%), SHREECEM (-2.2%), and BAJFINANCE (-2.1%) were the top losing stocks. Among the sectoral indices, PSU BANK (+1.6%), MEDIA (+1.0%), and METAL (+0.8%) were the top gainers while REALTY (-1.1%), FMCG (-0.5%), and FINANCIAL SERVICES (-0.4%) were the top losers.

 

Disbursement growth will be higher than AUM growth– CHOLAFIN

 

Excerpts of an interview with Mr. D Arul Selvan, Executive VP and CFO, Cholamandalam Investment and Finance (CHOLAFIN), aired on CNBC-TV18 on 4th March 2021:

  • Commercial Vehicles (CV) replacement has been delayed by about 2 years now due to a series of factors such as axle load norms, BS6 implementation, and covid-19 impact. Mr. Selvan expects the replacement demand to kick in as CVs have to be replaced sooner or later. February 2021 itself saw good growth across CV segments.
  • Disbursements will have good growth in FY22E, but the AUM growth will not be the same. During the moratorium period, disbursements dropped but AUM was not impacted in the absence of repayments. Now as repayments also happen, disbursement growth will be higher while the AUM growth will be lower.
  • CHOLAFIN is adequately provided and won’t see higher credit costs. The collections are also improving. February as a 28-day month generally has lower absolute collections. However, collections in February 2021 have been marginally higher than January 2021.
  • Selvan is seeing that the earning potential of customers is improving and they are now able to service loans comfortably.
  • CHOLAFIN’s 4QFY21E RoE should be significantly better than FY20 reported numbers and directionally, the RoE would now improve.
  • Mr Selvan expects that the NIMs will be stable. NIMs could have marginally improved but CHOLAFIN is now scaling up on M&HCV segment which has lower NIMs. M&HCV lending business has a lower yield but it is compensated by much lower operating expenses and lower loan losses.

 

Asset Multiplier Comments:

  • CV cycle recovery has been a matter of debate between industry players for some time now. Some companies seem to be banking on the hope that CV recovery is here, while some players think we are still some time away from the upcycle.
  • Lenders across board have been witnessing improvement in collection efficiency. This is attributable to opening up of the economy post lockdown.

 

Consensus Estimate (Source: investing. com and market screener websites)

  • The closing price of CHOLAFIN was ₹ 537 as of 8-March-2021. It traded at 4.5x/ 3.8x/ 3.1x the consensus BVPS estimate of ₹ 119/142/171 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 444/- implies a PB multiple of 2.6 on FY23E BVPS of ₹171/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Cholamandalam Investment & Finance, NBFC , , , 0 Comments Read more...
03 Feb

Bigger demand in financing younger vehicles – Shriram Transport Finance

Update on Indian Equity Market:

The Budget 2021 induced rally which started on Monday continued as Nifty50 closed the day 142 points higher at 14,790. The rally was led by PHARMA (2.8%) along with PSU BANK (2.6%) and PVT BANK (1.7%) continued its upward journey while REALTY (-0.4%) and FMCG (-0.1%) were the only sectors that closed in the red. Within the index, INDUSINDBK (7.3%), POWERGRID (6.0%) and DIVISLAB (4.7%) were the biggest gainers whereas SHREECEM (-1.6%), UPL (-1.5%), and ULTRACEMCO (-1.0%) were the biggest losers.

Excerpts of an interview with Mr. Umesh Revankar, Managing Director- Shriram Transport Finance Company Ltd (SRTRANSFIN) with CNBC TV18 dated 2nd February 2021:

  • Mr. Revankar believes that the announcement of a voluntary vehicle scrappage policy is a positive development for the auto and allied industry. The development will increase the demand especially for financing of 3 to 10-year-old vehicles.
  • The existing loan book of the company is not impacted by the introduction of the policy. The company normally lends for a maximum of 12-13 years. However, he expects people to buy younger vehicles between 3-10 years and there will be a big demand in that space.
  • He mentioned that the company is able to raise money at low costs for a longer tenure. This is expected to reduce the overall cost of funds and eventually improve NIMs (Net Interest Margins). He is confident of breaching 7 percent in NIMs.
  • The company may do much lower than what had been planned for restructuring. As a result, the restructuring portfolio will be much smaller.
  • The credit cost as of December-2020 was at 2.59 percent which is expected to be sustainable in the next few quarters. The company is aiming to go back to 2 percent by the end of FY22E.

Consensus Estimate: (Source: market screener website)
•The closing price of SRTRANSFIN was ₹ 1,464/- as of 3-February-2021. It traded at 1.7x/ 1.5x/ 1.3x the consensus book value estimate of ₹ 854/ 970/ 1,093 for FY21E/FY22E/23E respectively.
• The Consensus price target of SRTRANSFIN  of  ₹ 1,393/- implies a 1.3x PB multiple on FY23E book value estimate of ₹1,093/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By NBFC, Shriram Transport Finance , 0 Comments Read more...
23 Dec

The auto industry will be back in full form in FY22E – Chola Finance

Update on Indian equity market:
Markets bounced back to erase Monday’s steep loss as Nifty closed the day 138 points higher at 13,466. Within the index, ADANIPORTS (5.6%), HCLTECH (5.4%) and TECHM (4.1%) led the index higher while KOTAKBANK (-1.0%), HDFC (-0.7%) and BAJFINANCE (-0.6%) were the highest losers. All the sectoral indices closed the day in green led by IT (3.4%), PHARMA (2.2%), and METAL (1.4%).
Excerpts of an interview with Mr. Arulselvan D., Executive Vice-President & CFO, Cholamandalam Investment & Finance Company (Chola finance) published on CNBC-TV18 dated 21st December 2020:
The impact of COVID-19 impact is behind now. The disbursements, collections, and profitability is expected to reach the pre-pandemic level in one or two quarters.
Demand in the auto segment surged ahead of the festive season. The auto industry will be back in full form in FY22E. The company will look to catch up with lost business during the COVID period in FY22E.
Post moratorium, there are certain segments that are not out of its COVID-19 pressure like the school bus segment, employee transport buses, and to some extent heavy commercial vehicles.
The company is witnessing improvement in the collection on a month-on-month basis and good traction from moratorium customers.
The rural segment especially is doing well because of good monsoon. More than 85% of the company’s branches are in the rural area and the company is confident of growth in the rural parts of the country.
Net interest margin will show a slight improvement from hereon. The cost of funds has reduced further with improvement in yields.
Consensus Estimate: (Source: market screener website)
The closing price of Chola finance was ₹ 360/- as of 21-Dec-2020. It traded at 3.1x/ 2.7x/ 2.3x the consensus Book Value estimate of ₹ 116/ 135/ 160 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 380/- implies a P/B multiple of 2.4x on FY23E BV of ₹ 160.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Cholamandalam Investment & Finance, NBFC , 0 Comments Read more...