Cholamandalam Investment & Finance Company is maintaining its FY27 assets under management (AUM) growth guidance of 20-23%, with improving trends in the auto segment supporting its growth outlook. According to reports from CNBC TV18, D Arul Selvan, Chief Financial Officer, stated that the company continues to see a positive operating environment and expects the second half of the financial year to remain on track. Selvan noted that auto is picking up and a large part of the El Niño threat has been subdued, though there are still some pockets of deficiency in monsoon conditions. As per The Economic Times, Selvan emphasized that things on the ground are good and the company is not changing its growth stance, with everything appearing on the right path for the second half.
The company is significantly expanding its gold loan operations, planning to add 300-350 gold loan branches during the current fiscal year, with more than 120 already launched. As reported by CNBC TV18, Selvan explained that gold loans remain a key area of focus as the company expands its branch network. The company had around ₹1,800 crore AUM across 119 branches as of March 2023, and the gold loan business is expected to take 2-3 years to reach break-even at the PBT level. According to The Economic Times, Selvan noted that gold will continue to be in negative territory at a PBT level for another one or two years before existing branches become larger and their contribution becomes more solid. The company is setting up exclusive branches for gold loans, unlike other businesses within its portfolio, which will have higher operating expenses.
Selvan highlighted the role of technology in controlling fraud risks in the gold loan business, stating that there are multiple options available to track gold loans at every stage, from receipt to delivery. According to CNBC TV18, the company is using RFID packets or RFID tags to track gold loans, enabling monitoring from a command centre at a central point. The technology developments help make the gold business much more secure, addressing concerns about fraudulent or spurious gold coming through customers or collusion of employees at branch level. As per The Economic Times, Selvan noted that there are multiple options available to track gold loans at every stage, right from its receipt from the customer to its delivery back to them.
On the regulatory front, the company has a small exposure to revolving-credit products at around 0.6-0.7% of its overall book, which is around ₹1,600 crore. As reported by CNBC TV18, Selvan stated that the company will take a view on this once it receives final RBI guidelines. The company has also been slowing its supply chain finance business, which is not ROA-accretive, and Selvan expressed doubt that regulators intend to add supply chain into the circular, though it may not be a large variance from an AUM perspective. According to The Economic Times, Selvan noted that the company doesn't have a product like revolving credit, and even in supply chain, they have been slowing down because it's not an ROA-accretive product.
Selvan noted that gold loans are a good business that should be focused on, despite increasing competition creating pricing pressure. According to CNBC TV18, the product is an appreciating asset with no worry about product cannibalisation or depreciation. The company is taking people from existing industry players while also creating training and development programmes to home-grow people for the future. As per The Economic Times, Selvan emphasized that gold is a good business that we should focus on, noting that while competition is coming in and creating pricing pressure, there is enough PBT, and certainly, for Chola, it will be an ROA-accretive business in the days to come. The company is making efforts to make the AUM per branch larger than industry standards.
