Good evening. Welcome to the earnings conference call of Cholamandalam Investment and Finance Company Limited. We discuss 1Q FY 2027 earnings today. The senior management of the company is represented by Mr. Vellayan Subbiah, Executive Chairman, Mr. Ravindra Kundu, Managing Director and CEO, and Mr. Arul Selvan, Chief Financial Officer. I would now like to hand over the call to Vellayan for his opening comments, after which we'll take Q&As. Over to you, Vellayan.
Thank you, Nischint, thank you, Kotak, for hosting the call. Good afternoon, everyone. I'm happy to take you through our performance for Q1 FY 2027. Chola continued its strong growth trajectory in Q1, reporting aggregate disbursements of INR 29,612 crore, up 22% year-on-year, reflecting healthy performance across all major businesses. A result, our AUM expanded 23% year-on-year to INR 2,54,392 crore, underscoring the strength of customer demand and effectiveness of distributing and operating model. The vehicle finance business maintained its growth momentum, with disbursements increasing 21% year-on-year during the quarter. Growth was aided by healthy demand trends across key vehicle categories and deep market penetration, resulting in auto OEM growing 19% to INR 1,24,132 crore. The MSME portfolio also demonstrated continued resilience, with disbursements growing 6% year-on-year and AUM increasing 26% year-on-year.
The segment benefited from sustained customer acquisition and continued expansion in under-penetrated markets. Within the segment, LAP AUM grew 23% year-on-year to INR 54,130 crore. SME AUM and SBPL AUM recorded robust growth of 39% and 40%, reaching INR 9,923 crore and INR 3,730 crore. Consumer segment delivered strong growth during the quarter, with disbursements increasing 52% year-on-year, reflecting sustained traction across all product categories and continued customer acquisition momentum. A result, AUM grew 24% year-on-year to INR 41,671 crore. Within the segments, the home loans continued to scale steadily, with AUM increasing 22% year-on-year to INR 23,644 crore. CSEL AUM grew up 12% to INR 15,884 crore, while gold loans witnessed strong expansion, with AUM reaching INR 2,143 crore, supported by growing customer acceptance and network expansion. NIM improved by 42 basis points year-on-year in Q1, supported by lower funding cost.
Credit cost declined by 24 basis points year-on-year, aided by healthy collections and continued stability in portfolio performance. Continued improvement in margins and asset quality drove stronger profitability, with ROA increasing to 3.7% in Q1 FY 2027 from 3.1% a year earlier, while ROE stood at 21.2%, reflecting the company's disciplined growth strategy and efficient capital deployment. Company continues to maintain a strong liquidity and capital position with good assets of INR 1,984 crore, including undrawn sanctions. Of June 2026, the capital adequacy ratio of the company stood at 19.81%, with Tier 1 capital at 14.81%, providing ample headroom to support future growth. Of the INR 2,000 crore CCD issuance, INR 1,370 crore was converted into equity during FY 2026, followed by a further INR 200 crore conversion in July 20, 2026. The remaining INR 430 crore of CCDs is expected to be converted in October 2026, further reinforcing the company's capital base.
Nischint and team, with that, I will stop and turn it over to participants for questions.
Sure. Thanks, Vellayan. The first question comes from Kunal Shah of Citi. Kunal, you can ask a question.
Hi. Firstly, if you can just highlight in terms of the overall macro environment, any business impact that we are looking in any of the product segments. Would there be any risk to the credit cost guidance which we had given earlier of, say, almost 1.5-odd% for FY 2027? This quarter we have seen increase across the board, say, in Stage 3 for most of the product segments, except for CSEL.
First of all, the net credit cost has already come down to 1.5% from 1.8% of the last year. We have achieved the target. I don't know why you are saying it has gone up.
No, he's concerned about GNPA.
GNPA you're talking about?
Yeah.
GNPA is basically the seasonal effect. We normally goes up from quarter four to quarter one, and it went up significantly higher last year. As compared to that, it has gone up by only 25 basis. That way, our start has been fantastic in terms of Stage 3 and Stage 2 improvement from or increase from quarter four to quarter one, and that is the reason there has been a improvement in net credit cost as against the last year of 1.8%-1.5%.
Now, coming to the disbursement and market, what we are seeing with respect to the business of what we are doing, as of now, we see that all the business line, whether it is Vehicle Finance or Loan Against Property or housing loan or SME or SBPL or CSEL or gold, and even consumer durable for us, we are seeing quite a good trend even in the month of July, and likely to be better growth, continue to be in the coming quarters also. We haven't seen any adverse impact on our disbursement or the growth, whatever we have been discussing, that 22%-23%, we're still holding it.
Okay. No product segments wherein you see any risk cropping up in second or third quarter because of be it below average monsoon or maybe the geopolitical conflict, any product segment wherein you could see maybe a slightly higher stress?
Currently, that visibility is not there that what is going to happen in quarter three after the Even the rainy season is not over, we are expecting that July, and whatever days left out in August, it could rain. As you know that the prediction is 92% rain, which is slightly below average as against the 96%. If that happens, it will not be so bad. Therefore, we are continuing to hope that the quarter three, quarter four also will be good with respect to all the product segment.
Sure. Just a couple of data point question. One is on the used vehicle disbursement side. Is it again more of a seasonal, it's down, maybe sequentially as well as in terms of the proportion in the overall Vehicle Finance disbursements? Second, in terms of home loan yields, that's also down almost 60 basis points quarter-on-quarter. Would this be more like a Q4 to Q1 phenomenon, or is there anything to read into this? Thanks.
No. Actually, the Vehicle Finance disbursement has been up to the mark. Obviously, quarter one growth is slightly lower than quarter three, four. That happen always.
No, on used vehicle particularly.
Yeah. It is the same line only. Used vehicle or new business they put together, they have grown more than 20% in disbursement. Their growth has been good only across all segment, in the Vehicle Finance. Coming to the point that, mortgage business, whether it is home loan or loan against property or even SBPL, and even in the case of used business, we have moved to recognize the disbursement by the check clearance from this quarter onwards. To that extent, wherever we issue the check and complete the formality, whether it is used business or it is home loan business or loan against property and the SBPL business, the disbursements are slightly lower. Like to like, if you see that, they have grown more than 20%.
From next quarter onward, you won't see this gap coming up because this is a one-time call we have taken, and said that now overall the disbursement will be aligned to the check clearance date instead of check disbursement date or check handover date.
Got it. Perfect. Yeah. Thanks a lot. Yeah.
Even after this, overall disbursement has been over and above 20%. That is also, you have to consider that.
Even interest income would be lower because of this, maybe, and that's the reason home loan yields are lower 60 basis points quarter-on-quarter in terms of when do we start booking the interest income. Would that have impacted the interest income line item in home loan in particular?
No, no. See, in the case of home loan, they are now moving to the slightly bigger ticket size also. Branch expansion, which they started now, which is going to take over in next six-month time. If you see that, their interest income has improved from 15.5% of last financial year to 15.9%. In a way, their yields are higher than last year, their yields are not going down. Their ROE also has improved from 3.9% pre-tax ROE to 4.7%. Yeah. I don't see what data you are referring to.
Quarter-on-quarter. Sorry. Yeah.
Quarter-on-quarter, always across the company, across all product, what happens is that, last quarter we do very good collection, and collection income goes up, so overall disbursement goes up, the other income goes up. Because of that, overall income always quarter four is higher than quarter one, and then again from quarter one, it start picking up towards quarter four. That's a normal phenomena.
Got it. Perfect. Yeah. That answers all the question. Thank you.
Thanks. Raghav Garg from Ambit. You go next, Raghav.
Sir, thanks for the opportunity, and good afternoon. I just have one question. When I look at your slippage ratio, and maybe if we round it off to just one decimal place, it's around 0.7%, which is same as Q1 of FY 2026. I think the expectation may have been for a higher improvement. I just wanted to understand if there's anything to highlight in any of these segments, if you're seeing any asset quality pressure. Just couple of more data points. In LAP and the vehicle finance portfolio, your gross Stage 3 percentages are also up YoY. Where I'm coming from is that last year, first half was probably much more intense in terms of flows into the NPA bucket versus what we've seen in the second half and what we were expecting for this quarter or maybe for this year.
Anything to highlight specifically in LAP and VF and in general, overall? That's the only question that I have. Thank you.
No. We have mentioned that from quarter four to quarter one, it is always slight jump in there. From quarter one to quarter two, quarter three, it is always improving, and you have seen that. In the loan against property, they have already delivered 0.3% of net profit.
NCL have been always at 0.3%. For the LAP business, the loan losses have been at about 30 basis points. For this first quarter, it is 37, 38 basis points. At an annualized basis, this will be maintained at 0.3% going beyond that. The other point on the Stage 3 on LAP is it's been at the same levels while the percentage increase in the Q1 and the Q1 of 2026 and 2027 remains almost the same. For default, it's also in the same range, between 2.3%-2.5%. We are not seeing any specific stress or trend, and we are pretty confident that this will be resolved.
Understood. Just one more question. If you guys can give the vehicle finance slippages, the absolute numbers for this year and the same quarter last year, if that's possible. That's all from my side. Thank you.
Even if you see the vehicle finance number, Vehicle Finance as on 31st March 2025, the number was actually lower than the March closing of 2026. March number was 3.84%, and even the previous year it was lower. We need to see that. Even March number was higher than the last year June number. Now, if you compare the March to June, last year March to June was like 3.52%- 3.89%, which is almost 45 basis point increase from the annual closing to quarter one closing. As against that, it is only 20 basis point has gone up from 3.84%- 4.05%. That is what we are trying to say, that the last year increase was 45 basis point and now it is the only 25 basis point, it is easy for us to basically reverse it over the year.
Understood. Point well understood. Thank you. That's all.
Thanks, Raghav. Next is Piran Engineer from CLSA.
Yeah.
Piran comes up.
Hi, thanks for taking my question, and congrats on the quarter. Just firstly on asset quality, is there scope for further reduction in NCL? Just simply because the share of CSEL is much lower today and we've cleaned out the fintech part of it, and vehicle is on a recovery mode.
First of all, we said we will be trying to reach 1.5% in this financial year. Luckily, we achieved it in first quarter itself. It is achieved because the increase in the NCL because of the lower increase in Stage 3 compared to the last year is actually benefiting us to achieve that 1.5%. Obviously, if we achieve 1.5% in the quarter one, by end of this financial year, it will be improved only. It is nothing because not only CSEL, but other businesses are also going to reduce their NCL, including the Vehicle Finance. That scope is there. CSEL itself is going to further reduce because they are continuously improving their NCL and we are in the process of improving further in this financial year. That part is also available.
Understood. Sir, my next question is for Arul, sir. When we speak with the banks, they say that now they have much more pricing power on corporate loans, especially NBFC loans, than they had, say, six months back. Do you also see that in your dealings with them, and what does this mean for our cost of funds going forward?
The cost of funds has been low, especially from banks when we borrow, we borrow mostly the priority sector loans, there we have a better bargaining power over them. On the market side, cost of funds has been slightly hardening, and we are worried whether the second half there will be a rate increase. If that happens, cost of funds may go up in the second half. Overall cost of funds may go up by around 10 basis points, but my guess is, for the full year, we'll be same as last year number, the percentage to averages. It is primarily because last year, first and second quarter were high and the third and fourth quarter were low. This year, first and second quarter will be low and third and fourth quarter may be higher.
Understood. Sir, this is assuming no rate hike, the cost of funds will be flat.
This is assuming rate hike of around 25- 50 basis points.
Understood.
I'm talking rate hike on the repo.
On the repo, yeah.
Yeah.
Today, between a bond and a bank borrowing, the non-PSL bank borrowing, what would be cheaper?
Right now, the bank still is cheaper. Sometimes it will be MCLR linked. If it is MCLR linked, then We don't know where it will ultimately land, because if there is a price increase, I mean, the repo rate goes up, then they hike the MCLR, it can be a problem. A bond, that way is a fixed pay. To that extent, you have more visibility of that.
Understood. Just lastly, in the home equity business, our yields are up 30 basis points, QoQ and YoY. Is there some one-off DA income booked in that?
No. No DA income gets booked in the individual businesses. DA income is shown separately. DA income is not part of that business.
No. Okay.
It is business income.
It is business income.
Business income only.
30 basis points it has improved. Okay. We hiked the internal.
They are continuously building product accounts.
No, we are continuously doing business and yield income both put to this LAP also.
Yeah. The composition of the small ticket LAP increase as well as going deep tier. It is also helping us in increasing the yields.
Understood. Yeah, okay. That's it from my end. Thank you and wish you all the best.
Thank you.
Thanks. Next we have Shixuan from UBS. Composition increase.
Hey, thanks so much for the opportunity, and congrats on your good quarter. Just wanted to follow up on your comments that disbursement number that we see this quarter is impacted by definition change on timing of recognizing disbursement. Just want to understand, on a like-for-like basis, what kind of disbursement growth are we seeing this quarter, adjusting for that?
Yeah. See, the disbursement, there are different ways of recognizing. One is, at the time of loan sanctioning itself, that was the initial way of doing it. We made a change that it will be at the time of handing over of the check. To be more conservative, to make sure, because this handing over of a check cannot be established with any specific date, which is validatable. What we have done is now we have moved from this quarter to debit in the bank account itself of the respective check. That is a provable, validatable data. That has moved the disbursement numbers slowly. From next quarter, you will see them as per the same way we are doing it now. Once we start doing it in the same fashion, we will see the growth happening correctly.
Okay. This impacts HL, LAP, and SBPL?
It is more pronounced in LAP and HL because there is a time lag between the cutting of the check versus the customer depositing. For example, in vehicle finance, what happens is it is a trade advance given to the dealer and then it's only a delivery order that's given. Already the money is given to the dealer, so there was no need to prove that this money has gone to the dealer or for the customer. The debit date will be the delivery date. Whereas in the case of LAP, there is a time lag between the time the check is cut versus it gets honored, because it needs to be entered into the registration document, which takes some time at the registrar office, et cetera.
You are saying used vehicle also is impacted by this definition change?
In used vehicle also it happens because there, again, there is a time lag between the time we cut check versus the.
Registration.
Physical registration or the hypothecation of the vehicle happening. In wherever there is a shift of asset from one individual to another, there will be some time lag. It is a purchase of a new asset, it flows through immediately.
Does this also impact the timing of the start of recognizing of our interest income in the P&L also?
In all the cases, we will follow now the debit into the bank account as the modus.
I see. Just adjusting for these definition changes, what's the like-for-like organic disbursement growth for home loan and.
It will be around 20% in the case of LAP and HL. Yeah.
Okay. itself.
Yeah. That's why the AUM growth is a better measure to watch for, that is where we have been consistently growing, because the time lag gets absorbed.
Okay. The difference is, organically, it's 20% for HL and LAP.
Correct.
Okay. Got it. Thank you so much.
Thank you.
Yeah. Hey, Nischint, I'm just curious, is this because of any new regulation or something that has come in for NBFCs that you have changed this?
No. See, what happens is the delay between the check cutting date or the loan booking date and the check honored date is slightly larger than RBI says that the customer is losing interest on the intervening period, and they want us to reverse the interest. We started reversing the interest more than a year back. What happened was that still the asset is lying in the book, and then it is seen as an asset lying in the book without earning interest, because you're reversing the interest. We needed to not recognize the asset itself in the first place. That is the reason why we are now saying we will recognize the disbursement only after the check is honored in the bank. This is not based on any RBI regulation.
It is our call that we have taken in order to basically to be more prudent.
It's good for customers.
Very technically, this could just mean that maybe at a margin, your yields could look a little higher.
Yeah. In a way, yes, because last year, the AUM carried some of the dispersed assets without the interest being recognized because we had been reversing the interest manually. To that extent, you will see some fill-up, because the denominator is marginally coming down.
Thanks. Next is Viral Shah from IIFL. Viral. Just one request to all participants, just stick to two questions because we have a long queue.
Sure. Thanks, Nischint. Thanks, everyone, for a good set of results. Just a couple of questions. I'll try to restrict it into two. Just from the perspective of the guidance for this year, right? In this quarter, as you called out, there were some realignment changes with regards to the disbursement recognition. Despite that, we have delivered a 22% disbursement growth. Even in the VF, we are at close to 21%. On the credit cost front, we are starting the seasonally the weakest quarter for us at 1.5%. I understand there is a basically second half seasonality, more so or not seasonality, I would say the risk given the El Niño, et cetera, but we are also carrying INR 200 crores of buffer provisions.
With regards to your guidance, both on the growth, as well as on the credit cost front, do you see some risks to the upside for this year or, say, at the higher end of it?
Look, as I mentioned earlier also, Viral, to someone that we are still hoping that we will continue to do well in this financial year. In terms of disbursement, second half is challenging because last year the growth started happening from the second half only. Having said that, market is still looking very buoyant and we are also in vehicle finance and in other businesses also, we are getting little bit market share benefit in terms of new businesses, CSEL, SME, they are doing good business. Considering that, and also now loan negative property, housing loan, SBPL, mortgage businesses and vehicle finance, used businesses, where from next quarter onward, there is alignment done with respect to disbursement date and disbursement recognition.
We don't have any problem in terms of delivering the number what we are seeing as of now, other than the base effect in the quarter three and quarter four. Quarter two will definitely will be as good as what we have done. After that, we have to see the market is supporting or not. If market is continue to be what it is now in the current quarter or it is slightly around that, we can still deliver 22% disbursement growth even quarter three, quarter four also.
Right. Does that mean, from an AUM standpoint, this year, 23% kind of number looks more doable for you?
Yeah, 23% we have already achieved. I think it is doable. We'll definitely not going down.
Got it. Sir, the second question, Arul Sir, more so for you. You mentioned that after baking in some bit of repo rate hike, you are expecting not more than 5, 10 basis points, kind of a cost of fund increase from here on, which means on a full year it will be flattish. When I overlay this with, say, the yields, wherein our mix is changing favorably with the CSEL business also now starting to grow, plus the fact that we will get the CCD conversion money, close to INR 630 crores, the effect of it will come after this quarter. Do you think that on the margin front, we can actually see a meaningful margin expansion in this year on a full year basis?
I mentioned about the cost of funds first. That's what I said, it will be flat. NIM will improve. Yeah. On the other side. No, you are right. CCD is improving, gold will improve. Those should bring, but let us see. I mean, let's not count the chicken before.
Got it.
As of now, NIM is 8.2%, and we are hoping that we'll hold it either by with the help of Arul sir or with the help of the business heads sitting here. Both put together, they will help us to basically continue to achieve this growth in terms of NIM.
See, there are other sides to it. The insurance IRDAI is coming with some things that I don't know what are the impacts of that. Let's see as it goes.
Now that, sir, you mentioned that piece, would you also want to basically just call out.
Let the circular come, we'll decide about it. It's not going to happen for this financial year is what I hear, so I don't know about it. Let us see what is the impact.
Just on that point, in terms of data, what is the associated kind of OpEx that is related to that income? If you have to assess what can be the risks to the bottom line, if at all.
No, I don't want to comment on it.
Yeah.
Without knowing what is the circular and what is the implication, we should not talk about it.
Got it. Makes sense. Thank you.
Next is Abhijit from Motilal.
Yeah. Thanks, Nischint. Ravi sir, first question is for you. We would have seen, right? I mean, all through the course of this call, lot of questions on asset quality. I think predominantly what people are trying to understand is that among all the NBFCs that have reported until now, we have generally seen good credit trends. In other words, maybe the deterioration that we are typically used to seeing in the first quarter was maybe not as pronounced as what we saw in Chola's results this time. Having said that, we heard you that the kind of deterioration which was there from 4Q to 1Q last year, this time it's much lower from 4Q to 1Q this year.
Just trying to understand, this is just normal what you said earlier, or is there something that we would look forward to in terms of the various developments which are there? It could be this U.S. war, the West Asia crisis, or for that matter, El Niño or weak monsoons. The only reason I ask is, over the last one and a half months, the NBFCs that we have met, very often they say that even if this year, if the monsoons are relatively weak, Despite that, the impact of weak monsoons will only be felt next year and not this year. If you could help us understand this, please. Why is this the case, and what are your thoughts here?
Yeah. First of all, Abhijit, you need to see that what is our Stage 2 and what is our Stage 3. These are the two delinquency points. Stage 2 has improved from June 25- 26 by 33 basis point, and Stage 3 has been increased from 3.16% - 3.29%, which is 13 basis point. These two data points should be added and see that what is our delinquency level. Our delinquency level is only 6%, that means 94% are current. Suppose you're comparing with any other NBFC, see that what is their delinquency level, what is their current, and what is their non-current.
Yeah.
How much the delinquent and how much is non-delinquent. If the company has 96%, 94% of the account is actually paying on time, then there will be seasonal effect, little bit. What I'm saying is that even after that, our numbers have improved from quarter one to quarter one in terms of overall delinquency. 33 basis points has improved in the Stage 2, and 13 basis points has deteriorated. Put together, the overall delinquency has improved by 20 basis points year-on-year. That is why it is reflecting on the net credit cost. Otherwise, net credit cost would have not improved, because our target to achieve 1.5% of net credit cost was for the full year, wherein we have achieved that in the first quarter because we have improved significantly better.
We have to see why we were saying 1.5% for the year and why we have achieved 1.5% in the quarter one, without comparing with anyone else. Suppose you compare, then compare what is their Stage 2 plus Stage 3 versus what is our Stage 2 plus Stage 3, and then see where they have gone up and where we are. That is the delinquency comparison. Now, coming to three problems. One is the West Asia crisis, then your El Niño effect, and then you have some macro-related issue, which can come up in the second half. That's what people are talking about. What we are seeing that, last time also when we were discussing with the investors, we said that quarter one is looking better, and it will deliver better number for the industry itself.
Similarly, what we are saying, quarter by quarter only we talk. We cannot predict so long. What we are seeing in this financial year, in this quarter, that July has been better till now, and it is likely to be better. We are expecting to improve credit cost from here further. That means we are considering all kinds of problems and saying that. If any ill effect comes out at a later stage, at that point in time only we can say that, but till now, we do not have that visibility, that how much it can impact. According to us, it is not impacting as of now, and therefore, we are very confident about quarter two and quarter three.
Got it, Ravi . Sir, just to sum that up, whatever we have seen in this quarter is just seasonality at play. Given the visibility that we have today, we are still confident and when we get to, let's say, March 2027, those asset quality numbers will be better than March 2026.
See, in fact, first point what you're making it now, one or two people also said that. The seasonality. What I'm seeing that even after seasonality, our performance has been good.
Right, sir.
That please note it down. Definitely the quarter four to quarter one, there has been some deterioration. It happens every time. In terms of delinquency, there is a U type of shape happen. It goes up from quarter one and then quarter two, quarter three is flat, and quarter four comes down. This time, the U is slightly started with small. Therefore, the delinquency level by quarter four going to go down. Better than quarter four, what we have seen last quarter.
Got it, sir. Then the last question that I had was on gold loans. I understand still very early days, but how are you seeing traction in that business? What are the plans there? Just trying to understand how's the competitive landscape in the gold financing space.
Gold loan, we have decided to open up another 360 branches. We have reached to INR 2,000 crore plus AUM now, likely to hit INR 5,000 crore in this financial year. The branches are doing well. Our per-branch AUM has been now INR 12 crore-INR 15 crore, which is going up continuously. That is a reflection of the people are productive in the new branches. Also the branches which we are planning to open up, they will also start delivering INR 12 crore-INR 15 crore in this financial year itself. That means by the next year end, all the branches what we are opening this year will become profitable.
Got it, sir. That's all from my side. Thank you so much for answering my questions, I wish you and your team the very best.
Thank you, Abhijit.
Thanks.
Next is Mr. Arvind Ravichandran from Sundaram Alternatives.
Hello, sir. Thank you so much for the opportunity. Actually, I am just continuing on the previous question that I asked Viral. Most of my questions are answered with respect to other segments. Only with respect to SBPL. Even there, actually, we have seen deterioration in that business for the entire market. From there, we saw continuous improvement for the past two quarters. Suddenly, you again see increase in NPA. That one segment, I was not able to understand why that happened. Is there anything to be worried about in that particular segment? With respect to CSEL, can we expect that business to start doing ROE at PAT level, above our group consolidated numbers?
First of all, you see that their PAT is much higher than the group. They are at PBT itself, 7.9%, PAT will be.
CSEL.
CSEL, you are talking about?
First question is before.
Firstly, I'm talking about the SBPL. First is that SBPL numbers are much better than the company performance in terms of ROA, and their NCL is at 2.3%. More or less, they will be in the range of 2.5%, even in the future also, because this is a high yield business. We are actually catering to very small merchant who are into smaller town, and where the yields are also higher. This business is designed like that. As of now, the pre-tax ROE is 7.9%, which is much higher than our expectation. That means they're doing very well. Coming to the Stage 3 number. Their Stage 3 number totally depending on the ARC because they don't have SARFAESI. Because a small ticket size NBFC doesn't have SARFAESI facility.
We do it with the ARC, and they work with us and then they recover it up, which is like, whichever quarter we do it, their NPA goes down, and then it is actually maintained. In last quarter, we did, and next quarter we will do it. As and when we do it, our collection efficiency goes up because those cases which are already in Stage 3, you need to do some legal action, and that legal action actually is possible through SARFAESI, which is available through ARC rule. Therefore, we are quite confident that their delinquency level in terms of Stage 3 and the net credit cost is in line with the business plan, and they're delivering more than 7% ROA. In fact, they are 7.9% pre-tax ROE, which is much higher than that. We will continue to grow it.
In fact, their disbursement growth has been fantastic. They are growing more than 30% growth, which you will see they will continue to grow. In this quarter, they are again, because of the alignment between the disbursement date and disbursement check clearance, the disbursement are slightly lower. In general, they are doing 30% + disbursement. This is from SBPL. In terms of CSEL, they have already improved their ROA significantly, and very soon you will see that their ROA will be much higher than the company ROA. That is what we designed the business in the beginning when we thought about it. They are at 3.3%. This 3.3% was also not expected in the first quarter. We were thinking that they will start hitting 3% from the third quarter.
Luckily, they have reduced their net credit cost by 2%, from 6.7% to 4.7%, which is very good sign that very soon they will start catching up to 3.6%, 3.7%, and they'll start delivering more than that. Both SBPL, CSEL are high return, along with the loan against property and affordable housing. All four business are meant for delivering more than the company ROE.
Sure. Thank you.
Next is Renish from ICICI Securities.
Yeah. Hi. Am I audible?
Yeah. Go ahead.
Yeah. Thank you, sir, and congrats on a good set of numbers. Just one thing on the PBT ROA item, which showed at 3.7%. Now, obviously, you all are sounding quite optimistic about rest of the three quarters. Naturally, there are tailwinds also in place in terms of credit cost being lower even in a seasonally weak quarter. Naturally, second half should be much better. How should one expect PBT ROA by, let us say, exit of Q4 FY 2027?
This is one of the best question.
I mean, directionally, obviously, it suggested it will be definitely higher, but would you like to put any number to that?
This is what "Dil Maange More".
Oh.
We have been talking about 3.5% pre-tax ROA. We should be happy that we have delivered. It has been delivered because net credit cost has come down, cost of fund is down, income has gone up. It has delivered because of three different line items supporting that.
Right.
Always all three line item doesn't support because of various reason. Isn't it?
Right. Absolutely.
That is the reason we need to consider some conservativeness in our forecasting. Why we are saying 3.5%? That's the minimum number we have said, and we will continue to do it. At the same time, as I mentioned, the credit cost can improve from here because the first quarter itself, we have delivered 1.5%. CSEL people.
Yes.
Want to deliver much better than that. Therefore, there is a scope. As Arul sir mentioned, this cost of fund benefit of 30 basis points, it cannot be there for full year. It can go down. As and when.
Yeah, the CCD conversion will also help, right?
CCD conversion is very small. Was exactly coming around at INR 2,20,000 crore borrowing. It is not a game changer.
Okay.
What, in short, I am saying that we will try to hold it or try to improve it.
Got it, sir. Just last thing on the gold loan pace. All the new products which we entered over last two and a half year, I think, the strategy or the idea is to generate better ROE than the console book. Is it right to assume that the gold loan will be designed in a way that it should generate, let us say, more than 4% PBT ROA in a steady state basis?
Tom, after three years.
Yeah.
It cannot deliver that number. Yeah, obviously.
Yeah.
All other gold loan companies are delivering, obviously I have given a higher target to him, a better target. He's saying that we'll deliver much better than the incumbents. Isn't it?
On par or better.
Yeah. He's saying on par.
Okay. No, I think this is great, sir. Sir, thank you, and best of luck.
Thank you.
Welcome.
Next question comes from Sanket from DAM Capital.
Thank you. Yeah. Hi, Ravi sir. I think the question was on growth and margin, you kind of answered. Just, I wanted to say that if in the first quarter you are seeing such growth versus what we have seen in last two years, where you have been fairly conservative and the positive or the buoyancy on the credit cards as well. Generally, whenever this happens, next two years are likely to be an up cycle. Do you see that or do you share that view? How do you see along there on?
Yeah, it is very difficult to say at this juncture because these two, three other uncertainties are also there. What you said is right. After the two to three years of down cycle, if things start improving, it actually lasts for another three, four years. That is correct. That formula has been right so far. We are going through a different scenario. El Niño is there, then you have a war going on and tariff issue going on. All those things we need to consider. We are hoping that we should continue to do well what we are doing for longer period. That is the reason, one or two quarter I can predict as of now.
Okay. Sure. Sure, sir. That was the only question in mind.
Thanks.
Thank you, Sanket.
Yes, sir. Very good set of numbers.
Yeah. Next question comes from the line of Subhranshu. Subhranshu, you can ask your question.
Hi. Good evening. Thanks for the opportunity. Three questions. The first one is on the CSEL. Now that we have knocked off fintech originations, what are our approval rates and FEMI numbers in the new book for personal loans? Second is that, now Mudra loans are allowed up to INR 20 lakhs. Essentially, they are unsecured loans up to INR 20 lakhs. What is the impact that we see in our small ticket LAP or even the home equity business till that, what could be the disbursement impact there? Third is, in terms of our bank loans, what is the pricing, say, blended above MCLR? What are the banks generally charging us? What's the premium above that? These are my three questions. Thanks.
Starting with the CSEL, FEMI rate, it is hovering around 3%. It continues to be at 3% throughout for last 15 months. There is no deterioration on the FEMI part. I previously also mentioned that FEMI is not the right matrix which I track. I normally track the six MOB and 12 MOB criteria. That is showing a much improvement, after our implementation of credit checks.
Approval rate.
Approval rate now is around 35%-40% for business loan, and for salaried loan it is around 60%.
And then.
On the Mudra loans, the small ticket, in fact our logins have improved on the small ticket and these borrowers, while they want a faster turnaround time, they want a long-term repayment. These customers prefer, and then the kind of distribution we have, we are able to penetrate these kind of customers, and we are not seeing any trend as of now on this segment.
The third one.
MCLR.
The bank loans are around 25%-30% of bank loan, which bank loan for itself is around 50% of the overall borrowing. It will be MCLR linked, the balance are benchmarked. The rate will be lower.
What's the premium on the MCLR blended?
We don't pay any premium on MCLR. We take it at MCLR.
We're basically borrowing at ballpark one year MCLRs?
It will be three month or even one month MCLR.
Three month to one month MCLR. Can I squeeze in just one last question if it's okay? Right. Can you spell out our collection architecture? How many people do we deploy in collections, and ballpark, if it can be given business-wise?
We have around 30,000, we can't give business-wise.
30,000 people are working and every business has different model to basically follow their collection. Good thing about CSEL is that 50% collection is happening digitally. There are different way of doing collection. Prashant is doing it. We have a T3, one for soft team, one for hard, and then recovery team. Different team has a different way of strategy with respect to the product.
Understood. This was very helpful. Thank you so much. Best of luck for ensuing quarters.
Yeah. Next is a follow-up from Viral. Viral, you can ask your question.
Thanks, Nischint. Sir, just wanted to basically clarify, I think with regards to the credit cost for this quarter, right? We have also seen that the Stage 2 and 3 PCR has kind of declined sequentially. Is this a function of the texture of the delinquent accounts and the segments also being different, and hence the PD, LGD kind of changing, or have you also consumed any part of the buffer provisions?
Buffer provisions are not being consumed. We have stated that also. The entire product grows, management only is still intact. We'll watch it then take a view on it at the end of this financial year. The PCR, one thing is, at least in VF, we wrote off some of the 100% provided cases. The PCR will look slightly moderating because of that, because you're removing the 100% provision on the DNPA, whereas the average rate is around 48% out there. That is the reason why you will see some mild variations in the PCR.
Has there been any experiential change in the PD, LGDs in any of the segments?
We don't change it every quarter. We do it once in a year. We do it in December quarter. We used to do it in the March quarter. From last year, we started with December so that we have some runway to make adjustments if anything is required in the fourth quarter.
Got it. Thank you.
Next, we have a follow-up from Piran CLSA. Piran, please go ahead.
Yeah. Thanks for the follow-up. Actually, my question is more broad-based on your gold loan business. Can you just broadly tell us whether we've done some analysis of our customers in vehicles, home loans, et cetera, how much of gold loans they have from the system, which we can easily tap because it's a cross-sell customer, and how we are really thinking about that opportunity? Or are most of our customers open market?
Yeah. First of all, we are not trying to basically do cross-sell with our own business, but we have done the analysis and found that around INR 700 crore, INR 800 crore loans have been taken by our customer across the country because our network and number of customers spread across the country is much higher. The gold loan, as of now, we are focusing in a concentrated market, where we are opening the branches and totally depending on open market customer.
Correct. Piran, to answer your question.
Okay.
90% of customers that we have acquired so far is new to Chola. In gold loan, what happens is we need not have an overlap with our existing set of customers because we open branches in places where we find opportunity to lend against gold. Since we operate in a very limited micro-market, let's say within three kilometers of the radius of the branch. Our focus is to, entrench deep into that micro-market and acquire customers in that micro-market. Yes, is there an opportunity there? There is a big opportunity to leverage on our existing set of customers, which we are planning to do in the days to come.
Piran, there will be the opposite opportunity also. There'll also be the reverse opportunity.
Correct.
Given that a lot of gold customers are entering Chola for the first time and the volume number of customers are high, cross-selling into them also over time can be a good option.
No, that's a fair point. Vellayan, what's our right to win there for the new to Chola customer? Is he also new to gold loans?
That's what we were saying.
If I do a breakup of the customers who are coming in, roughly new to gold loans would be about 20%-25%. The remaining are existing to gold loans. The right to win in that market is typically you look at it. Piran, you need to understand one thing. See, Chola has a brand name. Okay. We are riding, and in gold loans, trust plays a very vital role. We are riding on the trust that customers have on Chola as a brand in that micro-market. In this market, what I'm saying is, if you're offering a more transparent and better experience to customers, because all our journeys are digital journeys that we have currently in all our branches, right? Combined with an experience plus trust, we have a right to win in every market that we operate.
Understood. Our yields would be how much in this business?
I think our yields are on par or slightly a shade better than our peers in this industry.
Like 16%-17%, we take it at that sort of ballpark range?
Yeah.
Understood. Yeah. Okay. That was it from my end. This was pretty useful color and thanks and wish you all the best.
Thank you, Piran.
Thank you, sir.
Yeah. In the interest of time, maybe we can just take one question per participant. Raghav, you can ask your question.
Thanks, Nischint. Just one question from my side. On your ALM mismatch for the last few years, we've seen that at a -4%, -5%. When I look at FY 2026 annual report data, it seems that that negative mismatch has increased to about 10%. Any thoughts on your liability strategy if you would look to borrow more longer term, which may come at a higher rate, but also helps in containing the mismatch? Generally, if you can, comment on how you're thinking about the liability strategy ahead in light of this mismatch and your AUM growth targets. That's the only question from my side.
Annual report, that's not a full-fledged ALM. It's a column which is determined by the regulator that what is given there. It may not have the exact ALM. What you are seeing in the investor presentation is the right ALM. There is a defined way of presenting it, where you will see some differences between that and the statement out here. There is no mismatches, and you have to look at the mismatches only as a cumulative mismatch. Cumulative mismatch is what matters, because in earlier buckets, if you have a positive mismatch, then it helps to address the negative in such a way. There is no negative mismatch in cumulative mismatch in any of the buckets, and that's been our trend right throughout.
You're saying based on the investor PPT data, there is no negative mismatch, right? That's what you're referring to?
Investor PPT?
Investor deck.
That's the.
Investor. Correct.
Sure. Thanks a lot. Maybe I'll come back offline on that. Thanks a lot.
You always refer the cumulative gap, and cumulative, there will be no mismatch.
Sure.
Thanks. Next question comes from Shreepal Doshi of Equirus.
Thank you, Nischint, and thanks for giving me the opportunity. My question was on the gold loan side. Within that, do we have the vanilla bullet repayment as a product, or do we also have income-generating gold loan products as a product bouquet?
See, bullet or EMI are two options that typically is available in the market on a product level. Whether it is a consumer, if your question is whether, are we doing consumer and also?
Yes.
Income-generating loans? Yes, we do both. We've just started our income-generating loans recently. Largely, it is consumer loans.
Got it. In the income-generating loan that you've recently launched, what would be the typical tenures there?
We are looking at a tenure in the range of around anywhere between six to nine months.
Got it. Will that be the same for consumer loans as well?
Consumption loans typically would be in the range of around, we've got both six and 12 months.
Got it. I just have one more question, Nischint, if I can just squeeze that in. It's on the branch expansion strategy for our products like Vehicle Finance and gold loans. If you could give some highlight on that. Thank you.
Vehicle Finance, we are continuously putting up our resident location places. We are already having 600 + resident locations. There is a threshold which internally we are following, as and when they start hitting the disbursement number, we start converting them into permanent branches. In general, we have seen that.
We will be shifting around 125 resident locations into full-fledged branches by the end of this year.
Yeah. This is the number, on an average, we are doing it every year. Not only Vehicle Finance, even for affordable housing, loan against property, they are also moving in the same trend of 100 + branches, at least, they are opening it up.
Got it, sir. On the gold loan side, that number would be higher? Is that a trend?
Gold loan is specific.
Yeah.
Standalone branches. Rest of the people are working together from one premises, but gold loan people are separate.
Correct.
They are this year operating, starting 360.
Yeah, we are opening 360 more branches.
Got it, sir. Thank you so much for answering my questions and good luck, sir.
Thank you. Yeah. Thank you very much. That brings us to the end of this call. Thank you, everyone, for joining us today. Thank you, management, for giving us an opportunity to host the call.
Thank you.
Thank you.
Thank you very much.