Motilal Oswal Reiterates Buy Call on Cholamandalam Investment and Finance, Sets Target Price at Rs 1870

Cholamandalam Investment and Finance Shows Signs of Recovery

Cholamandalam Investment and Finance (CIFC) appears to be emerging from a cyclical slowdown, with a recovery in growth momentum and early signs of asset quality improvement. The company is expected to report strong, broad-based disbursement growth across its key product segments, supported by robust demand across commercial vehicles (CVs), passenger vehicles (PVs), and two-wheelers in both new and used categories.

The Goods and Services Tax (GST) rate reduction has aided affordability by lowering vehicle prices, thereby strengthening demand conditions and improving conversion rates across segments. Over the past 12-18 months, CIFC faced sustained asset quality pressures, with Gross Non-Performing Assets (GNPA) deteriorating sequentially, driven by elevated delinquencies in the vehicle finance portfolio and higher slippages in the Consumer Durable Finance (CSEL) segment; however, early signs of improvement are now visible, aided by improving collection efficiencies in Vehicle Finance (VF) and moderation in credit costs, led by the exit from the partnership-sourced CSEL business.

Strong Growth Projections Ahead

We expect CIFC to deliver a Compound Annual Growth Rate (CAGR) of approximately 21% in Assets Under Management (AUM) and 26% in Profit After Tax (PAT) over the period of FY26-28. Additionally, the company is projected to achieve a Return on Assets (RoA) and Return on Equity (RoE) of 2.7% and 20.0%, respectively, in FY28.

| Projection | FY26 | FY27 | FY28 | | --- | --- | --- | --- | | AUM CAGR | 18% | 20% | 21% | | PAT CAGR | 24% | 25% | 26% | | RoA | 2.2% | 2.5% | 2.7% | | RoE | 17.5% | 19.2% | 20.0% |

We reiterate our BUY rating on the stock with a Target Price (TP) of INR1,870, based on 3.6x March 2028 Estimated Book Value Per Share (BVPS).