Cholamandalam Investment and Finance Company (Chola) held a press meet subsequent to their Annual General Meeting held on July 30, 2012 to discuss the performance of the company for the quarter ended June 2012 and future plans. The meeting was addressed by Vellayan Subbiah, Managing Director of the company.

Key takeaways of the meet

Disbursement grew by 52%yoy in Q1FY13 to Rs 2535.20 crore. The company expects the disbursement for full year to be higher by 30% given tough market conditions especially in vehicle financing. While HCV is slowing down the demand from LCV segment is stable auguring well for the company.

The Gold loan operation has disbursed about Rs 16 crore in Q1FY13. The vehicle finance disbursal stood at Rs 2026 crore (up 56%yoy from Rs 1302 crore in Q1FY12) and Home Equity Loans disbursal was at Rs 493 crore (up 33% from Rs 370 crore in Q1FY12).

Total assets under management crossed Rs 15000 crore during Q1FY13, including vehicle finance assets under management of Rs 10000 crore during the quarter.

The Gross NPA of the company were at 0.88% of total assets as end of Q1FY13 and the Net NPA constituted 0.33% of total assets. The same figure as end of corresponding previous period was 2.36% and 0.28% respectively.

The company plans to foray into rural finance and MSME (Micro, Small and Medium Enterprise) segment) finance business. As far as Rural Finance is concerned the company will leverage the strong rural connection of Group Companies i.e. EID Parry (India) and Coromandel International. Similarly MSME finance will first focus on enterprises affiliated with the Murugappa ecosystems such as vendors to Murugapa Group companies. The Rural Finance and MSME finance operation will commence by August-September 2012. Moreover the company is also planning to enter into affordable housing finance as line of extension of Home Equity and this segment largely target the non salaried class where the spread is high and the market is currently served largely by regional players offering good growth potential for national players such as Chola.

The Rural finance will be in the ticket size of Rs 50000-100000/-. The company will have a de-risked model, and this loan portfolio will be with-out recourse. The company will primarily originate these loans for other financial institutions.

The company expects new businesses such as Rural Finance, MSME finance as well as Affordable Housing Finance etc will mature in next 3 years and will become significant pillars for Chola over time of next 5-10 years.

The company has expanded its presence to 429 branches as on June 30, 2012 compared to 375 as on March 31, 2012. The additional branches are in Tier III and Tier IV locations across India.

The company raised Tier II capital of Rs 220 crore during the period by way of subordinated debt to strengthen its capital adequacy ratio.

The company has also ventured into tractor financing and gold loan. The tractor financing has captured a market share of 3.5% in its first full year of operations. Similarly the gold loan operations, which commenced in last quarter of FY12 has a book size of Rs 42 crore.

The company brought down the Net Credit Losses to 0.37% in vehicle finance.

Cholamandalam Factoring, a subsidiary of the company made a profit of Rs 51 lakh compared to a loss of Rs 57 crore in Q1FY12.

The wealth management business of the company (represented by Chola Securities & Chola Distribution Services) has reduced its losses to Rs 0.35 crore in Q1FY13 from Rs 0.49 crore in corresponding previous period.

The company is consciously focusing on new vehicles for financing. Of the vehicle finance only about 29% is used CV segment and even out of that 29% about 15% is refinance to customer who has strong track-record.

Capital adequacy ratio has increased to 18.41% from 16.77% in June 2011. The company does not require any capital infusion this fiscal but may require by early next fiscal.