Q1 VF stress + Q2 Cobrapost gone.

Could you highlight growth expectation for next year and re-highlight the 25% medium-term guidance? Specifically on home loan growth, given 16% disbursement growth this year vs higher capacity. Also on credit cost in newer businesses (CSEL, SBPL, SME) - are these at peak-ish levels and should we see improvement across all businesses for FY26?

Vellayan said overall AUM growth is guided at 20-25% range and that holds. Prashant said home loans are seeing 15-20% disbursement growth and book growth of 30%+ for next 2 years. Ravindra said credit cost was 1.4% (vehicle finance 1.6%); expects vehicle finance to reduce by 20bps which gives 10bps benefit at company level (55% of book), CSEL/SME to reduce 50bps (10% of book = 0.5%), HL/LAP/SBPL may rise 10bps (35% of book = 0.35%); net company credit cost expected to drop from 1.4% to 1.3%.

On growth, in the medium term, should the newer segments be additive to the overall 20-25% growth profile or help sustain those levels?

From a guidance perspective, Vellayan said the 25% range always includes the new segments. The company will manage the mix within that, but 25% is the delivered number for the company.

Just for clarification - did you say AUM growth for Vehicle Finance will be 30% in FY26, or 25%?

Vehicle finance asset growth was guided at 20% and non-vehicle at 30%, which gets to 25% overall. Stand is to target 20-25% growth, dependent on monsoon. Vehicle Finance disbursed 12% for the year and is likely to increase from 12% to 15-17%. The company is slightly conservative, guiding 20-21%.

Looking at 4Q numbers for vehicle finance, there seems to be seasonality - in Q4, yields tend to increase 30-40 bps QoQ. Why is that?

Q4 income goes up because of collection efficiency improvements - the last quarter always shows improved collection efficiency, including EMI collection, recovery collection, shortfall collection and other charges, which increases overall income in Q4 (e.g., from 15.2% to 15.6% this year, 15.1% to 15.4% last year).

Has the cost of hedging on foreign borrowings gone up in recent months?

Cost of hedging has gone up in Q1 now, but it was good in Q4. The company managed to get good deals at fine rates, fully hedged in Q4 and will continue to be selective and watch the market.

How are you looking at cost of borrowings getting repriced this year given rate cut assumptions? With HL/LAP/SME on floating rate, what proportion will be passed on, and what margin expansion is expected? Also on credit cost - what has to change for the environment to improve and bring credit cost down next year? And gold loan launch - geographies, ticket sizes, target loan-mix proportion in 1-2 years?

Arul said about 20% of borrowings are linked to repo/T-bill (benefit flows immediately), 50% is linked to banks (must wait for MCLR reductions); marginal borrowings can be negotiated; full year reduction expected at 10-15bps net of pass-through, with NIM improvement of around 10 bps. Ravindra said credit cost improvement comes from vehicle finance, CSEL (running down Fintech book from Q3) and SME (SARFAESI resolutions in H2). Gold loan launching with 120 branches in South and East; targeting INR2,000 crores in 1.5 years; consumer durable also being initiated; cautious advance approach.

On opex - in Q4, opex growth has materially slowed, which is typical of Q4. What were the reasons? Going ahead with launch of gold finance and other new businesses, how do we see opex trending over the next year?

Generally opex increases a bit in Q4. This year, costs related to new businesses introduced over the last year have been completed, which kept it under control. Next year will see a little bit of opex coming because of the Gold Loan, but no further major increases. Target is to keep opex-to-asset ratio at 3-3.1%.

On assignment income - we have done assignment in last 2 quarters. Is this now a consistent strategy going forward?

There were opportunities and the securitization market has slowed because banks are saturated. Most probably the company will do one or two more deals, then slow down depending on market. Some income will continue to come through securitization, assignment, or sale of assets.

On Vehicle Finance disbursement growth guidance of 15-20% from 12% YoY - what segments will you focus on this year, where do you see green shoots, and is economic recovery built into the guidance?

Targeting 15% disbursement growth and 20% asset growth in vehicle finance for FY26. This will happen when LCV and SCV pick up. Used and passenger vehicle continue strong. Last year's good monsoon supported tractor and 2-wheeler. Focus is across all product segments across the country to achieve 15% disbursement growth and 20% asset growth.

On home loan, what would lead to improvement in disbursement and AUM growth (15%/20%)? On LAP, growth has been strong - will it normalize or continue?

Home Loan: 15% disbursement growth will deliver 30% asset growth, similar to current; 60% of HL disbursement still comes from South. Cautiously expanding in East/West/North. LAP is now expanded across the country with disbursement and asset growth at similar 30% levels; targeting 25-30% disbursement growth in FY26 to deliver 30% asset growth. Non-vehicle target is 30%.

On new businesses, when do we start seeing the pickup, particularly on SME and other segments where disbursement growth this quarter wasn't great? Will it be after first half with credit cost normalizing?

CSEL disbursement is lower because of exit from Fintech partnerships, compensated through consumer durable, in-house digital lending, and traditional TL/BL. Asset growth is slightly lower this year but will catch up next year. Net credit cost will remain at the same level for the first half and only in Q3/Q4 will NCL start coming down. SME: supply chain finance reduced (low ROA); replaced with small term loan and equipment finance; 30% asset growth possible; SARFAESI cases likely to resolve in Q3 with NCL going down.

In the new initiative, all three businesses (CSEL, SBPL, SME) have shown deterioration in asset quality, slowdown in growth, recalibration in strategy. What has gone wrong in terms of strategy?

SBPL delivered 7.6% ROA in Q4 and FY25, growing 70% on small base - doing very well. SME book is growing 33% with NCL at 1%; targeted ROTA is 2.5%, delivered 1.9%; the 0.5-0.6% gap will come from NCL reduction, very confident in delivering next year. Only CSEL Fintech business has high delinquency due to FLDG cap rule change (5% cap); the company has decided to exit Fintech digital business. In-house digital lending book delivers ROA above 6% standalone.

What share of CSEL book is Fintech as of March '25? And will gold loan be in standalone branches or shared with vehicle finance branches?

Arul said Fintech is 1.5% of overall Chola book. Ravindra said gold loan will be in standalone branches; planning to roll out 120 gold loan branches in this quarter; infrastructure has already been created.

On rolling out separate branches for gold loan - what's the rationale, since other new businesses have used the existing network? What's the thought process?

Gold loan needs a separate vault, separate RFID, and additional controls (tracking who enters the branch, who takes out gold) from head office. Gold loan branches also require specific locations to operate. These two requirements can be fulfilled only with standalone gold loan branches.

Does the opex guidance hold given the branch expansion for gold loan plus pickup in vehicle finance disbursement and incentives?

Broadly, the 3% to 3.1% opex-to-asset target should hold because the count of gold loan branches will not be very high in the first year.

What could be disbursement growth in SME lending next year, given last 5-6 quarters have been flattish? And what's the TAM in branches for LAP and home loans (already 800 LAP, 700 HL) - further expansion or just productivity-driven growth?

SME disbursement will be flat in FY26 because supply chain finance is being cut; small term loan and equipment finance now being introduced. Asset growth maintained at 30% via long-tenured term loan book. LAP and HL operate in three new zones for the last 3 years with disbursement lower than South due to productivity - focus is on improving productivity in current year. Branch expansion not high in FY26; subsequent year LAP and HL may add another 100 branches.

On the Tamil Nadu bill that was tabled over the weekend - given major exposure in this state, how confident are you of sustaining growth/credit cost? And what is your assessment on the ground post the bill?

Similar legislation exists in Karnataka, Telangana, Andhra Pradesh, and is more related to private lenders and microfinance. Cholamandalam has compliant collection approach. Balraj said the legislation does not apply to banks and NBFCs. Ravindra said the legislation does not apply to RBI-registered NBFCs (only cooperative banks/societies); does not see impact on vehicle finance, home loans or LAP.

But in Karnataka, players have been impacted because borrowers take time to understand the bill. Is any product in your portfolio vulnerable?

Nothing like that. The company approaches the market peacefully in collections; across the country the approach has been very soft - following up but not harassing customers.

On HL, delinquency rates have risen up to 0.6% - any concern? Also clarification - the 3-3.1% opex is opex-to-assets?

Arul confirmed the 3-3.1% is opex to assets. Prashant said actual delinquencies are at 0.40% for the year - last year had a Stage 2/Stage 3 release; 0.40% is being maintained and expected to continue. Stage 2/Stage 3 are in good shape; focus is on fresh bucket. Ravindra said HL/LAP credit costs are tightly maintained; 10bps increase would only impact 0.35% which gets netted by SME/CSEL 50bps reduction (0.5%); HL has no SARFAESI so resolution takes time via arbitration.

On a full year basis, do you still expect to maintain that 0.4% for FY26?

0.4% to 0.5%.

In the vehicle finance portfolio, have you seen any write-offs? Any color on sub-segments you're closely monitoring or seeing vulnerability?

Arul said only normal levels of write-off relating to repossession/sale of vehicles; no different change in trend; some skewness from higher proportion of used vehicles. Ravindra clarified that write-offs have not been done - only repossession and sale of vehicle has been done.

How about bounce rates and early delinquencies for the DPD book in vehicle finance?

Non-starter is lower than last year (March '24 to March '25 has come down). Early default has come down over December and September quarters but is still higher than March '24 numbers. Balraj said non-starter is the lowest in the last 18 months. Ravindra noted improving portfolio quality, but better monsoon is still required to see better NCL this financial year.

On asset quality - the fourth quarter seasonality was not strong as you had been guiding. Does that mean the 1Q weak seasonality will also not be as pronounced, especially in vehicles?

Last year Q1 was 1.9% in vehicle finance, currently at 1.6%. From 1.6%, vehicle finance Q1 will not go to that 1.9% level - so will definitely see Q1 to Q1 reduction. Balraj confirmed Q1 to Q1 reduction.

Did I hear correctly that 1.5% of book is Fintech-driven partnership AUM? Are we saying first half of the year, NCLs will still be high in CSEL primarily because of this Fintech book - on remaining INR2,000 crores AUM expecting another INR500-700 crores credit cost?

Fintech book is INR2,000 crores (~1% of INR2 lakh crores AUM). Ravindra clarified that CSEL NCL remains at the same absolute level (INR210-240 crores per quarter) in Q1 and Q2; only after the book runs down in Q3/Q4 does NCL come down. Arul clarified the INR240 crores is on the 8% CSEL book, not the 1.5% Fintech book.

In this quarter you have done some extra provisioning in CSEL. Could you give that number?

Extra provisioning was INR35 crores. The base CSEL credit cost was INR220 crores (similar to Q3 INR210 crores), and INR35-36 crores extra was created, taking the total to INR256 crores. This absolute level remains for two more quarters before going down.

On vehicle finance - clear pickup in new LCV and HCV financing in past two quarters. Comment? Also, your growth in car/UV financing significantly outperforms underlying industry sales - what's driving this? Have we tied up with more OEMs?

LCV growth was 4% vs industry 3%; SCV degrew 6% vs industry 9% (conservative, reduced market share). HCV: Chola grew 21% vs industry de-growth of 3%; market share rose from 2.9% to 3.5% as captive/fleet operators bought first then retail customers. Balraj said in passenger vehicle, market share has grown - Tier 3/4 city branch reach is helping; Maruti segment market share has gone up substantially.

In terms of new businesses, apart from gold loan and consumer durable lending, what are the sizable opportunities in the next few years? Will the consumer side be a big focus?

Will continue to focus on existing and new businesses already rolled out. For 3-4 years, do not see going beyond gold loan and consumer durable because SBPL, CSEL and SME need to be groomed. Five new businesses rolled out post-COVID need to be made as big as vehicle finance, LAP and HL.

Why have you moderated growth in supply chain financing - is the regulator indicating anything?

Not by the regulator. Primarily a low ROTA product with much faster churn (less than a month asset stay). Large disbursements but does not really count to AUM and real income; opex becomes a burden at low yield. Not at targeted ROTA expectation, hence the moderation.