Rate cut to support margins, but pass-through limited
Selvan said the company expects another 5–10 bps improvement in margins ahead, though all guidance should be viewed year-on-year.
He projected 25–30 bps lower cost of funds in FY26 versus FY25. However, the entire benefit will not translate to lending rates, as only 25% of Chola’s borrowings are linked to repo rate.
“Most of our book—vehicle finance, SBPL—is fixed rate. Pass-through will apply largely to floating-rate loans,” he said.
Growth outlook steady at 20–23%
Despite the rate cut, Chola is not revising its AUM growth guidance.
“We remain on track for 20–22%, maybe 23%. Passing on rate cuts depends on competition as well as underwriting strength,” Selvan noted.
Gold loan book to hit ₹1,000 crore by FY25-end
Chola is expanding its gold loan footprint, now operating 120 branches, up from 113 in Q2.
Selvan expects the gold loan AUM to reach around ₹1,000 crore by year-end, though he declined to specify branch expansion numbers.
Demand trends: GST cut boosting consumer loans
The company saw strong disbursement growth in October, followed by a moderated but healthy November.
GST cuts are driving demand in passenger vehicles, two-wheelers and consumer durables (CD).
But demand in commercial vehicles (CVs), tractors and construction equipment remains muted.
“Borrowers aren’t rushing into purchases because the GST cut is here to stay. Replacement and new demand will take time,” Selvan said.
Asset quality weak in Q1–Q2, but improvement ahead
Higher delinquencies in states like Odisha and Madhya Pradesh reflect normal seasonality, Selvan explained.
“Collections dip in Q1–Q2 due to monsoons, mining shutdowns, and rural earnings slowing. Q3 and Q4 always bring reversals,” he said.
Mortgage assets remain stable, while the unsecured fintech portfolio is undergoing cleanup and will take a couple more quarters to normalize.
Return ratios to improve next year
Chola expects FY25 PBT ROTA at 3.3–3.4%, below the earlier 3.5% aspiration, given a weaker H1.
For FY26, Selvan is more confident: “With rate benefits and higher AUM traction, we should reach 3.5% PBT ROTA next year.”
CV cycle still seasonal
Weakness in CVs is not structural, he insisted.
“Small road transport operators suffer in Q1–Q2 due to monsoons and lower utilisation. This turns in Q3–Q4 with festivals and harvest season. Credit costs should improve.”
Chola remains well-positioned for margin expansion, demand pick-up in consumer segments, and better asset quality heading into FY26, even as it keeps a close eye on CV cyclicality and competitive dynamics.