Good morning, everyone. Welcome to the interaction with management of Cholamandalam Investment and Finance Company Limited.

We will discuss 3Q FY26 earnings today. The senior management is represented by Mr.

Vellayan Subbiah, Chairman and Executive Director, 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 will take the Q&A.

Over to you, Vellayan.

Thank you, Nischint. Good morning, everyone.

I'm happy to take you through our performance for Q3 FY26. We had aggregate disbursements of ₹29,962 crores, which is a growth of 16% year-on-year, and that takes our AUM to ₹2,27,770 crores.

AUM growth remains steady at 20% at the end of this quarter. Disbursements saw healthy growth across all major product segments in the quarter.

Vehicle finance delivered a 17% year-on-year increase in disbursements, supported by broad-based industry momentum across CVs, PVs, and two-wheelers in both new and used categories. GST rate reduction also helped bring down vehicle prices, which further strengthened customer sentiment and supported sustained demand across segments.

Loan against property, home loan, and SBPL also delivered strong disbursement growth during the quarter. This momentum was supported by sustained housing demand across key markets, coupled with healthy traction in mortgage-backed lending for both self-occupied residential properties and SME credit demand.

Q3 witnessed robust customer inquiries and improved conversion rates across segments, contributing meaningfully to the overall expansion of our retail mortgage portfolio. LAP grew disbursements by 26% year-on-year, and home loans grew disbursements by 10% year-on-year, and SBPL by 30% year-on-year in Q3 of FY26.

AUM growth in these business verticals continued to be strong, with LAP clocking 31%, HL registering 27%, and SBPL having a 52% growth over Q3 FY25. Disbursement growth in the unsecured segment was also strong, with momentum picking up in Q3, registering a 32% growth over Q2 of FY26.

Due to the withdrawal from fintech-based lending, the growth year-on-year continues to be negative over Q3 of FY25. This will change from Q1 of FY27, as we had stopped lending through fintech relationships from Q1 of FY26.

Likewise, in SME also the growth in disbursement over Q3 of FY25 continues to be negative due to the conscious slowdown in supply chain finance. On a sequential basis, disbursements grew by 16%, driven by term loans and equipment finance.

The AUM growth was robust at 33%. The newly introduced gold loan business disbursed ₹772 crores during Q3 FY26, operating out of 118 dedicated branches in the southern and eastern parts of India.

As highlighted in our previous call, NIM was improved by 33 bps in Q3 over previous year, with the RBI's rate cut progressively impacting our cost of funds favorably. Operating expenses have remained steady on a year-on-year basis, even after incorporating the impact of the new Labor Code in this quarter.

This reflects our continuous focus on cost discipline and productivity. Credit costs improved marginally as the impact of running down the fintech business continues to reduce our credit costs.

On the vehicle finance side, the credit costs have stabilized and we are looking at a reasonable moderation in Q4. ROA for Q3 FY26 stands at 3.2% and ROE at 19.11%.

With the second half progressing well, we anticipate Q4 to reflect improved performance in line with past trends. In terms of liquidity and capital adequacy, we hold a strong liquidity position with total liquid assets of ₹18,857 crores, including undrawn sanction lines.

The ALM is comfortable with no negative cumulative mismatches across all time buckets. Our capital adequacy position stood at 19.16% in December '25, with Tier 1 capital at 14.12%.

Out of the total issuance of ₹2,000 crores, CCDs amounting to ₹307 crores were converted in the month of October 2025. Further, ₹1,060 crores of CCDs were converted in January 2026.

This will improve Tier 1 capital in Q4 of 2026. There's a balance of ₹633 crores of CCDs which is expected to be converted in April and July of 2026.

Finally, the board approved the payment of an interim dividend of 65%, which is ₹1.30 per share. Nischint, I'll stop with that and we'd be happy to turn it over to you for questions.

Sure. Sure.

The first question comes from Suraj Das of Sundaram Mutual Fund. Suraj, your line is unmuted, you can ask the question.

Hi. Am I audible?

Yes, yes.

Yeah. Hi, sir.

Thanks for the opportunity. Sir, one question on the vehicle side.

First, in terms of asset quality, if I look at the, let us say, overall credit cost on the vehicle, that is running a bit higher versus your historical levels. Anything that you want to call out in terms of specific geography or particular OEM or probably any sub-segment that is probably giving the pain?

While you are highlighting that probably the vehicle credit cost will see substantial moderation going ahead, but what will be the rationale? Is it because of, let us say, the growth, and hence automatically the credit cost coming down, or it would be more from underlying cash flow improvement from the borrowers, or maybe the state government's payment coming in, or something like that?

Just first if you can highlight, what is the cause of this pain, because your vehicle credit cost is running at 2%, which is relatively higher versus the peers as well as your historical levels. That would be my first question.

Yeah. Morning, Suraj.

Few data points which I would like to tell you about the vehicle finance is that Stage 3 from June quarter of 3.89 has gone up to 4.11 in September, and December it is remained at 4.17. Means Stage 3 we have got the stability now.

As far as Stage 2 is concerned, it is 3.9 in June and gone up to 3.96, but it has come down to 3.61. So, 30 basis point improvement in Stage 2 has been seen, and also internally we are monitoring the early default and non-starters, those are coming down significantly well in Stage 3, in the quarter 3 itself, and likely to further improve in in in the March quarter.

This is in line with our plan only. Our NCL numbers in quarter 1 was 2.2, which has come down to 2.1 in quarter in the next quarter, and then in in this quarter it has come down to 2%.

From the first quarter to third quarter, the NCL has also come down. Though it is at elevated level, but as you know that that first first two quarter of the you know in the India is actually getting impacted due to the rains, and and also capacity utilization get impacted.

That is the case with the seasonal effect, and it is it is similar to the last year. This year onwards we are seeing that there is a good demand coming up.

Vehicle demand has improved after the GST rate cut and all those things happened, and then we are seeing that disbursements are going up, that means the deployment of the customers have improved and the capacity utilization are improving. We are expecting quarter 4 of vehicle finance going to be very good, and then they are going to maintain it the next financial year.

Coming back to the your point that it is at elevated level, yes, but it started coming down in Stage 2, and early default and non-starters come down. Stage 3 is stable.

From here, it will go down.

Sure, sir. Sir, this early starter or, let us say, the early delinquency coming down, is it a factor of underlying cash flow improvement or is it a factor of more, let us say, growth?

Because this quarter the disbursement growth has been relatively good on a Q-o-Q basis.

Early default is basically pertaining to the first six months or 12 months of the book where the customer is getting into the first delinquents. It is nowhere related to the denominator effect.

If one customer goes into the first bucket, it is early default, or non-starter. Only the period we basically monitor.

Non-starter for six months, and so it is very stringent norm, and it is nowhere getting impacted because of the denominator. Therefore, early default and non-starter going down and also Stage 2 has come down for the full book, is actually the indication that the collection efficiency is increasing.

In the month of January also we have seen that, which is recently we have completed. This trajectory is going to be maintained in vehicle finance.

Not only in vehicle finance, we are seeing the similar impact and benefit coming in CSEL also.

Sure. This improvement has been across OEM, across geography?

Across OEM, across geography, across the type of product, new and used.

Sure, sir. Sir, last question on growth.

I think this quarter the vehicle disbursement growth has been very strong. Partly could be pent-up demand also, but how do you see the overall disbursement growth going ahead?

Since we have seen the January, I have opportunities to tell you that things are looking better than quarter 3 in this product. Still now, because 30 60 more days to go.

Quarter 4 will be better than quarter 3 in terms of overall disbursement and as well as across all the businesses we are seeing the disbursements are up. Quarter 3 you would have seen that SME or CSEL are slightly behind in terms of the disbursement, comparing the quarter 3 of the last year because they were doing much higher, and they have given up some portfolio.

Now the disbursements are up.

Sure, sir. If I can squeeze in last one question, sir.

Can you give the slippages and write-off number in vehicle this quarter, or nine months maybe?

Those numbers are consistent, actually. We have not seen any increase.

Significant change in terms of number. It is ₹401 crores.

The write-off in

Okay. ₹401 crores.

Plus

₹353 crores.

₹353

crores. ₹353 crores up to ₹401 crores.

Okay. And ₹353 crores is write-off?

No, ₹401 crores.

Okay. And ₹353 crores is the slippages?

No, ₹353 crores was the previous quarter. Just comparing, it is ₹40 crores, ₹50 crores up.

Sure. Understood, sir.

Thank you so much.

Kunal Shah from Citi. Kunal, you go next.

Mr. Kunal.

Yeah. Hi.

The first question was on home loan credit cost. Not a significant number in absolute term on the base where it is, but if we look at it in terms of the credit cost in home loans, that has gone up.

Anything to read into it? Was there any one-off out there which has led to slightly higher credit cost?

The second question was on CSEL. Now we have started to see the improvement on the disbursement side.

There was a decent traction on a quarter-on-quarter basis on the disbursements. Going forward, maybe last time also you indicated that the stress has peaked out in CSEL.

Should we see now significant improvement in CSEL and where should the credit cost stabilize compared to 6. 6.4%?

Yeah. Just to start with the home loan, and this is one-off quarter for the home loan in terms of their NCL.

What they did is that the non-SARFAESI pool they were working on and they got into the stage where the collection is feasible through the legal, now they have contacted or tied up with the ARC and given up ₹65 crores of their Stage 3, wherein we booked the NCL upfront. The NCL hit is in the line of HL P&L is around ₹35 crores for the ₹65 crores of book which is basically they've removed.

The income line is actually slightly elevated because of the whole deal has gone up by 23 crores. The P&L line is actually not much gap.

Therefore, you can see that the ROA is

remained at

4.2%. That's because of the we take NCL line NCL, not like in some of the players we have seen that they do it slightly differently.

Hence, they basically take it income also into the NCL line and keep the NCL better. We have not done that, and we have also created little bit extra provision because now we are going to get this money collected through the ARC.

We have not taken entire benefit. ₹5-6 crores extra NCL we have taken.

Net-net, what I'm saying is that this and even in the past we said that because the NBFC like Chola doesn't have the non-SARFAESI for less than ₹20 lakh rupee for SBPL and CSEL and SBPL and HL and for LAP also they have a small LAP. Time to time when we get into this situation where we are quite confident that in such pool if we can collect money, then we will route it through ARC and get it done, and that is what is going to be process even in the future.

Once in a while it will be done. At ROA level, if you see that they are at very high level, 4.2%, and they will continue to do that.

Their target of ROA of 4.5% pretax ROA, Prasad has been always saying that he will deliver it. We should actually rely on his comment.

Now coming to the CSEL, CSEL is

On this, there was a sale to ARC during the quarter and we had taken the provisioning knock of ₹35-odd crores on that transaction. Is that the right interpretation?

NCL line.

Yeah. Accounting line, let you understand from our CFO.

No, let me explain. There is a ₹65 crores of assets sold, and when you sell, you have to write it off in the book and the income that comes is coming in the income line.

This is as per the Ind AS. It's not like the whole thing has been removed from the book as assets, and you have brought the income, whatever the Provision which has been carried, would have got reversed.

Net impact is around ₹35 crores in the NCL line.

Got it. Got it.

Which is

65 bps of the 1.1%.

Exactly.

If it wasn't for this, it would have been

.45.

.45,

yeah.

Our overall NCL also would have been better for the company. This is the right thing for the organization, that is what we are terming it.

Now coming to the CSEL NCL actually moving right direction. In quarter 1, it was 6.7%.

Now quarter 2 was 7%, and now it has come down to 6.4%. In absolute value also, NCLs are coming down because of the run-down of the partnership book, and also we are seeing the overall NCL of the traditional CSEL, which is like on-ground DSA, DST business which is done—unsecured personal loan, business loan, and professional loan.

There also the absolute value NCLs are coming down. We are expecting this 6.4% of NCL of December quarter to further go down in quarter 4, and that trajectory will be maintained in next year also.

You will see that because they have cut down their almost ₹500 crores disbursement per month from this financial year. Now they are reaching to the same level of disbursement what they used to hit it last year.

From the next year, they will get the benefit of base and then disbursement look very high. Once the disbursements start picking up, and NCLs are going to go down.

Even in the case of NCL, I would like to tell you what we have done into the DSA, DST business where we segregated the entire portfolio into four category, and gold, silver, and bronze. Every quarter we have removed bronze, silver, and gold.

Now we are only sourcing the diamond quality of the portfolio, which has got the very lower NCL as of now. Overall NCL because of the new portfolio will start appearing after one year.

We are moving in that direction. By doing that, we have also successfully maintained our disbursement growth at the same level.

Now we will start growing the disbursement with the better quality of sourcing. The quality of sourcing is improving, disbursement growth is improving, and portfolio quality is improving in terms of NCL.

This is a good news from the CSEL side.

Yeah. The question was where should it settle ideally compared to 6.4% after doing this if we are sourcing diamond category?

Four quarters down the line, what should be the steady-state NCL in CSEL?

That's what I said, that this entire book of diamond will be accumulated in next two to three years' time. Ideally, by that time we should improve the number significantly.

That is the number. At this juncture, I don't want to commit any number.

But

6.4% is very high, and it can come down definitely below 5% in next financial year.

Thanks, thanks. That's helpful.

Next is Piran Engineer from CLSA. Piran, you can ask the question.

Thank you and congrats on the quarter. Just firstly, in the M&HCV segment, we are seeing demand migration towards large fleet operators, and that's being then tapped by the banks.

How is it in the case of LCVs and SCVs? Is that a risk you foresee for this segment also?

No. Piran, if you see in our HCV, for last two, three years we from HCV.

Therefore, when the cost of funds started coming down, we started getting benefit to start acquiring more HCV customer. Some numbers are very, very surprising to you that industry grew by 20%, but Chola grew by 56% in heavy commercial vehicle.

In the case of light commercial vehicle, we were already high. Therefore, our growth and market growth are more or less same.

In the case of small commercial vehicle, the market is actually growing at the rate of say 16%, we grew by 28%, which is a high-yield book. In the commercial vehicle segment, in the new segment, overall disbursement growth is coming because of market share as well as the industry.

Banks are always there in the large and captive customer. We were always into the SRTO.

SRTO were away from the market because they were not seeing the capacity utilization. After the GST cut, where the cost of vehicle has come down and also EMI burden has come down because of the both interest rate cut and also total loan has come down because of the vehicle price coming down, the SRTOs are now getting into that.

Our disbursement growth is not depending on whether bank is aggressive or not. It is depending on whether our segment is coming to the market to buy the vehicle or not.

We are seeing that now that is happening, and therefore, HCV and small commercial vehicle started growing and we are maintaining our market share at a similar level in the light commercial vehicle.

Vellayan, you want to comment

anything? I No, sir, my question was

Question is different.

My question is different. It's more on the market structure, right?

Is the LCV market also heavily towards fleet operators or is it more fragmented towards SRTOs, which is why y'all can still continue to maintain? That's my question.

LCV is more into the SRTO and less into the fleet. HCV is more into the fleet and less into the SRTO.

Okay. That will continue like this, you feel?

Yeah. Because in light commercial vehicle, it start from 3.5-ton GVW to say 19-ton GVW.

Therefore, the range is large. As of now, the banks are concentrating in a high-tonnage vehicle, which is like 10-ton-plus.

The lower-tonnage vehicle is still actually getting sold in the Tier 3, Tier 4, Tier 5 town where the people are buying for transporting vegetable and all. They are mainly the market load operator, where the NBFC only financing.

To add on that, the retail operators, be it in light commercial vehicle, that is I&LCV, intermediate segment, and M&HCV, we are seeing a strong traction of retail operators, which is Chola's set of customers, coming in from November, December, and that trend is continuing in the month of January.

When you have the Amazons and all the e-commerce players which need that last-mile distribution, do they end up outsourcing that to smaller transport operators? I would assume that this segment also gets more and more formalized with the proliferation of e-commerce.

That is what I said, no? In any case, that was there earlier, and they were actually being funded by bank.

What I'm saying is that

No, his question is on the e-commerce shift, right? The e-commerce shift, yes, so, Piran, to your question, the e-commerce players will prefer to contract with people that have a larger fleet, and you do see some people getting into fleets.

Traditionally, if you take the percentage that has gone to fleet in terms of these businesses, it is much, much less than heavy commercial vehicle. Heavy commercial has always been larger fleets.

Here you see it getting a bit more formalized, but, Piran, it's only that the e-commerce segment that basically demands that, right, which is kind of this large level of formalization from their supply base.

Correct. Yeah.

Besides of that, there's not that many guys.

Also, this is there for quite some time. Post-COVID, we are seeing this e-commerce buying the vehicle being funded by the banks are already there.

It is not that this year it is getting changed. Electric vehicle is getting more funded by the banks because those are getting actually purchased by the large operator.

If the EVs are going to go up, then you will see the shift in that in terms of the mix between the banks and NBFCs.

Got it. My next question is on yields.

Now, when I look at, say, SME yields over the last nine months, they've been the same as it was in March '25 despite 100 bps of repo rate cut. Have you pruned low-yielding business, or why hasn't the transmission happened?

Likewise, even in LAP, and I'm just taking a longer time frame here, if I look versus pre-COVID and today, LAP yields are actually higher today, and it's counterintuitive given how much of SME, MSME competition we've seen in the last five years. Just your comments on how we've been able to sustain yields in both these segments would be helpful.

On the LAP side, post-COVID, we have also introduced small LAP with the higher rate of interest and

The business mix issue. The business mix which is kind of helping us in sustaining.

We understood this is going to be a challenge and we changed the strategy immediately after the COVID.

In SME?

In both situations, it's a business mix issue. If you take a like-for-like product, you will see yields coming down.

The thing is, we constantly are looking at is if we have to maintain, then kind of we do look at changing the mix as well.

LAP has introduced small LAP, and that small LAP is now started getting the momentum. The amount of volume they are generating, ₹6,000 ₹3,000 crores, in that around 20% is coming from small LAP, which has got high yield, and therefore, they are able to maintain the yield.

At the same time, SME has given up the supply chain finance, and they have reduced their disbursement by ₹600 crores what they used to do it, and they have reduced it. Also, they have introduced the

Increase of equipment finance, which is our equipment finance business has gone up, which is a shorter term and a higher rate of interest, MSME business. That is helping us to improve our [unclear].

Got it. This explains it.

Thank you and wish you all the best.

Thank you, Piran.

Thank you.

Next in line is Sudhanshu Mishra from PhillipCapital.

Hi, good morning. Congratulations on a great set of numbers, and thanks for the opportunity.

The first question is around the growth itself. We're looking at a stellar growth which is coming because the GST rate cut.

Are we in discussions with various OEMs? Is there any RM inflation which is to be passed, which could more likely offset the GST rate cut benefits that we have seen?

CAFE norms is still in a discussion paper. Are we going to see any kind of rate hikes by OEMs there?

Second is, if we can speak about various OEMs, what kind of market shares do we enjoy there, and what are we looking at in terms of market share increases, say, the larger OEMs like Maruti, Tata Motors, Mahindra, Ashok Leyland, the larger ones? The next question is a bit strategic in nature.

What is our aspiration or maybe when do we hit a ₹1,000-crore PAT on an annual basis in each of the three new businesses that we have started, which is SBPL, SME, and CSEL? The third is just a data-keeping question.

What would be our FMMI in the personal loans? Thanks.

A

lot of questions, Sudhanshu.

Why don't you go on the OEMs, and then FMMI you'll get

that. For vehicle finance, as far as the OEMs are concerned, see, two things.

What has happened from October, November, December across the segment, be it small commercial vehicle, light commercial vehicle, I&LCV, M&HCV, passenger cars, all the market share, we have grown. As we have our market share in Tata, Eicher, Leyland, these have all grown, and most of it are in double digits.

Maruti, we have gained substantial market share across. Small commercial vehicle also we have grown.

In fact, two-wheelers, we have grown our market share in Royal Enfield, in Honda, and of course in Hero also, because we are focusing in these three manufacturers mainly. To your question that across the board, our market shares have gone up, and the growth has been higher than the market growth.

The trend has continued in the month of January. We hope this will continue for this quarter and going forward.

FMMI, you asked, Nishant?

Yeah. What is the question on FMMI as

well? Current FMMI

rate. FMMI like, for FMMI rate, it used to be peaked at 3.90%, but over the last three months, it has come down to 3.1, 3.2 types.

That is what, but now I would like to tell you that FMMI is never a, indicator for for any of your, metrics, because it requires what you call the registration, NACH registration with the bank. All those things are, as a indicator.

I would say it has come down, but it is never a indicator from my past experience, I'm saying.

Just one clarification. The market share, this is on volumes we are speaking of, right?

Market share in numbers. In numbers.

VAHAN

number.

Sure. The last part, ₹1,000-crore PAT

in each of the three businesses? I think the broad guidance has always been this, right, which is when we get into some of the newer businesses, the growth rates will be higher than the growth rates in some of our traditional businesses.

We obviously, we don't want to give guidance on when each of them are going to give a ₹1,000 crores in PAT. I don't think we'll give specific guidance on that.

Sudhanshu, actually, if you see that the CSEL now has the ROTA 1.4%, and what we have been discussing between me and Sujith that he will deliver 3.5% PBT ROA, which is normally we target it in the next financial year. Both Vijay, Dinesh, Sujith put together driving the CSEL business.

Most important thing is the ROA. In the case of SBPL, if you take one by one new businesses, SBPL is already delivering PBT ROA more than 7%, and SME is started delivering more than 2%.

They are all moving towards the direction what we have set in the beginning in terms of profitability.

Understood. This was very helpful and look forward to ₹1,000-crore PAT in each of these businesses.

Best of luck.

Thank you.

The next question comes from Raghav Garg from Ambit Capital. Guys, just a request to all participants, we have a long queue, maybe you can just keep your questions short and probably restrict to one question per participant.

Over to you, Raghav.

Thanks, Nischint. Hi, and thanks for the opportunity.

I have two questions. One, I just wanted to go back to the vehicle finance asset quality bit.

See, when I look at your asset quality trends on this portfolio and compare it to peers, your trends seem to be a little inferior. Say, for example, the Q-o-Q drop in credit cost is lower, the Y-o-Y trend is higher, and even when I look at the net accretion to vehicle finance NPAs, it's on the higher side versus peers.

I just wanted to understand specifically with respect to your customer segment, in the sense that why is he finding it difficult to repay you versus what we've seen for other auto NBFCs? Is there some customer-specific color to this or any vehicle-type color to this?

That's my first question.

No. In our vehicle finance, if you know that our mix is not towards the one segment alone.

It is actually distributed across all segment. That means we have been financing heavy commercial vehicle, light commercial vehicle, small commercial vehicle, new.

Suppose you compare with any finance company which is more towards the used, the used is not so much deteriorated during last two years. The small commercial vehicle and light commercial vehicle plus tractor has deteriorated in the last two years because of the two years back when the slightly monsoon deficit was there and then capacity utilization got impacted during last two two years in during the first half.

Having said that, what I mentioned in the beginning of the call in today itself, that our vehicle finance Stage 2 has come down from 3.96 to 3.61%. Whenever the Stage 3 goes up, like it was 4.11 in September quarter, now it is 4.17, same level.

First, the Stage 2 and early default and non-starters start coming down, and then subsequently you start seeing the results coming, improvement coming in Stage 3 as well. The trajectory is looking very good in terms of vehicle finance.

You're asking why it has gone up. I have said that it's because of the mix of both new and used, not that either new or used we are doing it.

We are doing all product. That is the reason things is started looking slightly high in Stage 3.

The trajectory is looking good from the early default and non-starter point of view, and you will see the result in quarter 4 and going forward.

Understood. Thanks a lot.

As far as the market and product is concerned, product or market across the geography, we do not have any concentration in terms of any particular market or any particular product is basically doing very bad. It is all distributed across.

Understood. My second question is, I heard your commentary on early starter or non-starter, those metrics showing improvement.

My question is that say, for example, if we see ₹100 of credit cost in the vehicle finance portfolio, how much of this would you attribute to this specific bucket of early starter or non-starter? Then if we see this number as percentage of, say, two- or four-quarter-lag disbursements, would that be the right way to look at it?

No, majority of the NCL is coming from Stage 2 and Stage 3. Stage 2 is obviously much lower, as I mentioned.

Stage 3 also we have not that we have one single provisioning. In the Stage 3, as the

His question is, he's saying, ED and non-starter contribute to what percentage of our

That ED, non-starter is a part of the Stage 2.

As a percentage of our NCL over time. From a cohort perspective, how much of it flows into Stage 3.

I think that's your question? Yes.

The behavior of these two parameters indicates the goodness of the portfolio. If it is coming down, then it means the current portfolio is behaving better.

The impact of this will be seen over the next four or five quarters. That means, if there is a lesser of early default and non-starters, then what happens is at a given point in time, the equity of the customer becomes larger, he will not move out.

That's the sort of the attribute we're looking towards as we move or keep reducing this.

See, my only point behind asking this question is because we don't get segment-wise Stage 2 or even the net slippage on a segment-wise basis, just getting some color as to how much of the credit cost in the vehicle finance is coming from the early bucket would just help in modeling the numbers better. That was the only objective behind asking this question.

I think understood. We can get back with that data.

Sure, sir. That'll be helpful.

I have one more question. Can I ask?

Yeah. Go

ahead. In the affordable HL, I think you mentioned six sorry, ₹65 crores of principal has been sold to ARC.

Is that right? Is that understanding right?

Yes.

Despite that, GNPA has come down only from 376 to 358, which means that there have been some slippages here too. Is that understanding also right?

Yes.

Okay. Any specific or geographic color to this?

No, basically only the non-SARFAESI pool there is a slightly increase in delinquencies, which we do all the legal means to collect out of that. It is only the non-SARFAESI pool slightly gone up.

It is not about any geographies. Geographies, in fact, everywhere the infant delinquencies are coming down.

Q4, we'll see this has started coming down everywhere. We'll maintain the NCL as .5 going forward.

Okay. Thanks a lot for all those answers.

Thanks.

Thank you.

Next is Shreya Shivani from Nomura.

Hi. I hope I'm audible.

Thank you for the opportunity. I have two questions.

My first question is on the vehicle book. In December and probably end of November probably, there were two cyclones that hit southern part of India.

Can you help us understand what has been the impact of these cyclones on our customer base? Is there some stress that can show up in the 4Q numbers because of this pool?

My second question is on the growth outlook for the non-vehicle book. We've backed out from the fintech portion, and we are going to scale up direct digital and consumer durable loans.

Can you help us understand how much time will it take for you to set up the infrastructure for these two segments and then the growth can kick in for you? Is the growth four quarters away or three quarters away in these segments, which are basically replacing your fintech book?

Those are my two questions. Thank you.

To answer the first question, as far as the South Zone is concerned, for the vehicle finance, last four months, South Zone had the collection across all metrics, they have done well. For the month of Jan also, in spite of the highest holidays in a year in South Zone happens in the month of January with Pongal, Makar Sankranti, all this happening.

We have done extremely well in South Zone for the month till January. We are not facing, or we have not seen any kind of pressure or stress as far as the cyclone, and it has been very, very, very marginal.

There is not much of impact on vehicle finance book in South Zone for Chola.

As far as the CSEL is concerned, there are two segment of CSEL. One is the DSA, DST business, which we are now doing ₹700 crores per month, and then CD and now digital lending, which we are doing ₹300 crores per month, close to ₹1,000 crores per month.

Our peak was ₹1,200 crores per month. Quarter 1 of this financial year was only ₹2,000 crores.

If we do even ₹1,000 crores, we will do ₹3,000 crores. From the quarter 1, you will see significant growth coming up.

As I mentioned in the call also, what are the corrective measures we have taken in order to improve the quality of CSEL traditional in terms of removing the three segment of the portfolio which were actually causing the concern in terms of the NCL and still growing at the rate of ₹700 crores per month, which is going to grow the disbursement from quarter 1 at the rate of 25% plus.

Right. In the digital and consumer durable, you said ₹300 crores.

I'm assuming that majority would be digital because consumer durable the infrastructure, as in partnering with all the stores, etc., would take time, right? It's that ₹300 crores maybe more digital?

Is that understanding correct?

Digital is actually ₹100 crores and ₹150 crores is around Samsung. Samsung.

Then around ₹50 crores is the CD business which we are doing through the open market. Around ₹300 crores.

So, ₹200 crores CD, ₹100 crores digital. Still CD is higher than the

digital.

CD is only going to grow.

We have the tie-up with Samsung Finance+. Already the infrastructure is all set as far as the platform is concerned.

We are distributing or our distribution is based on the Samsung Finance+ platform itself. We're able to acquire more customers across the country.

I think from a time-lag perspective, that has been taken care of.

Interesting. You will be looking for more tie-ups in the CD, right?

This must be your first Yeah, all right. Okay.

We already have about nine tie-ups. We have already covered about 90 75% of the entire mobile market.

We are actually working on distribution on the open market platform for CD. In addition to

Shreya, we've just moved out of mobile into

non-mobile

appliance segments as well. It's going to kind of grow in different tiers over time, right?

The first part was going to be mobile, and then the second part is going to be non-mobile other household appliances as well.

Got it. This is very useful.

Thank you and all the best. Thank you.

Thank you.

Next comes in Viral Shah from IIFL. Viral, you can ask the question.

Hello? Am I audible?

Yes, Viral.

Good morning. Thank you for the opportunity.

Sir, I had two questions primarily. One is I was looking at your comments with regards to within the vehicle finance industry, and therein you have mentioned that the used vehicle finance prices saw good demand with replacement cycle kicking in or expected to kick in and prices declining.

Over here, just wanted to understand first of all two parts to it: which sub-segment of this, I would say, within vehicle, the used segment is seeing a demand pick up because of replacement; and secondly, what is the extent of the used CV prices declining, and if at all you see any concerns with regard to asset quality over there? I'll ask the second question after this.

See, there are two things. See, immediately after the GST reduction was announced, there was a lull for almost 15 days.

Subsequent to that, the market got corrected. The initial spurt in demand happened in the M&HCV segment at the retail operator level.

Subsequently, it has flown towards the I&LCV segment. M&HCV to I&LCV segment.

In the M&HCV segment also in the used business, the initial was on the haulage segment. From January, we are seeing a traction coming up in the tipper segment also because a lot of contracts have been released and the usage for the secondary segment, there is a demand for tipper also coming in.

This is where it stands. It's more or less BAU as far as the small commercial vehicle segment is concerned in used business.

I&LCV, we are seeing a traction coming up. M&HCV started.

From haulage, it has moved to tippers. This is what the current scenario is.

Just to continue, Viral, this is also linked with the new HCV and new LCV sale. As the HCV market is growing, the replacement cycle also be kicking up for the used.

The people who are buying the vehicle, they are not only adding the vehicle, but they are also sometime replacing the vehicle what they have. When they sell their existing fleet and buy the new vehicle, new vehicle sales picks up and old vehicle sales also pick up.

Both are going to get benefited because when the existing customer having the vehicle are selling and that vehicle comes in the market, quality of the vehicles are good, and that vehicle gives better price than the vehicle which comes through the repo sale and all. Now the quality of the used vehicle coming in the market after, say, December or say after November, are quality-wise better.

Little bit drop is there in terms of valuation of the vehicle, which is hardly 5%, but it doesn't matter because at the end of the day, if someone wants to buy new vehicle, wants to sell the vehicle, he need it for his replacement, customer need it for their deployment. That is not important.

What is important is that vehicle is available for us to finance, and therefore, our used business is going up from December onwards, which is likely to go up further in quarter 4.

Right. How long, sir, do you see this replacement cycle playing out?

Is this something that you expect over the next few quarters or is it just 4Q?

It is simple. Last two years there have been lull in the new vehicle sale.

New vehicle sale now only it's started picking up. Commercial vehicle did not pick up immediately after the GST cut.

It started only in December. In fact, December was very low.

January, I'm seeing the big impact is coming. The passenger vehicle, whatever we have seen in the Q3, that remains same, is not going up.

Now the disbursements are driven by the new vehicle sale commercial vehicle side, which is going to also support the used vehicle side. Suppose new vehicle, I'm talking about the heavy commercial vehicle and light commercial vehicle, is continued to grow at the rate of, say, 15% or even 10 10 to 15%.

Obviously, to that extent, the used vehicle is also going to come in terms of unit. Now, when you are financing it, the GV value is actually matter for financing.

If that is the case, 10 to 15% is the unit number, it convert into the value, it comes 20% plus. It can continue till such time new vehicle sales continued.

Got it. Secondly, sir, the question was more for Arul, sir.

Sir, how do you see now the cost of fund trajectory for you given how the bond yield movements have been, especially not just today, but I would say over the last three, six months as well? We have barely seen any reduction in the G-Sec rates.

How should we think about it, and consequently, the margins also going ahead?

You're right. There has been tightness in the liquidity as well as on the rates.

I think the good part is we have a mix which is also partly fixed-rate borrowings. There is steam left in that to reduce, more on the NCD side and the market borrowings and the MCLR side on the bank borrowings.

These two will still give us another 5 to 10 basis points on the cost of fund reduction in next quarter is a working one, which should, at least to a large extent flow through to the NIM.

Sir, beyond that?

Beyond that, I don't think there is

I know.

I think only

Beyond that, we need to the NIM through business only. In the quarter 4, obviously, due to better collection, your other income goes up, and you have seen that last year, if you take the investor presentation, we're able to see quarter 4 NIMs are always higher.

We are going to expect that also in this quarter.

Got it, sir. Thank you very much.

I'll come back in the queue. I have just one more question if it is there.

Please, please.

Next question comes in from the line of Akshay Jain from Autonomous.

Hi, sir. Thank you for the opportunity.

My first question is again on margins. While you have indicated that next quarter the margins will go up because of two impacts: one, cost of funds will come down; and number two, other income being pretty well in 4Q.

Currently the NIMs are around 8% odd, and maybe next quarter given your guidance or given your outlook, it can go up to, say, 8.1%, 8.2% range. How should we look at FY27?

Should we expect this margins to be held around similar levels, 8.1-ish, 8.2-ish levels, or how should we think about NIMs incrementally? What will be our incremental cost of funds in this quarter?

I said 5 to 10 basis points. You took it to 20 basis points.

No, no. I included the other income as well.

No, no, all put together only, income. The 8 8.1 could be the quarter 4 number.

Overall, we should end the year with around shade less than the 7.9 we are talking here. I expect it to hold next year to a large extent unless there is some drastic increase.

I don't see any reduction coming through beyond current levels. I hope unless there are some macro issues propping up, that should not be increase also.

We should hold at current.

Understood. On the AUM growth, while you have guided for a wide range of 20-25% and given the strong Q3 and your comments on continued strong January, should we expect the AUM to grow at the higher end of this range?

No. See, it is the same thing in the reverse way.

When we drop, disbursement dropped in Q1, Q2, AUM didn't drop that far. Same way, when in one or two quarters of disbursement peaking, AUM will also not react so fast.

Still we hold the 20 to 22% AUM growth for the current year. Yes, we will look at opportunities to improve, but I don't want to give any guidance beyond that.

Understood. Any guidance on the credit cost front also, because for this year you had mentioned around 1.6% and 4Q is expected to be strong for Chola.

It's my third question, so.

It's fine, sir. If you can answer it, it will be great.

Hello? Am I audible?

Yeah. Akshay, you have any other questions?

No, it's fine. Thank you.

Thanks. Next question comes from the line of Aravind Ravichandran from Sundaram.

Hi. Can you hear me?

Yeah.

Yeah. My question is most of my questions are answered, but one question is on SBPL business.

We are seeing continuous increase in NCL in SBPL business. I understand it's on the low base so the growth is still coming through.

Do we see any risk to that growth in that particular business? Similarly, in LAP business, should we expect spreads to hold largely, considering the mix is shifting towards small-ticket LAP?

These are my two questions.

Request the management to answer. There's no response from the line.

Probably just hold on a minute.

Oh, sure.

That's so good.

Hello, Nischint?

Hello?

Hello. We can dial in on

Yeah. Hey,

I told you to take care. You connect to hear it.

Can you connect on this?

Sir, you are actually on the Zoom call. You can answer your questions.

You're right. Correct.

All right.

Okay. Can you hear us now?

You can.

Probably, Aravind, you can ask the question once again.

Yeah. Sure.

Please go ahead, Aravind.

Yeah. Thank you.

Thank you for the opportunity. My question is on SBPL business, where net credit cost is moving up continuously for the past few quarters.

Do we see any risks to growth there in the near term into that business? Are we comfortable with this level of credit cost?

That is my first question. Second question is on LAP business.

Should we consider then spreads and margins to hold largely despite rate cuts which has come through because of the mix change which is happening continuously? If I can ask one more question, in affordable housing segment, should we start to see again disbursements growth picking up?

For SBPL, the credit cost for Q3 may look higher, but it has basically reached a peak. We don't see any more damage as far as credit cost is concerned.

In fact, actually, if you go geographically, two of our zones have already started improving in December and January. It will reflect in Q4 end or Q1, definitely we'll see stabilization of that, and further to that, it will start going down.

Also, we've mentioned that in the past that SBPL is entirely a non-SARFAESI book. The collection is through a traditional way of doing legal and also the follow-up on-ground.

Traditional way of doing legal means it takes two to three years' time. It requires cycle of resolution of the cases which is there in the pipeline.

Now we've started getting resolution through legal in some market, and some market we yet to get. That's the reason Ashish is commenting that the NCLs are picking up now here, and from here, we can actually expect that the NCL will go down.

Also, in the case of SBPL, we will time to time, we will see that how we can actually do some ARC sale and reduce the Stage 3. That is also in the pipeline.

Their PBT ROA is quite good, at a very high level, at 7.3%, and they will continue to deliver this.

In the case of HL In the LAP. LAP, come.

In case of LAP, if you look at last year to current year, there's a 20 basis points increase in the margin. This is primarily, as I mentioned earlier also, it's primarily because of the product mix.

We have continued to expand our higher interest product. Equally also we are expanding our geo to the Tier 3, Tier 4, which is also helping us in sustaining our yields.

Now, the NIM would be about at the same range. We will continue to hold it at the same levels.

There could be slight increase in the if you look at the Q3 opex is about 1.8%, and the YTD opex is 1.7%. It will again be at the same range-bound 1.7 to 1.8%.

I think that should not be any material impact on the overall ROA. If at all that could be a 10 basis points maximum, otherwise it will be at the same range only.

For HL growth side, we have seen a good quarter, and we have always maintained that the book growth, AUM growth will be around 20 to 30%, and we see that coming for next two years.

Sure, sir. Thank you so much.

Thank you so much.

Next we have Nidesh Jain from Investec.

Thanks for the opportunity. Sir, my question is on growth and asset quality.

If I look at segmental data, in home loans our GNPA has been increasing if I add the ARC transaction. In SBPL also, our GNPA has been increasing.

There is slight increase in SME also. What gives us confidence in growing these segments?

In the CSEL segment, when the GNPAs were increasing, we have slowed down the growth. In this segment, we are continuing to push growth.

What is giving us confidence to continue to grow despite increasing GNPA?

We have seen that in the case of HL, LAP, and SBPL, even in the SME, there are two type of customers who are getting into this Stage 3. One are they, which can be resolved by the SARFAESI, and one is a non-SARFAESI.

SARFAESI cases are getting resolved because in this property business, mortgage business, when you have a property, you will get the money because it's a appreciating asset. There is no point that you're going to lose money unless you have a problem in the property itself.

We are confident that the underlying security is in place. It is just a matter of time, either SARFAESI 9 to 9 months to 12 months or non-SARFAESI, it takes 2 to 3 years.

That's the reason we have done the deal in the case of non-SARFAESI in HL book, and we are seeing that even after doing all these things in the HL, the steady-state NCL going to be 0.5 to 0.6% and their PBT ROA going to be 4.5%. Similarly, in the case of LAP, they are committing that they will be continue to deliver 3.7 to 3.8%.

In the case of SBPL, again, they are delivering 7% plus PBT ROA. In the case of SME, as we mentioned that since the term loan book, which is actually again with the mortgage of the property of the customer, which takes time because here the entire book is SARFAESI, but it is a corporate customer where the SARFAESI takes little bit more time because of the customer contest it in for a longer period.

That's the reason SARFAESI cycle in the SME, it takes one and a half years. We are seeing that some results have started coming in the month of December, which is going to continue in quarter 4, and quarter 4 onwards, you will see the better result in the SME in terms of the Stage 3 reduction and NCL reduction.

Sure, sir. Thank you.

That's it from my

side. Thanks.

Our next question comes from Sonal Gandhi of AmSec.

Yeah. Thanks for the opportunity.

My question was more on the PBT ROTA. For a long time, we've been guiding that we'd be closer to 3.5%.

Obviously, we understand there's issue with credit cost. Going ahead, maybe when we are also talking about consumer durable business, okay, so that's a high infra-heavy business.

Probably ROAs would not come until you reach a scale. How do you see opex and how do you see PBT ROTA for CSEL and overall business say for FY27 and FY28?

Second one was on the impact of new Labor Code. Are we done with the entire, have we taken the entire impact in this quarter or is there anything remaining for the Q4?

Labor Code, no? Labor.

Labor

law. The CSEL business still is a very small percentage of the overall AUM.

It's around 7% of the overall AUM. As we scale up, we will certainly make sure that it starts contributing at the same our residual expectation levels of above 3% ROTA, and progressively build thereon from there.

That should not be a change. The larger impact would be once we correct the vehicle finance business, and then the other businesses stepping in with the expected levels of ROTA.

Those two will be the contributing factors to reach the 3.5% pretax ROTA. With regard to the Labor Code, yes, we have provided for the gratuity fully for all the past period based on the actuarial valuation.

That's been completely covered. The rest will be only on a month-on-month basis changing.

That made me a slight difference in the salary cost as we do some corrections with regard to the wage definition per se, but I don't see that as a big game changer.

Sure. Thank you, sir.

Thank you.

We'll take the last question from the line of Abhijit from Motilal Oswal.

Yeah. Thanks, Nischint.

Ravi, sir, just two questions. One is, if we look at this financial year FY25-26, right, I would say difficult years from March '24 to now.

We've discussed in the past, right, that infrastructure spending has actually been very slow. I think I heard on the call earlier today that GST cuts and you're seeing very good momentum in Q3, expecting that to continue into Q4.

If you look at the asset quality, right, from March '24 to now, right, just one direction. Things have kept deteriorating.

Do you think this is just to do with the weak macro that we are seeing? For a significant improvement, because obviously we are in Q4, we could look at a better Q4, but then we again head into the seasonally weaker first half of the next fiscal year.

What do you think we really need, right, as an industry at Chola, right, for things to substantially start improving from here in terms of asset quality? The other thing is in terms of non-interest income, are there any initiatives that you are taking to improve the fee income or the non-interest income side?

Those two questions. Thank you

so much. Good morning, Abhijit.

See, for last one and a half years, starting as you mentioned 2024 immediately after the election, part from the election year itself, that quarter itself, we started seeing that there is a problem in terms of vehicle finance, in terms of the NCLs are going up. In our business, we have eight business lines.

Out of eight business lines, we have only two business lines where the NCLs are high. One is vehicle finance, CSEL.

Vehicle finance is entirely due to the macro. CSEL is because of the partnership business has gone slightly higher.

That is one reason, it is not related to macro, I'll say. It is because of the segment.

Also in the case of CSEL traditional, which is unsecured, we are into professional personal and the business loan, it is because of the type of process it is being adopted by entire industry that, at that point in time, multiple fundings were happening. Number of loans being given to one customer were high.

Number of inquiries were high. That is the reason in that segment, the NCL went up, which is because the number of players suddenly went up, and then the DSA I think, I can say, the direct advantage they have taken, and therefore, that segment got impacted.

Otherwise, when that segment was done by few players, then that problem was not there. If you see CSEL and VF business, where ₹600 crores and ₹300 crores put together ₹900 crores NCL is coming in a quarter, I am expecting that that number will start significantly going down because the capacity utilization vehicle has improved significantly.

As you mentioned that Stage 2 is coming down. That means collection efficiency is improved.

That is going to start showing up in the NCL also from the quarter 4. Now coming to the future.

The seasonality effect is going to be there. There has been two problem in vehicle: seasonality and cyclicity.

I am expecting that the cyclicity problem is going to get resolved if the vehicle demand is continued to be there from now onwards till next three, four years, as we have seen that the cycles are actually four years up and four way to one, one and a half years down. That should vehicle finance the good news if the cyclicity get resolved.

Seasonality impact is going to be there, and that is the effort we need to put it on ground, which I think because during cyclicity we improved the collection, feet on the street on ground more, and then after the cyclicity problem get resolved, our collection efficiency improved significantly. Vehicle finance is going to be better, significantly better from quarter 1 if the cyclicity problem is not there, seasonality is there.

Now coming to the CSEL, as I mentioned, the indication is that our numbers are looking better because the partnership book has already come down from ₹3,000 crores to ₹600 crores. The partnership book NCL is completely getting eliminated from next financial year.

Traditional CSEL business, their NCL is also started coming down. Both put together, their NCL will look better, as we mentioned that they can go down as low as 5%.

Both the side, we are benefited in time to come.

Got it, and thank you, sir. The last thing on the non-interest income side, are we taking any initiatives there to improve the

Non-interest as such in our business is not much. The fee income what we do it by doing the protecting the asset and the life of the customer, what we do insurance, the fee income is coming, and then other income is coming from the additional finance charges and all which we collect it.

What is going to happen in the time, when the collection improves, and this is very specific to vehicle finance, whenever collection improve, their other income goes up. That is the reason the fee income or other income, whatever you say that, is going to go up in the quarter 4.

If that continue, as I mentioned, if the cyclicity is improved in quarter 1 onwards and their collection is improving, Stage 3 is coming down, during that period for short period, for at least one year, you will see that their overall income will be high.

Got it, sir. This is all from my side.

Thank you so much and I wish you and your team the very best.

Thank you. Thank you so much, Abhijit-ji.

Thank you very much. This concludes the call.

Thank you, participants, for joining us today, and thanks a lot to the management for giving us an opportunity to host the call.

Thank you. Thank you, Nischint.