Cholamandalam Finance HOLD: ICICI Securities Raises Target Price Amid Q2 Hiccups - Should You Buy?

Cholamandalam Finance (Chola) experienced a slowdown in its Q2FY26 performance, attributed to tariff adjustments and Goods and Services Tax (GST) cuts, which created transitional challenges. This led to a deceleration in its Assets Under Management (AUM) growth to 21% year-on-year, compared to previous quarters. Despite this, the growth remains within the company's guided range of 20-25% in the near term.

Management has indicated that October 2025 showed a good recovery in both credit demand and collection efficiency, leading to optimism for a stronger second half of FY26 (H2FY26) compared to the first half (H1FY26).

ICICI Securities, in its research report, has maintained a 'HOLD' recommendation for Cholamandalam Finance. The brokerage firm has revised its price target (TP) upwards to INR 1,625 from INR 1,430, valuing the stock at 4.25 times its estimated September 2026 Book Value Per Share (BVPS), an increase from the previous 3.75 times.

Impact This 'HOLD' rating suggests that while Cholamandalam Finance is expected to improve its financial performance in H2FY26, the current stock price may have already factored in most of the anticipated positives. Investors should monitor collection efficiencies and AUM growth trends closely. The revised price target indicates a modest upside potential but cautions against aggressive buying at current levels. The news itself could lead to a neutral to slightly positive sentiment in the short term, depending on broader market conditions. Rating: 6/10

Difficult Terms: Assets Under Management (AUM): The total market value of the investments that a fund manager manages on behalf of clients. For a finance company, it represents the total value of loans and advances outstanding. FY26: Refers to the Financial Year 2025-2026. H1FY26/H2FY26: First half and second half of the Financial Year 2025-2026, respectively. YoY: Year-on-year, a comparison of a metric from one period to the same period in the previous year. Tariff cuts: Reductions in the rates charged for services or goods. GST: Goods and Services Tax, an indirect tax levied on the supply of goods and services in India. Price Target (TP): The price level at which a stock analyst believes a security will reach within a certain time frame, usually 12 months. BVPS: Book Value Per Share. It is calculated by dividing the total shareholders' equity by the number of outstanding shares. It represents the net asset value of a company on a per-share basis.