Motilal Oswal has issued a 'Buy' rating on Cholamandalam Investment and Finance Company with a price target of Rs 2,160. The brokerage cites the lender's move to diversify away from vehicle financing into faster-growing areas like MSME and gold loans as a key growth catalyst.
Motilal Oswal has assigned a 'Buy' rating to Cholamandalam Investment and Finance Company (CIFCL), setting a price target of Rs 2,160. Shares of the company are currently trading in the range of Rs 1,815 to Rs 1,825. The brokerage’s positive outlook is based on the company's evolving business model and its ability to scale new revenue streams.
The lender is currently transitioning its strategy to reduce reliance on its traditional vehicle financing business. While auto loans remain a core part of its operations, Cholamandalam is aggressively growing its loan book in other sectors, including mortgages, consumer finance, MSMEs, and gold loans. This diversification is intended to protect the company from the cyclical downturns often seen in the automotive lending sector, creating a more stable and resilient business model over the long term.
The company’s recent financial performance appears to support this growth ambition. In the first quarter of fiscal year 2027, the company reported a 23% year-on-year increase in its assets under management and a 22% growth in disbursements. To fuel this expansion, the firm has been actively strengthening its capital base. On September 1, 2026, the company successfully allotted unsecured perpetual non-convertible debentures worth Rs 2,000 crore, providing the necessary liquidity to fund its growing loan portfolio.
Investors should be aware that the stock is currently trading at a premium compared to its industry peers, with a price-to-book value ratio of approximately 4.8x to 5.1x. This premium reflects high investor expectations regarding the company's future growth and return profile. However, this also implies that the stock may be sensitive to any performance that falls short of these expectations. Like other non-banking financial companies (NBFCs), Cholamandalam faces inherent risks, including potential credit losses, sensitivity to interest rate fluctuations, and rising competition in newer segments like consumer and gold loans.
Moving forward, the primary monitorables for investors will be the company's ability to maintain asset quality while rapidly scaling its newer business segments. The market will also track the impact of funding costs on the company's profit margins, especially as it continues to raise capital to support its aggressive expansion plans.