ICICI Securities has upgraded Cholamandalam Investment and Finance Company to a 'Buy' rating with a price target of ₹1,950. The brokerage cited strong loan book growth and disciplined credit cost management as key drivers. This rating change follows a recent 20% correction in the stock price, which the brokerage considers an attractive entry point.
ICICI Securities has upgraded its rating for Cholamandalam Investment and Finance Company to 'Buy,' maintaining a price target of ₹1,950 per share. This shift in stance follows a recent period of market volatility that saw the company's stock price decline by approximately 20%.
The company’s operational performance for the second quarter of fiscal year 2027 showed resilience against broader economic challenges. Assets under management (AUM) grew by 25% compared to the same period last year, exceeding the management's initial guidance of 23%. Disbursements reached ₹358 billion, a 21% increase sequentially, indicating that despite seasonal disruptions affecting the wider non-banking financial company (NBFC) sector, the firm maintained strong loan demand.
Asset quality remains a central focus for the company. During the quarter, credit costs were reported at 1.4%, which aligns with the firm's conservative risk framework. To manage potential uncertainties, the company has retained a management overlay of ₹2 billion, or roughly 10 basis points of AUM. This buffer serves as a cushion against possible volatility, including risks related to geopolitical instability in regions like West Asia that could indirectly impact the domestic economic environment.
Regarding valuation, the stock is currently trading at 2.9 times its estimated fiscal year 2028 price-to-book value. ICICI Securities suggests that this valuation, combined with the company’s diversified financial franchise, presents a compelling opportunity for investors. The target price of ₹1,950 is based on a valuation of 4 times the estimated book value per share for September 2027.
Investors looking at the sector should track how the company maintains its credit costs in the coming quarters. While the firm has performed well, the NBFC sector often faces cyclical pressures from interest rate changes and competition. Sustaining growth while managing asset quality will remain a key monitorable. The management has maintained its full-year guidance of 23% AUM growth and 1.5% credit costs, and stakeholders will be watching for consistency in these metrics as the fiscal year progresses.