Cholamandalam Investment and Finance Company (Chola Investment) shares slipped over 2% in morning trading after global brokerage CLSA downgraded the stock to a ‘Hold’ rating. The firm also revised its target price to ₹1,600, citing stretched valuations that now closely align with those of market leader Bajaj Finance. As of 9:31 AM, the shares were trading 2.34% lower at Rs 1,621.00.
Currently, Chola trades at 4x FY27 price-to-book value—just a 9% discount to Bajaj Finance. CLSA believes this premium is hard to justify unless Chola maintains an aggressive AUM (assets under management) growth rate of 30-40%. At present, Chola’s AUM growth stands in the mid-20% range, with CLSA projecting it to average around 18–20% CAGR over the next two years.
While a potential rate-cut cycle could be a positive for NBFCs, CLSA remains cautious on its impact for Chola. A 25 basis points cut in interest rates would enhance net interest margins by only 7-8 basis points and earnings per share (EPS) by around 2%—a modest gain that’s unlikely to drive significant upside in the short term.
Despite Chola’s strong fundamentals and growth prospects, CLSA’s cautious stance reflects concerns over valuation sustainability and limited near-term catalysts.
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