CLSA has downgraded Cholamandalam Investment and Finance Company to a ‘Hold’ rating, revising its target price to ₹1,600, citing stretched valuations that now closely mirror the market leader, Bajaj Finance.
The stock currently trades at 4x FY27 price-to-book, only a 9% discount to Bajaj Finance—a level CLSA believes is difficult to justify unless asset under management (AUM) growth sustains at 30-40%. In comparison, Chola’s AUM growth is currently in the mid-20% range, and the brokerage expects it to average 18–20% CAGR over the next two years.
While Chola is expected to benefit from a potential rate-cutting cycle, CLSA cautioned that the impact may be limited. An additional 25 basis points cut would improve net interest margins by just 7-8 bps and EPS by around 2%, which is not materially accretive in the near term.
Disclaimer: The above views are of the broker’s and not the author or the publication’s. Please make any and every investment decision after consulting your financial advisor.
