CHOLAFIN Q2 FY27 Earnings Call: Disbursements Jump 47% YoY, Rs. 5,000 Cr Fundraise Cleared

CHOLAFIN held its Q2 FY27 earnings call on October 28, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Broad-Based Growth Across All Three Engines

• Aggregate disbursements up 47% YoY to Rs.35,872 Cr in Q2 FY 2026-2027, with AUM at Rs.2,68,000 Cr (+25% YoY); management cited broad-based momentum across vehicle finance, SME and consumer finance.
• Vehicle finance disbursements up 31% YoY to Rs.17,800 Cr (AUM Rs.1,29,787 Cr, +21% YoY); management said Chola grew materially ahead of the industry on market share gains, supported by replacement demand and healthy freight utilization.
• Secured SME finance disbursements up 42% YoY to Rs.9,345 Cr (AUM Rs.72,356 Cr, +27% YoY) — LAP Rs.57,447 Cr (+24%), SME Rs.10,943 Cr (+45%), SPPL Rs.3,966 Cr (+35%).
• Consumer loans disbursements up 103% YoY to Rs.8,726 Cr (AUM Rs.45,902 Cr, +32% YoY); housing +43%, CSEL +103%, gold +320% disbursement growth.
• Credit costs reduced by 37 bps and PBT ROA expanded 40 bps YoY in Q2 FY 2026-2027; NIMs maintained despite a volatile rate environment. ROE stated at 9.4% vs 18.1% a year ago (Q2 FY 2025-2026).
• Asset quality improved — gross stage 3 at 3.25% in September 2026 (vs 3.29% in June 2026); GNPA per RBI norms at 4.4% vs 4.5% in June 2026.
• Liquidity of Rs.21,974 Cr in total liquid assets; capital adequacy at 20.62% (tier-1 16.02%) as of September 2026, with CCD-to-equity conversion completed.

FY27 Guidance Held; Rs.5,000 Cr Enabling Resolution

• FY 2026-2027 full-year guidance reaffirmed at 25% growth and 1.4% net credit cost — both already achieved in H1 FY 2026-2027; management noted Q3/Q4 FY 2026-2027 have historically been better than Q1/Q2 but does not want to set a bigger target despite the mortgage book scale-up.
• Vehicle finance growth guidance of 20-23% for FY 2026-2027 held ("we hold our commitment") when asked whether it had been raised to 24-25%.
• Board approved a proposal to raise up to Rs.5,000 Cr (subject to shareholder and regulatory approvals, period unspecified); management plans execution within the next 6-9 months (by around Q2 FY 2027-2028), depending on market pricing — Executive Chairman Vellayan Subbiah framed it as strengthening CAR and the balance sheet, not tied to new segment entry.
• No new sub-segments planned — Subbiah said the company has "a pretty full set of segments"; growth will come from existing businesses including the fast-growing gold loan and consumer durables books.
• CSEL to be reported separately — CFO Arul Selvan said the two CSEL businesses (unsecured business loans; CD/mobile/digital lending, headed by Sujed Vardhan and Vijay Pini) will start being reported separately "probably from the next months" once they reach good size (period unspecified).
• Consumer business profitability improving — the two CSEL businesses together delivered close to 3.6% ROA in Q2 FY 2026-2027 and can "definitely deliver more than 4% pre-tax ROA" (period unspecified), driven by declining net credit costs and some opex reduction.

Yield Dip Is Technical; NIM Compression Flagged for FY27

• Aggregate yield fell 30 bps QoQ from 14.9% to 14.6% in Q2 FY 2026-2027 despite most segment yields rising, driven by lower gain on assignment (only one deal executed, ~20 bps impact); expected to normalize in Q3 FY 2026-2027. Committed assignment limits with certain banks are exhausted and management may not renew.
• H1 FY 2026-2027 NIM at ~8.05%, flat vs the FY 2025-2026 average; with cost of funds guided up 20 bps for FY 2026-2027, management flagged NIM compression of at least 10 bps for FY 2026-2027, expected to be more than offset by lower credit cost, keeping overall ROA better than FY 2025-2026.
• Cost of funds guidance of 10-15 bps increase applies to FY 2026-2027 and assumes a cumulative 50 bps of rate hikes — 25 bps already done, with another 25 bps that "may happen" (a possibility, not a certainty, per the CFO).
• Rate sensitivity: under a 50 bps repo hike scenario in H2, cost of funds would rise ~15-20 bps YoY — a full-year FY 2026-2027 impact of ~15 bps; ~25% of borrowings are repo-linked and ~25% linked to other benchmarks, with the rate impact expected to be larger in FY 2027-2028 than in FY 2026-2027.
• OpEx ratio rose from 2.9% in Q1 to 3.1% in Q2 FY 2026-2027 (+10 bps QoQ, better than the 20 bps rise a year ago), on July salary increments and a one-time annual business week event (staff trip to Australia); employee cost at ~Rs.1,400 Cr/quarter reflects insourcing from the outsourcing entity, with outsource costs down ~Rs.100 Cr QoQ.
• OpEx ratio expected to stay close to 3-3.1% for H2 FY 2026-2027 and beyond (management would not rule out 3.2%); it aims to bring it down to 2.8% in 2-3 years' time.
• LAP IRR up from 12.5% to almost 13.40% over the last 7 quarters (through Q2 FY 2026-2027), driven by the small-ticket LAP book running ~Rs.500 Cr of disbursements per month at average ticket sizes of Rs.15-20 lakhs; management declined to disclose a segment-wise yield when asked if it is upwards of 14%.

Strong Industry Tailwinds; Cautious on Tractors and Small-Ticket Used Vehicles

• Q2 FY 2026-2027 industry vehicle sales growth — HCV 40%, LCV 25%, SCV ~26%, passenger vehicles 31%, two-wheelers 15%; HCV grew 20% in H1 FY 2026-2027 with highest-ever H1 sales on strong freight movement.
• Q3 FY 2026-2027 disbursement growth guided at ~20-22% YoY, aided by a two-month festive season (October and November 2026) vs a single-month season in FY 2025-2026; October 2026 vehicle finance disbursements tracking 18-20% YoY growth.
• Management expects industry HCV growth of ~20%+ in Q3 FY 2026-2027 — October tracking ~18%, November expected above November FY 2025-2026 on Diwali timing — with worst-case industry growth of 15-20% across vehicle segments in H2 FY 2026-2027.
• Tractors and small-ticket used vehicle loans are the most at-risk segments amid the El Nino/drought uncertainty; management has already turned cautious on disbursements in these markets, with clarity expected only after December 2026 (Q3 FY 2026-2027).
• Tractors are just 3% of the overall vehicle finance book (Q2 FY 2026-2027); CFO Arul Selvan noted the rainfall deficit stands at 13% in the current season (FY 2026-2027) but sowing is at par with last year, and the deficit is mostly concentrated in the Northeast, Kerala and regions with limited agriculture activity — no impact "as of now."
• Maruti relationship deepening — management said Chola is "one of the largest players in the Maruti council," continuously increasing share especially in upcountry/rural markets on entry cars; no quantified market-share or PV-growth figure was provided for the next 12-18 months (into FY 2027-2028), and management did not quantify a passenger-vehicle growth outlook in response to analyst Shubhranshu (PhillipCapital) citing Maruti's raised guidance of 2026-10-27.
• Network expansion via RL upgrades — for FY 2027-2028, MD & CEO Ravindra Kundu said ~125 resident locations that have hit critical disbursement numbers are being upgraded to full branches; combined branches-plus-RL network cited at almost 22,600 as of Q2 FY 2026-2027.

CSEL Ramp-Up Deliberate; Gold Branch Rollout Productivity-Gated

• ~60% of YoY disbursement growth in Q2 FY 2026-2027 came from consumer durables and ~40% from CSEL unsecured products (business loans and personal loans); management said the CSEL surge reflects groundwork over prior quarters, with the underwriting model and credit scorecard in place before scaling up sourcing.
• CD growth driven by mobile financing — MD & CEO Ravindra Kundu said the business began with a Samsung partnership and expanded over the last 12 months into the open market with all other mobile OEMs, including the majority of tier-3 markets; YoY growth is aided by a low base — CD disbursements peaked at Rs.1,000-1,200 Cr/month in FY 2024-2025, were reduced in FY 2025-2026, and are back at similar levels now without Samsung partner volume.
• Gold loan book is almost entirely 12-month bullet loans, with EMI-based lending at <1% of the book as of Q2 FY 2026-2027; management said the Stage 2/Stage 3 recognition issues peers flagged on short-term gold loans relate to EMI-based funding versus bullet loans and are not present in Cholamandalam's book.
• 120 gold loan branches opened in FY 2025-2026; ~360 opening in FY 2026-2027 with 480 total expected by end of FY 2026-2027 — management explicitly denied a 1,000-branch plan; Phase 1 branches deliver ~Rs.21 Cr AUM per branch (Q2 FY 2026-2027) while Phase 2 branches must reach Rs.15-20 Cr per branch (period unspecified).
• Management corrected an analyst's ~Rs.9,000 Cr end-FY 2026-2027 gold AUM estimate, clarifying the Rs.21 Cr per-branch AUM applies only to Phase 1 branches, not the full network; no multi-year branch or AUM target was quantified and no gold-price outlook was given.
• HL/LAP acceleration partly optical — the CFO said Q1 FY 2026-2027 disbursements for HL, LAP and to a lesser extent SME/SBPL did not appear in reported numbers due to a technical correction aligning disbursement with asset recognition; underlying drivers are consistently low delinquencies and branch productivity gains from the last 2-3 years, with FY 2025-2026 slow due to changes in government norms and the SRO chain.
• Mortgage geographic runway — ~40% of the mortgage business (HL, LAP, SBPL, SME) comes from the South and ~60% from North/East/West; management hopes zone-wise distribution equalizes within 1-2 years (from the Q2 FY 2026-2027 call).

Drought Watch, Insurance Reform and FY28 Mitigants

• Rain deficit contained to a few districts — CFO Arul Selvan said it is confined to Vidarbha, Malwa, parts of Madhya Pradesh and parts of Karnataka, with sowing and the big markets unaffected so far; the impact on these limited pockets will become clear by December (Q3 FY 2026-2027).
• Drought-prone areas deliberately under-weighted — the CFO noted Vidarbha, Malwa, coastal Karnataka and parts of Madhya Pradesh have historically been stress-prone, so concentration is kept lower there; tractor financing has not been done in a big way for the last 3 years, and with the vehicle book diversified by product and geography, management sees no problem as of now.
• Rabi risk timing — kharif farmer income is not impacted as of now; the rabi impact depends on reservoir levels and will only be known by December (Q3 FY 2026-2027); if rabi sowing does not decline, the risk shifts to next year's rains — a deficit monsoon in FY 2027-2028 would create a problem in FY 2027-2028.
• Insurance distribution reform (credit life) — management has not yet quantified the impact on ROA/ROE; its mitigation working is ready but it is awaiting the final conclusion of the reform before finalizing its response, and aims to keep the revenue line intact despite lower insurance income in order to deliver 3.5% pre-tax ROA (period unspecified).
• FY 2027-2028 mitigants queried — analyst Renish (IIFL Securities) asked what levers exist to sustain 3.5% PBT growth in FY 2027-2028 given the draft insurance commission paper and potential drought; the CFO said a plan B for insurance income is ready and will be rolled out once the extent of the income decline is known, but clarified that a higher share of profitable products is not a new mitigant — product diversification has always been ongoing.
• H2 FY 2026-2027 growth to moderate on base effect — YoY growth percentage will be lower than the high base of 2H FY 2025-2026, but October momentum indicates continuation and management does not view this as a slowdown; mix-wise, within 3-4 years (management first referenced "by FY28-FY29" but said the exact year is uncertain) vehicle finance is expected to decline from 52% to below 50% of the book as mortgage rises slightly, with small-ticket/consumer products (CSEL, CD, gold) to remain within 15% max in the near term.
• Collections infrastructure scaled — ~2,800 people in pre-sale collections as of Q2 FY 2026-2027 (~1,800 on-roll plus ~1,000 via agency), with unsecured-loan collections handled entirely on-roll (~800 people); state-wise breakup is disclosed only for vehicle finance, with the all-business top-5 state exposure figure to be provided when ready.