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The market expects Cholamandalam Finance to do better than it ever has.
At today’s share price, buyers are assuming Cholamandalam Finance earns about 23.6% a year on the money invested in it, from here on. Over the last ten years it actually earned about 20% a year. So the share price only makes sense if the business improves on its own track record. If it simply carries on as before, buyers today have paid for something they will not get.
- How it is valued: Excess return — the correct lens for an NBFC.
- What the price assumes: 23.6% return on equity, against 20.0% the model takes from its own record.
- Ten-year record: Between FY2019 and FY2026, Cholamandalam Finance's revenue went from ₹7,088 crore to ₹31,073 crore — it compounded at about 24% a year over 7 years.
- Biggest swing factor: Loan growth. Main risk: Vehicle cycle.
01The Murugappa group's lender
Cholamandalam Investment and Finance, part of the Chennai-based Murugappa group, is one of India's largest non-bank lenders. Its core is vehicle finance — new and used cars, commercial vehicles and tractors — especially in smaller towns.
It has expanded into loans against property, affordable home loans, small-business loans and consumer finance. As an NBFC it funds itself through bank loans and bonds rather than deposits.
02What the market is assuming
Work backwards from today's share price and you can see what buyers are quietly taking for granted. Here is the return on equity that price implies for Cholamandalam Finance, next to what the model assumes from the company's own record.
The further apart these two numbers are, the bigger the bet a buyer at today's price is making.
03Cholamandalam Finance's record, in plain numbers
Between FY2019 and FY2026, Cholamandalam Finance's revenue went from ₹7,088 crore to ₹31,073 crore — it compounded at about 24% a year over 7 years. Net profit grew from ₹1,197 crore to ₹5,233 crore, about 23% a year — roughly in step with revenue. In FY2026 it kept 16.8% of revenue as net profit — against a low of 12.1% in FY2020 and a high of 21.2% in FY2022. The latest year added 20.2% to revenue, well behind its own long-run pace.
Revenue and earnings per share in ₹, return on equity and leverage as ratios — all from the filed statements.
Revenue and net profit by year (₹ crore)
| Year | Revenue | Net profit | Margin |
|---|---|---|---|
| FY2019 | 7,088 | 1,197 | 16.9% |
| FY2020 | 8,712 | 1,054 | 12.1% |
| FY2021 | 9,579 | 1,521 | 15.9% |
| FY2022 | 10,141 | 2,154 | 21.2% |
| FY2023 | 12,884 | 2,665 | 20.7% |
| FY2024 | 19,140 | 3,420 | 17.9% |
| FY2025 | 25,846 | 4,263 | 16.5% |
| FY2026 | 31,073 | 5,233 | 16.8% |
04How Cholamandalam Finance gets valued — and why
Excess return — the correct lens for an NBFCA lender is not valued with a discounted cash flow. Borrowing is the raw material of the business and interest is operating income, so enterprise value means nothing here. It is valued on excess return instead — the profit it earns above the cost of the equity funding it.
05What decides Cholamandalam Finance's value
Loan growth
Rapid book growth drives earnings.
Return on equity
Holding high returns as it diversifies is the key test.
Funding costs
Borrowing costs follow bond yields and bank rates.
Credit costs
Newer unsecured books carry higher defaults.
06What could go wrong
- Vehicle cycle. A slowdown in vehicle sales cuts new lending.
- Unsecured lending. Consumer and small-business loans can sour quickly.
- Regulation. Tighter rules on NBFCs can raise capital needs.
07What the full Cholamandalam valuation shows
Sign in free to see the complete Cholamandalam Finance valuation
- ✓Fair value per share — from the excess-return model used for lenders
- ✓The lender workpaper — book value, cost of equity and sustainable return, step by step
- ✓Bull, base and bear cases — and exactly which assumptions move between them
- ✓Peer comparison — against Bajaj Finance, Shriram Finance and Bajaj Finserv
- ✓Downloadable report — the full write-up, yours to keep
08Compare Cholamandalam Finance with peers
The same valuation, run side by side.
Cholamandalam Finance vs Bajaj FinanceThe benchmark NBFC, on a broader consumer book.→Cholamandalam Finance vs Shriram FinanceThe nearest peer on vehicle and small-business lending.→Cholamandalam Finance vs Bajaj FinservA focused lender against a diversified financial parent.→09Questions people ask about Cholamandalam Finance
What does Cholamandalam Finance lend for?
Vehicles, property, homes, small businesses and consumer purchases.
Is Cholamandalam a bank?
No, it is a non-banking financial company that funds itself in the market.
Chola or Bajaj Finance — which is better value?
Both are valued on the same excess-return model; the comparison page sets them side by side.
Is Cholamandalam Finance overvalued?
At ₹1,850 the market is pricing in roughly 23.6% sustained ROE, against the ~20.0% its own record supports. That is more than it has delivered, so the price is justified only if the business can hold a rate it has not previously sustained.
What is the intrinsic value of Cholamandalam Finance?
It is computed from the filed financial statements using the method that fits this business (excess return), with every assumption shown alongside the result. The per-share figure and the full working are in the report.
How much debt does Cholamandalam Finance carry?
Debt to equity stands at 5.17, against 5.16 at the start of the period — the balance sheet is a core input to the cost of capital used here.