We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.

INVESTING RATIONALE

• In Q2FY19, AUM growth was strong at 30.9% YoY to Rs 477 bn, primarily driven by vehicle finance portfolio (up 38.1% YoY; 74.3% share of total AUM). After conscious slowdown in home equity portfolio, growth is slowly picking up at 11% YoY (22.5% of overall AUM).

•Headline asset quality improved with GNPA down 19 bps QoQ at 2.8% (down 2.2% QoQ at Rs 13.5 bn in absolute terms). There has been no incremental borrowing from the CP market post September and CIFC has adequate liquidity to maintain any significant development in the bond markets.

•Focus remains to grow in line with industry, increase share of high yielding products, maintain NIM by passing on any increase in cost of funds and build product lines (high yielding) like 2-wheeler loans (currently less than 1% of book). Also, CIFC has tightened underwriting standards and is focusing on good credit quality customers. These will help in maintaining quality and retaining profitable market share.

•We reiterate a BUY on Cholamandalam Investment & Finance Co with a target Price of Rs 1,403.