Cholamandalam Finance Absolute: LONG Relative : OverWeight...October 31, 2018 Analyst: Ankit...

October 31, 2018 Analyst: Ankit Choudhary [email protected](+91-8128694914)/Rohan Mandora [email protected] of 14

Before reading this report, you must refer to the disclaimer on the last page.

Cholamandalam Finance Absolute: LONG

Relative : OverWeight

2QFY19 Result: Est. (↑), Target (↓), Rating (↔) Regular Coverage 33% ATR in 11 months

NIM contraction likely ahead, but lower provisions to keep RoE above 21% — retain LONG BFSI

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 1,271

Target Price (Rs) 1,650

Target Date 30-Sep-19

Target Set On 31-Oct-18

Implied yrs of growth (ERE) 20

Fair Value (ERE) 1,650

Fair Value (DDM) -

Ind Benchmark BANKEX

Model Portfolio Position

Stock Information

Market Cap (Rs Mn) 1,98,645

Free Float (%) 46.9%

52 Wk H/L (Rs) 1761/1038

Avg Daily Volume (1yr) 3,41,667

Avg Daily Value (1yr) 480

Equity Cap (Rs Mn) 1,564

Face Value (Rs) 10.0

Bloomberg Code CIFC IN

Ownership Recent 3M 12M %

Promoters 53.1% 0.0% 0.0%

DII 15.9% -0.1% 2.7%

FII 20.5% -0.2% -2.9%

Public 10.6% 0.4% 0.2%

Price % 1M% 3M% 12M%

Absolute 8.9% -11.2% 10.4%

Vs Industry 7.6% -2.7% 10.1%

STFC 1.2% -15.7% -0.3%

SUF -1.1% 0.0% -5.5%

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (18A) 13.4 14.5 15.9 19.2

EPS (19E) 18.3 19.5 19.6 20.4

CIFC delivered a strong 2Q as a 46% yoy drop in provisions shored up PAT by 49% yoy to

Rs 3bn. AUM growth was robust at 31% yoy off a low base, and we expect it to grow at

19.5% CAGR (FY18-FY21E) amid strong CV demand with an increase in share of road

freight movement. NIMs could slip ~16bps in FY19E before stabilizing in FY20E as CIFC

would (a) pass on increased rates to borrowers and (b) increase the share of pre-

owned/tractor segments, both high-yield products. We trim our credit cost estimate as

recovery remains strong in the home equity segment while CV customers continue

regular servicing of loan despite rising diesel price. Maintain LONG with a Sep’19 TP of Rs

1,650 (Rs 1,700 earlier) at 4.4x/3.6x (unchanged) Sep’19/Sep’20 ABV of Rs 326/Rs 402.

AUM growth at 19.5% over FY18-FY21E: AUM/disbursements grew ~31%/~26% yoy

with vehicle finance/home equity disbursements up 29%/10%. VF growth was led by a

35%/28% yoy growth in LCVs/car & MUV segments and a ~206%/116%/73% growth

across CE/3W & SCV/tractor segments off a low base. Given the comfortable ALM

position, CIFC does not expect any slowdown in disbursements. Alongside, we expect

growth in CVs to remain strong with an increase in share of road freight movement

(Exhibit 9). We thus expect ~18% CAGR in disbursements (FY18-FY21E) leading to an

AUM CAGR of 19.5% over FY18-FY21E.

RoE to reach 21.7% by FY20E: Calculated NIMs during the quarter stood unchanged at

6.3%. CIFC raised ~Rs 50bn during the last week of Sep ’18 via bank borrowings at sub-9%

and CPs worth Rs 500mn during Oct’18. Management indicated that CoF is expected to

increase by 30bps-40bps during 2HFY19 but will be compensated by (a) passing on of

interest rates to borrowers in HCV/LCV/CE/car & MUV segments and (b) increasing share

of pre-owned and tractor segments which are high-yielding assets. We thus expect NIMs

to decline by ~16bps during FY19 before stabilizing in FY20E. Provisions declined yoy due

to a significant improvement in the home equity segment; on expectations of further

improvement in this segment, we cut our FY19E/FY20E credit cost estimate to 0.7%/0.8%

(FY18: 1.1%). We thus expect RoEs of 21.5%/21.7% in FY19E/FY20E.

Stage-III assets improve by 20bps qoq: Stage-III assets improved 20bps qoq led by a ~Rs

200mn reduction in home equity GNPAs with recovery under SARFESI. Management sees

further recovery in the home equity segment while CV customers (Small Road Transport

Operators) continue regular servicing of loan despite rising diesel price. We expect gross

stage-III/net stage-III to improve to 3.1%/2.1% in FY19 (FY18: 3.5%/2.2%).

Key risks: A protracted economic slowdown, considerable increase in COF, inability to

pass on rate hikes to borrowers and an increase in opex.

Rs Mn Revised Estimates % Change

FY19E FY20E FY19E FY20E

NII 31,044 37,406 1.6% -0.3%

Opex 11,285 12,720 2.1% 2.2%

Provisions 3,340 4,304 -17.3% -10.4%

PAT 12,156 14,904 5.0% 1.0%

EPS 78 95 5.0% 1.0%

AUM 5,23,098 6,24,655 0.1% -1.4%

Standalone Financials

Rs Mn YE Mar FY18A FY19E FY20E FY21E

Int Income 48,392 65,846 79,386 93,870

Int Expense 23,078 34,802 41,980 49,569

NII 25,314 31,044 37,406 44,301

Other Income 5,866 2,000 2,200 2,420

Operating Exp 12,895 11,285 12,720 14,363

Provisions 3,451 3,340 4,304 4,897

PAT 9,741 12,156 14,904 18,124

Loan & Advance 3,72,012 5,08,242 6,07,564 7,16,044

AUM 4,28,791 5,23,098 6,24,655 7,35,651

Net Worth 51,502 61,804 75,297 92,009

NIM 6.5% 6.3% 6.3% 6.4%

Credit Cost 1.1% 0.7% 0.8% 0.7%

Rs Per Share FY18A FY19E FY20E FY21E

EPS 62.3 77.7 95.3 115.9

Adjusted EPS 62.3 77.7 95.3 115.9

Book Value 329.3 395.2 481.4 588.3

Adjusted BVPS 287.5 326.1 402.4 498.3

DPS 6.5 7.5 7.5 7.5

P/E (x) 20.4x 16.3x 13.3x 11.0x

Adj P/B (x) 4.4x 3.9x 3.2x 2.5x

ROE (%) 20.6% 21.5% 21.7% 21.7%

RoA (%) 2.8% 2.4% 2.5% 2.6%

mailto:[email protected]

Cholamandalam Finance Absolute – LONG Relative – OverWeight 33% ATR in 11 Months

October 31, 2018 Analyst: Ankit Choudhary [email protected](+91-81286 94914)/Rohan Mandora [email protected] of 14

Quarterly performance

Particulars %Variation

P&L Statement (Rs Mn) 2QFY19 2QFY19E 1QFY19 2QFY18 % change vs Est % change q-o-q % change y-o-y

Net interest income (NII) 7,299.2 6,953.3 6,379.5 5.0% 14.4%

Other income 820.4 1,233.1 562.1 -33.5% 46.0%

Total income 8,119.6 8,177.8 8,186.4 6,941.6 -0.7% -0.8% 17.0%

Operating expenses 2,912.8 2,724.2 2,816.1 2,705.9 6.9% 3.4% 7.6%

Staff expenses 1,342.5 1,412.7 1,412.7 1,311.0 -5.0% -5.0% 2.4%

Other expenses 1,570.3 1,311.5 1,403.4 1,394.9 19.7% 11.9% 12.6%

Operating profit 5,206.8 5,453.6 5,370.3 4,235.7 -4.5% -3.0% 22.9%

Total provisions 611.6 1,017.6 982.6 1,134.7 -39.9% -37.8% -46.1%

Exceptional Item - - - - - - -

Profit before tax 4,595.2 4,436.0 4,387.7 3,101.0 3.6% 4.7% 48.2%

Tax 1,548.5 1,508.2 1,535.3 1,061.7 2.7% 0.9% 45.9%

Profit after tax 3,046.7 2,927.8 2,852.4 2,039.3 4.1% 6.8% 49.4%

Balance sheet (Rs Mn) 2QFY19 2QFY19E 1QFY19 2QFY18 % change vs Est % change q-o-q % change y-o-y

Borrowings 4,66,375.0 4,24,500.3 4,05,219.0 3,26,260.0 9.9% 15.1% 42.9%

Advances 4,67,515.8 4,67,462.0 4,48,620.0 3,56,493.0 0.0% 4.2% 31.1%

AUM 4,77,209.0 4,72,620.8 4,53,276.0 3,64,565.0 1.0% 5.3% 30.9%

Disbursements 68,995.0 70,143.0 54,923.0 -1.6% 25.6%

Gross Stage III 16,083.0 16,201.0 18,667.0 -0.7% -13.8%

Net Stage III 10,168.0 10,289.0 12,470.0 -1.2% -18.5%

Particulars 2QFY19 1QFY19 2QFY18 bp change q-o-q bp change y-o-y

Profitability ratios

Yield on AUM 14.3% 14.6% 15.0% (30) (70)

Cost of Funds 7.4% 7.2% 7.3% 20 10

NIM 6.9% 7.4% 7.9% (50) (100)

RoaA 2.6% 2.6% 2.3% - 30

RoaE 21.8% 21.8% 17.7% - 410

Asset Quality

Gross Stage III 3.4% 3.6% 5.1% (20) (170)

Net Stage III (Cal) 2.2% 2.3% 3.5% (15) (131)

Coverage ratio 36.8% 36.5% 33.2% 30 360

Business & Other Ratios

Cost-income ratio 35.9% 34.4% 39.0% 147 (311)

CAR 18.3% 18.2% 19.3% 19 (95)

Tier-I 13.1% 13.4% 14.0% (28) (85) Source: Company Filings, Equirus Securities



October 31, 2018 Analyst: Ankit [email protected](+91-8128694914)/Rohan [email protected] of 14

Exhibit1: GNPA/NNPA down 20/10bps qoq on sharp improvement in HE segment

Source: Company, Equirus Securities

Exhibit 2: Share of Vehicle Finance in overall AUM further increases qoq to 74.3%


Exhibit 3: Share of Vehicle Finance in overall disbursement at ~80% in 2QFY19


Exhibit 4: Bank loans formed ~39% of overall borrowings followed by NCDs at ~25%


30%

34%

38%

42%

46%

50%

0%

1%

2%

3%

4%

5%

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

GNPA (%) NNPA (%) PCR (%) - (RHS)

68.4

%

67.7

%

67.5

%

67.8

%

67.5

%

67.4

%

67.8

%

69.2

%

69.8

%

70.4

%

71.7

%

73.5

%

74.0

%

74.3

%

29.5

%

30.1

%

30.3

%

29.9

%

30.0

%

30.0

%

29.5

%

28.1

%

27.3

%

26.4

%

25.1

%

23.3

%

22.7

%

22.5

%

2.1% 2.2% 2.3% 2.4% 2.5% 2.6% 2.7% 2.8% 2.8% 3.2% 3.2% 3.2% 3.2% 3.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

Vehicle Finance Home Equity Others

73.8

%

76.0

%

76.2

%

76.1

%

72.9

%

73.1

%

79.8

%

84.5

%

78.7

%

78.2

%

82.9

%

85.2

%

80.8

%

80.3

%

23.7

%

21.0

%

20.7

%

20.1

%

21.7

%

20.3

%

14.2

%

10.4

%

15.2

%

15.1

%

11.8

%

10.1

%

13.4

%

13.2

%

2.5% 3.0% 3.1% 3.8% 5.3% 6.7% 6.0% 5.0% 6.1% 6.7% 5.3% 4.8% 5.9% 6.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

Vehicle Finance Home Equity Others

13.0%

8.2%

24.6%

4.9%9.9%

39.4%

Securitization

Tier II Capital

Debentures

CC/WCDL

CP/ICD

Bank Term Loans




Exhibit 5: Gross Stage III assets improve 170bps/20bps yoy/qoq to 3.4%

Particulars (Rs Bn) 1QFY18 2QFY18 4QFY18 1QFY19 2QFY19 Y-o-Y

change Q-o-Q

change

Gross Stage III 18.8 18.7 15.0 16.2 16.1 -13.8% -0.7%

Stage 3 Assets to Total Gross Assets

5.4% 5.1% 3.5% 3.6% 3.4% (170.0) (20.0)

ECL provision - Stage III 5.7 6.2 5.4 5.9 5.9 -4.6% 0.1%

Coverage Ratio - Stage III

30.4% 33.2% 36.3% 36.5% 36.8% 360.0 30.0

Gross Asset - Stage I&II 330.9 347.4 416.0 436.2 460.8 32.6% 5.6%

ECL Provision - Stage I&II

3.2 3.4 3.6 3.7 3.5 2.9% -5.3%

Coverage Ratio - Stage I&II

1.0% 1.0% 0.9% 0.8% 0.8% (20.0) -

Total ECL Provision 8.9 9.6 9.0 9.6 9.4 -1.9% -2.0%


Exhibit 6: AUM well-spread across regions


Exhibit 7: AUM well spread across geography with Maharashtra forming ~12% of AUM


Exhibit 8: CIFC has a well-managed ALM

Days (Rs Mn) Outflows Inflows Mismatch Cumulative Mismatch

1–14 Days 8,459 18,822 10,363 10,363

15–30/31 Days 16,284 26,633 10,349 20,712

Over 1–2 Months 21,925 21,935 10 20,722

Over 2–3 Months 19,071 19,360 289 21,011

Over 3–6 Months 36,505 49,872 13,367 34,378

Over 6 Months to 1 Year 70,572 85,580 15,008 49,386

Over 1–3 Years 2,31,684 2,12,755 (18,929) 30,457

Over 3–5 Years 40,725 50,728 10,003 40,460

Over 5 Years 33,064 48,149 15,085 55,545

Over 20 Years 56,835 1,289 (55,546) (1)

Total 5,35,124 5,35,123 (1) 0


27%

23%28%

22%

South

North

East

West

12%

8%

8%

7%

6%

5%5%5%

5%

5%

34%

AUM by state

Maharashtra

Tamil Nadu

Rajasthan

Chattisgarh

Uttar Pradesh

Andhra Pradesh

Karnataka

Bihar

Odisha




Exhibit 9: Road segment to maintain growth momentum owing to capacity constraint in Railways and growth in road freight exceeding GDP growth (as seen historically)

Year Road Freight Movement (BTK) Railway Freight Movement (BTK) Road Share Railway Share Total Freight Movement (BTK) YoY Growth 5Yr CAGR Growth

FY00 467.0 305.2 60.5% 39.5% 772.2

FY01 494.0 312.4 61.3% 38.7% 806.4 4.4%

FY02 515.0 333.2 60.7% 39.3% 848.2 5.2%

FY03 545.0 353.2 60.7% 39.3% 898.2 5.9%

FY04 595.0 381.2 61.0% 39.0% 976.2 8.7%

FY05 643.0 411.3 61.0% 39.0% 1,054.3 8.0% 6.4%

FY06 728.3 441.8 62.2% 37.8% 1,170.1 11.0% 7.7%

FY07 825.9 481.0 63.2% 36.8% 1,306.9 11.7% 9.0%

FY08 933.7 521.4 64.2% 35.8% 1,455.1 11.3% 10.1%

FY09 1,021.6 551.4 64.9% 35.1% 1,573.0 8.1% 10.0%

FY10 1,144.5 600.5 65.6% 34.4% 1,745.0 10.9% 10.6%

FY11 1,287.3 625.7 67.3% 32.7% 1,913.0 9.6% 10.3%

FY12 1,407.8 667.6 67.8% 32.2% 2,075.4 8.5% 9.7%

FY13 1,515.4 649.6 70.0% 30.0% 2,165.0 4.3% 8.3%

FY14 1,650.8 665.8 71.3% 28.7% 2,316.6 7.0% 8.1%

FY15 1,824.3 681.7 72.8% 27.2% 2,506.0 8.2% 7.5%

FY16 2,026.1 654.5 75.6% 24.4% 2,680.6 7.0% 7.0%

FY17** 2,247.5 620.2 78.4% 21.6% 2,867.7 7.0% 6.7%

FY22E*** 3,132.3 886.0 78.0% 22.0% 4,018.3

7.0%

Source: Transport Year Book, Indian Railway AR, Equirus Research estimates




Earnings call takeaways

Business overview

• CIFC is moving towards high-yielding products such as pre-owned vehicles, 2Ws,

tractors and 3Ws. It is also maintaining constant market share while increasing rates in

HCV/CE/MUV&CAR/LCV segments so that marginal yields for 2HFY19 increase. Growth

in the HCV segment was higher in earlier quarters, which dragged yields lower.

• Most of CIFC’s CV customers are Small Road Transporters (SRTOs) who have sub-

contracts with Large Fleet Operators (LFOs) owing 50-100 vehicles. Largely, SRTOs do

not have fixed contracts with LFOs. If LFOs do not increase freight rates in a rising

diesel rate scenario, SRTOs tend to move out of the contract and shift their vehicles to

other businesses (even as their bargaining power with large contractors is lower). To

avoid such situations, LFOs pay from their pocket till the time their own rates are

escalated from load providers; LFOs have 1-2 year contracts with load providers and

typically can’t move out of such contracts.

• Apart from the freight rate increase, transporters are benefitting from an increase in

axle load limit and higher number of kms covered by vehicles post GST.

• Post Sep’18, CIFC has raised ~Rs 500mn through CPs. In the last week of Sep’18, it

raised ~Rs 5bn via bank borrowings at sub-9% rates. The company took a rake hike in

the home equity book which is on floating basis. In vehicle finance, rates have been

increased gradually since Jun’18.

• CIFC’s market share in the MHCV segment has increased from 4.2% to 4.6%. The

company along with many other players provides 100% funding on chassis. It does not

finance First Time Users (FTUs) and First Time Buyers (FTBs).

• Given CIFC’s comfortable liquidity position, disbursements during 3QFY19 would be

normal.

• CIFC will get more stringent on the underwriting front by bringing in new digital

underwriting models.

• There were no upfront assignment gains booked in 2QFY19 vs. Rs 429mn booked in

1QFY19.

• Yields in the home equity segment declined qoq owing to lower yields and pre-closures

in high-yield loans.

Asset quality update

• Negative provisions in the home equity segment are because of recovery owing to

SARFESI which led to a release of provisions in certain cases. This led to a significant

reduction in home equity GNPAs (down ~Rs 200mn in 2QFY19). The reduction trend in

the next two quarters is expected to be on similar lines.

• Gross stage in the vehicle finance segment is Rs 8bn and for the home equity segment

Rs 5.9bn.

• Pre-closures have come down in the home equity segment as liquidity has dried up.

This will enable CIFC to fund good quality customers and lead to further asset quality

improvements.

Guidance

• HCV sales during Oct’18 were down but should pick up from Nov’18 post Diwali.

• The yoy disbursement growth in 2HFY19 would be lower than 1HFY19 owing to the

base effect as disbursements growth during 2HFY18 was higher.

• CIFC expects resolution in gross stage-III going ahead as some more home equity

GNPA cases would be coming up for resolution under SARFESI in the next 2 quarters.

• Credit cost in the VF segment is sustainable at 1%.

• CPs and CC will be forming 15-17% of overall borrowings. CoF is expected to go up by

30-40bps in 2HFY19.




Exhibit 10: ROE-ROA Tree Analysis

Particulars FY17A FY18A FY19E FY20E FY21E

Yield on AUM 13.2% 12.4% 13.8% 13.8% 13.8%

Yield on Investments 1.1% 5.0% 5.0% 5.0% 5.0%

Cost of Funds 9.6% 8.2% 8.2% 8.2% 8.3%

AUM (A) 3,41,670 4,28,791 5,23,098 6,24,655 7,35,651

Investments (B) 2,385 3,190 3,425 3,669 3,911

Cash & Cash Equivalent (C) 4,706 3,925 22,461 16,616 10,662

Interest Earning Assets (A+B+C) 3,48,762 4,35,906 5,48,984 6,44,939 7,50,224

Average Interest Earning Assets 3,25,418 3,92,334 4,93,672 5,96,962 6,97,582

NII/Avg Int Earning Assets 6.2% 6.5% 6.3% 6.3% 6.4%

Non Int Inc/Avg Int Earning Assets 1.2% 1.5% 0.4% 0.4% 0.3%

Total Income/Avg Int Earning Assets 7.5% 7.9% 6.7% 6.6% 6.7%

Op. Costs/Avg Int Earning Assets 3.1% 3.3% 2.3% 2.1% 2.1%

PPI/Avg Int Earning Assets 4.4% 4.7% 4.4% 4.5% 4.6%

Provisions/Avg Int Earning Assets 1.0% 0.9% 0.7% 0.7% 0.7%

Taxes/Avg Int Earning Assets 1.2% 1.3% 1.3% 1.3% 1.3%

Return on Avg Int Earning Assets 2.2% 2.5% 2.5% 2.5% 2.6%

Extraordinary item 0.0% 0.0% 0.0% 0.0% 0.0%

Adj Return on Avg Int Earning Assets 2.2% 2.5% 2.5% 2.5% 2.6%

Productivity (Avg Int Earning Assets/Avg Total Assets) 111.3% 111.9% 99.0% 98.8% 98.4%

Return on Average Total Assets 2.5% 2.8% 2.4% 2.5% 2.6%

Leverage (Average Total Assets/Average Equity) 7.4 7.4 8.8 8.8 8.5

Return on Average Equity 18.1% 20.6% 21.5% 21.7% 21.7% Source: Company, Equirus Securities




Company Snapshot How we differ from Consensus Equirus Consensus % Diff Comment

EPS FY19E 77.7 77.5 0.3%

We expect consensus to be revised

FY20E 95.3 94.7 0.7%

NII +

Other

Inc

FY19E 33,044 37,638.4 -12.2%

FY20E 39,606 45,322.0 -12.6%

PAT FY19E 12,156 11,950.5 1.7%

FY20E 14,904 14,723.7 1.2% Our Key Investment arguments: (1) AUM growth of 19.5% for FY18-FY21E (2) Gross Stage

III improving to3.1%/2.95 in FY19E/FY20E (3) Lower Credit Cost of 0.7%/0.8% in

FY19E/FY20E

Key Assumptions 2017A 2018A 2019E 2020E 2021E

Yield on AUM 13.2% 12.4% 13.8% 13.8% 13.8%

Cost of Funds 9.6% 8.2% 8.2% 8.2% 8.3%

Net interest margin (%) 6.2% 6.5% 6.3% 6.3% 6.4%

Fee Income/Gross Asset(%) 1.2% 1.4% 0.4% 0.4% 0.3%

Cost to Income Ratio (%) 41.7% 41.4% 34.2% 32.1% 30.7%

Prov/Avg Loans (%) 1.1% 1.1% 0.7% 0.8% 0.7%

DPS 5.5 6.5 7.5 7.5 7.5

Advances Growth (%) 9.7% 30.9% 36.6% 19.5% 17.9%

Borrowings Growth (%) 6.8% 32.3% 46.7% 18.4% 16.7%

AUM Growth (%) 15.2% 25.5% 22.0% 19.4% 17.8%

Key Risks: A protracted slowdown in the economy, a considerable increase in COF, not

able to pass on rates to borrowers and an increase in opex

Key Triggers: (1) Strong Pickup in Home Equity Disbursements and AUM (2) Substantial

improvement in asset quality.

Sensitivity to Key Variables % Change % Impact on EPS

Net Interest Income 10% 16.9%

Provisioning Costs 10% -2.1%

EroE Valuations & Assumptions

Rf Ke Term. Growth RoE in Terminal Yr

7.9% 13.4% 5.0% 18.4%

- FY19E FY20-23E FY24-28E FY29-38E

PAT Growth (%) 24.8% 11.8% 17.4% 17.4%

Dividend Payout (%) 11.6% 13.0% 13.0% 13.0%

BV Growth 20.0% 17.4% 17.4% 17.4%

RoE (%) 21.5% 18.4% 18.4% 18.4%

Years of strong growth 1 5 10 20

Valuation as of current FY end (Rs) 740 770 986 1,549

Valuation as of 30th Sep ‘19 788 820 1,049 1,650

Our EroE-based Sep’19TP of Rs1,650 implies 20 years of high growth, with cost of equity

at 13.4% and average RoE at18.4%.

Company Description:

Incorporated in 1978, Cholamandalam Investment and Finance Company Limited, a

nonbanking finance company, provides various financial services in India i.e. Vehicle

Loans, Home Equity, Home Loans and SME Loans. Part of Murugappa group, CIFC operates

through 885 branches and is headquartered in Chennai.

Comparable valuation Mkt Cap

(RsBn)

Price

Target

Target

Date

P/E P/B BPS RoE Div Yield

Company Reco. CMP FY18A/E FY19E FY20E FY18A/E FY19E FY20E FY19E FY18A/E FY19E FY20E FY18A/E FY19E FY20E

CIFC LONG 1,271 198.6 1,650 Sep-19 20.4 16.3 13.3 3.9 3.2 2.6 395.2 20.6% 21.5% 21.7% 0.5% 0.6% 0.6%

STFC LONG 1,165 264.3 1,330 Sep-19 16.9 10.8 9.0 2.1 1.7 1.4 690.4 13.1% 16.8% 17.4% 0.9% 1.0% 1.1%

SUF NR 1,498 166.4 NR NR 31.2 26.7 22.8 4.2 3.7 3.2 409.3 13.8% 14.4% 14.8% 0.8% 0.8% 0.9%




Standalone quarterly earnings forecast and key drivers Particulars (Rs Mn) 1Q18A 2Q18A 3Q18A 4Q18A 1Q19A 2Q19A 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E

Interest Income 12,962 12,941 13,833 15,622 14,972 15,938 16,282 16,706 17,590 18,557 19,610 20,762 48,392 65,846 79,386 93,870 Interest Expense 6,326 6,562 5,903 7,198 8,018 8,639 8,929 9,216 9,689 10,201 10,750 11,340 23,078 34,802 41,980 49,569

Net Interest Income 6,636 6,380 7,930 8,424 6,953 7,299 7,353 7,490 7,900 8,356 8,860 9,422 25,314 31,044 37,406 44,301

Non-Interest Income 1 562 1 2 1,233 820 902 993 1,092 1,201 1,321 1,453 5,866 2,000 2,200 2,420

Total Income 6,637 6,942 7,931 8,427 8,186 8,120 8,255 8,483 8,992 9,557 10,181 10,875 31,179 33,044 39,606 46,721

Operating and Other Expenses 2,315 2,706 3,237 3,779 2,816 2,913 2,746 2,810 2,942 3,088 3,252 3,438 12,895 11,285 12,720 14,363 Staff Cost 1,167 1,311 1,281 1,558 1,413 1,343 1,490 1,664 1,676 1,689 1,706 1,724 5,277 5,910 6,796 7,816 Other Operating Expenses 1,148 1,395 1,273 2,222 1,403 1,570 1,256 1,146 1,266 1,399 1,546 1,714 5,010 5,376 5,924 6,547 Pre-Provision Income 4,322 4,236 4,694 4,647 5,370 5,207 5,509 5,673 6,050 6,469 6,929 7,438 18,284 21,759 26,886 32,358 Provisions and Write-offs 1,080 1,135 902 116 983 612 855 891 957 1,026 1,114 1,207 3,451 3,340 4,304 4,897 PBT 3,242 3,101 3,792 4,532 4,388 4,595 4,653 4,782 5,094 5,442 5,815 6,231 14,833 18,418 22,582 27,461 TAX 1,145 1,062 1,300 1,531 1,535 1,549 1,582 1,596 1,732 1,850 1,977 2,118 5,092 6,262 7,678 9,337 Extraordinary - - - - - - - - - - - - - - - - PAT 2,097 2,039 2,492 3,001 2,852 3,047 3,071 3,186 3,362 3,592 3,838 4,112 9,741 12,156 14,904 18,124 EPS 13.4 14.5 15.9 19.2 18.3 19.5 19.6 20.4 21.5 23.0 24.5 26.3 62.3 77.7 95.3 115.9 Key Drivers Yield on Advances 16.6% 14.7% 16.2% 16.7% 13.8% 13.9% 13.6% 13.4% 13.5% 13.7% 13.8% 14.0% 13.6% 14.1% 14.2% 14.2% Yield on AUM 15.0% 14.5% 14.6% 15.3% 13.6% 13.7% 13.3% 13.1% 13.2% 13.3% 13.4% 13.6% 12.6% 13.8% 13.8% 13.8% CoF 9.1% 8.2% 7.8% 8.7% 8.2% 7.9% 7.7% 7.9% 8.1% 8.2% 8.3% 8.4% 8.2% 8.8% 8.2% 8.3%

NIM 8.4% 7.2% 9.2% 8.9% 6.3% 6.3% 6.1% 6.0% 6.0% 6.1% 6.2% 6.3% 6.5% 6.3% 6.3% 6.4%

C/I Ratio 34.9% 39.0% 40.8% 44.8% 34.4% 35.9% 33.3% 33.1% 32.7% 32.3% 31.9% 31.6% 41.4% 34.2% 32.1% 30.7%

Non-Interest Income/ Total Inc. 0.0% 8.1% 0.0% 0.0% 15.1% 10.1% 10.9% 11.7% 12.1% 12.6% 13.0% 13.4% 18.8% 6.1% 5.6% 5.2% ROA 2.5% 2.2% 2.7% 3.0% 2.5% 2.4% 2.5% 2.6% 2.2% 2.4% 2.5% 2.7% 2.8% 2.4% 2.5% 2.6% ROE 19.2% 17.9% 20.8% 23.9% 21.7% 21.6% 21.8% 22.6% 19.6% 21.0% 22.4% 24.0% 20.6% 21.5% 21.7% 21.7%

Sequential Growth (%)

NII -0.3% -3.9% 24.3% 6.2% -17.5% 5.0% 0.7% 1.9% 5.5% 5.8% 6.0% 6.3%

TI -0.3% 4.6% 14.2% 6.3% -2.9% -0.8% 1.7% 2.8% 6.0% 6.3% 6.5% 6.8%

PPI 10.7% -2.0% 10.8% -1.0% 15.6% -3.0% 5.8% 3.0% 6.7% 6.9% 7.1% 7.3% Provisions and Write-offs 104.4% 5.1% -20.5% -87.2% 749.3% -37.8% 39.9% 4.1% 7.4% 7.3% 8.5% 8.3% PAT -4.5% -2.7% 22.2% 20.4% -4.9% 6.8% 0.8% 3.7% 5.5% 6.8% 6.9% 7.1% EPS -4.6% -2.7% 22.2% 20.4% -4.9% 6.7% 0.8% 3.7% 5.5% 6.8% 6.9% 7.1% Advances 24.1% 2.9% -8.3% 29.1% 6.3% 4.2% 4.2% 4.4% 4.4% 4.5% 4.6% 4.8%

AUM 2.4% 4.3% 7.1% 9.7% 5.7% 5.3% 4.6% 4.8% 4.4% 4.5% 4.6% 4.6%

Borrowings 29.5% 4.5% -13.3% 33.3% 7.4% 15.1% 0.1% 0.2% 4.0% 4.2% 4.4% 4.7%

Yearly Growth (%)

NII 18.4% 7.6% 30.0% 26.5% 4.8% 14.4% -7.3% -11.1% 13.6% 14.5% 20.5% 25.8% 25.1% 22.6% 20.5% 18.4% TI 18.4% 17.1% 30.0% 26.5% 23.4% 17.0% 4.1% 0.7% 9.8% 17.7% 23.3% 28.2% 28.3% 6.0% 19.9% 18.0% PPI 29.4% 24.6% 33.7% 19.0% 24.3% 22.9% 17.4% 22.1% 12.7% 24.2% 25.8% 31.1% 29.1% 19.0% 23.6% 20.4%

Provisions and Write-offs 34.4% 47.1% -10.0% -78.1% -9.0% -46.1% -5.2% 669.7% -2.6% 67.8% 30.2% 35.5% 11.1% -3.2% 28.9% 13.8%

PAT 26.5% 19.6% 53.3% 36.7% 36.0% 49.4% 23.2% 6.2% 17.9% 17.9% 25.0% 29.1% 35.5% 24.8% 22.6% 21.6%

EPS 26.4% 19.5% 53.2% 36.6% 36.0% 34.0% 23.2% 6.1% 17.8% 17.9% 25.0% 29.1% 35.5% 24.8% 22.6% 21.6% Advances 29.6% 29.9% 15.6% 51.2% 29.5% 31.1% 49.0% 20.4% 18.3% 18.6% 19.1% 19.5% 30.9% 36.6% 19.5% 17.9% AUM 13.5% 14.4% 19.5% 25.5% 29.5% 30.8% 27.7% 22.0% 20.5% 19.6% 19.6% 19.4% 25.5% 22.0% 19.4% 17.8%

Borrowings 30.4% 31.5% 13.7% 56.5% 29.8% 42.9% 65.0% 24.0% 20.1% 8.7% 13.3% 18.4% 32.3% 46.7% 18.4% 16.7%




Standalone financials P&L (Rs Mn) FY18A FY19E FY20E FY21E Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E Particulars FY18A FY19E FY20E FY21E

Interest Income 48,392 65,846 79,386 93,870 Capital 1,564 1,564 1,564 1,564 Asset Quality

Interest Expense 23,078 34,802 41,980 49,569 Reserves and Surplus 49,938 60,240 73,733 90,445 Gross NPA (Rs mn) 12,098 16,250 18,216 20,440

Net Interest Income 25,314 31,044 37,406 44,301 NetWorth 51,502 61,804 75,297 92,009 Gross NPA (%) 2.8% 3.1% 2.9% 2.8%

% Growth 25.1% 22.6% 20.5% 18.4% Borrowings 3,19,023 4,67,931 5,53,856 6,46,194 Net NPA (Rs mn) 6,541 10,809 12,369 14,075

Other Income 5,767 2,000 2,200 2,420 Other Liabilities 24,521 24,766 25,014 25,264 Net NPA (%) 1.8% 2.1% 2.0% 1.9%

Total Income 31,179 33,044 39,606 46,721 Total liabilities 3,95,046 5,54,501 6,54,167 7,63,467 % coverage of NPA 45.9% 33.5% 32.1% 31.1%

Employee Expenses 5,277 5,910 6,796 7,816 Cash Equivalent 3,925 22,461 16,616 10,662 Delinquencies (%) 1.7% 2.0% 1.9% 1.8%

Other Opex 7,619 5,376 5,924 6,547 Investments 3,190 3,425 3,669 3,911 Business Ratios

Total Opex 12,895 11,285 12,720 14,363 Advances 3,72,012 5,08,242 6,07,564 7,16,044 Advances/Borrowing 116.6% 108.6% 109.7% 110.8%

Operating Profit 18,284 21,759 26,886 32,358 Fixed Assets 1,608 1,768 1,945 2,140 Advances/AUM 86.8% 97.2% 97.3% 97.3%

% Growth 29.1% 19.0% 23.6% 20.4% Other Assets 14,312 18,605 24,373 30,710 Securitized/AUM 13.2% 2.8% 2.7% 2.7%

Tax 5,092 6,262 7,678 9,337 Total assets 3,95,046 5,54,501 6,54,167 7,63,467 RoA (%) 2.8% 2.4% 2.5% 2.6%

Total Provisions 3,451 3,340 4,304 4,897 RoE (%) 20.6% 21.5% 21.7% 21.7%

Net Profit 9,741 12,156 14,904 18,124 % Growth 29.1% 40.4% 18.0% 16.7% Dividend Yield (%) 0.5% 0.6% 0.6% 0.6%

% Growth 35.5% 24.8% 22.6% 21.6% Key assumptions CAR

Earnings Ratios Borrowings RWA (Rs. bn) 382 498 583 676

Int Inc./Avg Asset 13.8% 13.2% 13.1% 13.2% Avg Borrowing Gr 32.3% 46.7% 18.4% 16.7% Tier I (%) 13.2% 12.4% 12.9% 13.6%

Int Exp./Avg Asset 6.6% 7.0% 6.9% 7.0% Avg cost of Borwing 8.2% 7.4% 8.2% 8.3% Tier II (%) 5.1% 3.9% 3.4% 2.9%

NIM (%) 6.5% 6.3% 6.3% 6.4% Advances Total CAR (%) 18.4% 16.3% 16.3% 16.5%

Int. exp/ Int earned 47.7% 52.9% 52.9% 52.8% Avg. Advances Gr 30.9% 36.6% 19.5% 17.9% Per Share Data

Oth. Inc./ Tot. Inc. 18.8% 6.1% 5.6% 5.2% Avg YoA 13.6% 14.1% 14.2% 14.2% BVPS, Rs 329.3 395.2 481.4 588.3

Staff exp/Opex 40.9% 52.4% 53.4% 54.4% Investments Adj. BVPS, Rs. 287.5 326.1 402.4 498.3

Cost/ Income Ratio 41.4% 34.2% 32.1% 30.7% Avg. Investment Gr 33.7% 7.4% 7.1% 6.6% Price/ Adj. BV 4.4 3.9 3.2 2.5

Prov./ Oper. Profit 18.9% 15.4% 16.0% 15.1% Avg. YoI 6.7% 6.4% 6.4% 6.3% EPS, Rs. 62.3 77.7 95.3 115.9

Prov./Avg. Loans 1.1% 0.7% 0.8% 0.7% P/E Ratio 20.4 16.3 13.3 11.0

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Historical standalone financials P&L (Rs mn) FY15A FY16A FY17A FY18A Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A Particulars FY15A FY16A FY17A FY18A

Interest Income 33,972 38,429 42,549 48,392 Capital 6,437 1,562 1,563 1,564 Asset Quality

Interest Expense 19,604 20,508 22,308 23,078 Reserves and Surplus 25,296 35,012 41,286 49,938 Gross NPA (Rs mn) 8,028 10,218 15,450 12,098

Net Interest Income 14,368 17,921 20,241 25,314 NetWorth 31,733 36,574 42,849 51,502 Gross NPA (%) 3.2% 3.4% 4.5% 2.8%

% Growth 21.9% 24.7% 12.9% 25.1% Borrowings 1,94,752 2,25,762 2,41,091 3,19,023 Net NPA (Rs mn) 5,235 5,978 10,334 6,541

Other Income 2,940 3,508 4,055 5,866 Other Liabilities 12,247 16,547 22,008 24,521 Net NPA (%) 2.4% 2.3% 3.7% 1.8%

Total Income 17,308 21,429 24,295 31,179 Total liabilities 2,38,732 2,78,883 3,05,948 3,95,046 % coverage of NPA 34.8% 41.5% 33.1% 45.9%

Employees Expenses 2,217 2,539 4,026 5,277 Cash Equivalent 3,407 4,905 4,706 3,925 Delinquencies (%) 3.1% 2.7% 3.8% 1.7%

Other Opex 5,271 5,910 6,107 7,619 Investments 675 666 2,385 3,190 Business Ratios

Total Opex 7,489 8,449 10,133 12,895 Advances 2,21,835 2,59,101 2,84,145 3,72,012 Advances/Borrowing 113.9% 114.8% 117.9% 116.6%

Operating Profit 9,819 12,980 14,162 18,284 Fixed Assets 683 1,113 1,401 1,608 Advances/AUM 87.2% 87.4% 83.2% 86.8%

% Growth 17.8% 32.2% 9.1% 29.1% Other Assets 12,132 13,098 13,311 14,312 Securitized/AUM 12.8% 12.6% 16.8% 13.2%

Tax 2,221 3,023 3,868 5,092 Total assets 2,38,732 2,78,883 3,05,948 3,95,046 RoA (%) 1.9% 2.2% 2.5% 2.8%

Total Provisions 3,247 4,272 3,106 3,451 RoE (%) 15.9% 16.6% 18.1% 20.6%

Net Profit 4,352 5,685 7,187 9,741 % Growth 10.8% 16.8% 9.7% 29.1% Dividend Yield (%) 0.3% 0.4% 0.4% 0.5%

% Growth 19.5% 30.6% 26.4% 35.5% Key assumptions CAR

Earnings Ratios Deposits RWA (Rs. bn) 228 269 296 382

Int Inc./Avg Asset 15.0% 14.8% 14.6% 13.8% Avg Borrowing Gr 7.6% 15.9% 6.8% 32.3% Tier I (%) 13.0% 13.3% 13.6% 0.1%

Int Exp./Avg Asset 8.6% 7.9% 7.6% 6.6% Avg cost of Borwing 10.4% 9.8% 9.6% 8.2% Tier II (%) 8.2% 6.4% 5.0% 0.1%

NIM (%) 5.7% 6.4% 6.2% 6.5% Advances Total CAR (%) 21.2% 19.7% 18.6% 0.2%

Int. exp/ Int earned 57.7% 53.4% 52.4% 47.7% Avg. Advances Gr 14.2% 16.8% 9.7% 30.9% Per Share Data

Oth. Inc./ Tot. Inc. 17.0% 16.4% 16.7% 18.8% Avg YoA 15.3% 14.9% 14.7% 13.6% BVPS, Rs 220.8 234.1 274.1 329.3

Staff exp/Total Opex 29.6% 30.1% 39.7% 40.9% Investments Adj. BVPS, Rs. 184.4 195.9 208.0 287.5

Cost/ Income Ratio 43.3% 39.4% 41.7% 41.4% Avg. Investment Gr -18.1% -1.3% 258.3% 33.7% Price/ Adj. BV 6.9 6.5 6.1 4.4

Prov./ Oper. Profit 33.1% 32.9% 21.9% 18.9% Avg. YoI 5.1% 4.2% 2.0% 6.7% EPS, Rs. 30.3 37.9 46.0 62.3

Prov./Avg. Loans 1.6% 1.8% 1.1% 1.1% P/E Ratio 41.9 33.5 27.6 20.4




Equirus Securities

Research Analysts Sector/Industry Email Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Bharat Celly Healthcare [email protected] 91-79-61909524 Viral Desai [email protected] 91-22-43320635

Depesh Kashyap Mid-Caps [email protected] 91-22-43320671 Viraj Mehta [email protected] 91-22-43320634

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Ruchi Bhadra [email protected] 91-22-43320601

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Cash Dealing Room E-mail

Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ashish Shah [email protected] 91-22-43320662

Pranav Mehta Building Materials [email protected] 91-79-61909514 Ilesh Savla [email protected] 91-22-43320666

Praful Bohra Healthcare [email protected] 91-22-43320611 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

Associates E-mail Sarit Sanyal [email protected] 91-22-43320666

Ankit Choudhary [email protected] 91-79-61909533 Vikram Patil [email protected] 91-22-43320677

Dhairya Dhruv [email protected] 91-79-61909528 Gaurav Mehta [email protected] 91-22-43320680

Harshit Patel [email protected] 91-79-61909522 Compliance Officer E-mail

Meet Chande [email protected] 91-79-61909513 Jay Soni [email protected] 91-79-61909561

Nishant Bagrecha [email protected] 91-79-61909526 Corporate Communications E-mail

Prateeksha Malpani [email protected] 91-79-61909532 Mahdokht Bharda [email protected] 91-22-43320647

Ronak Soni [email protected] 91-79-61909525 Quant Analyst

Rushabh Shah [email protected] 91-79-61909520 Kruti Shah [email protected] 91-22-43320632

Shreepal Doshi [email protected] 91-79-61909541 F&O Dealing Room

Varun Baxi [email protected] 91-79-61909527 Kunal Dand [email protected] 91-22-43320678

Vikas Jain [email protected] 91-79-61909531 Dhananjay Tiwari [email protected] 91-22-43320668

Mukesh Jain [email protected] 91-22-43320667

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

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Analyst Certification

I, Ankit Choudhary/Rohan Mandora, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their

securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures

Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the

Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock

Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers

Regulations, 1993 (Reg. No.INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP-324-2017). There are no disciplinary actions taken by any regulatory

authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to

merchant banking services, private equity, mergers & acquisitions and structured finance.

As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for

investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have

received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their

directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in

their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or

Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor

Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or

brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.

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(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c)

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company.

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Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst’ or Relatives’ financial interest No

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Research Analyst’ or Relatives’ material conflict of interest No

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Equirus Securities Private Limited (ESPL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition ESPL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by ESPL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., ESPL has entered into a chaperoning agreement with a U.S. registered broker-dealer name called Xtellus Capital Partners, Inc, (''XTELLUS'). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, XTELLUS, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.


Cholamandalam Finance Absolute: LONG Relative : OverWeight...October 31, 2018 Analyst: Ankit...

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