Cholamandalam sees rural demand boom in vehicle financing

Cholamandalam Investment and Finance Company Limited, a major participant in India's vehicle financing sector, reported a significant surge in demand, particularly in rural markets. The company's vehicle financing disbursements grew by 6% in Q4 FY24 to Rs 12,962 crore and by 22% in FY24 to Rs 48,348 crore compared to the corresponding quarters in FY23.

Cholamandalam, which recently entered the passenger vehicle (PV) segment, claims to have achieved double-digit growth in FY24, driven by rising sales of entry-level cars, especially in tier-4 and tier-5 towns.

This development is important considering that most major banks traditionally cater to salaried individuals for vehicle loans. Cholamandalam, on the other hand, focuses on the self-employed segment, a demographic witnessing strong growth in car purchases, particularly in lower-priced models.

Ravindra Kundu, executive director, Cholamandalam Investment and Finance, said during a post result analyst call said this is what was helping the company get numbers. "We are in the self-employed category of the customer and Tier-2, Tier-3, and Tier-4 towns, and as we see the country growing, the economy is growing, and the bottom of the pyramid of the category of the cities is also doing better," he added.

The PV segment witnessed an 11% growth in Q4 FY24 and an 8% YTD growth as of March 2024, marking record-breaking sales compared to previous years. Positive consumer sentiment is driving this growth, fueled by replacement demand and the launch of new models, especially in the MUV category.

Cholamandalam's vehicle financing disbursements grew by 6% in Q4 FY24 to Rs 12,962 crore and by 22% in FY24 to Rs 48,348 crore compared to the corresponding quarters in FY23.

Cholamandalam, backed by foreign institutional investors like Capital Group, Vanguard, BlackRock, and Norges Bank Investment Management, offers financing for various vehicle segments, including commercial vehicles (CV), passenger vehicles (PV), two-wheelers (2W), tractors, and construction equipment, in both new and used categories. The company maintains a strategic focus on retail customers, particularly in smaller towns and rural areas, operating through a vast network of 1334 branches across India.

The company management anticipates a marginal rise in the cost of funds due to an expanding borrowing profile. However, management also expects margins to return to pre-pandemic levels in the foreseeable future.