Cholamandalam Investment shares fall 4% after CLSA downgrade; check price target

Shares of Cholamandalam Investment and Finance Company Ltd. fell as much as 4% on Tuesday, April 22, after global brokerage firm CLSA downgraded the stock to 'Hold'.

CLSA has a price target of ₹1,600 per share, implying a potential downside of 3.5% from Monday's closing price.

The Cholamandalam Investment stock is currently trading at 4 times its FY27 price-to-book value, just a 9% discount to market leader Bajaj Finance.

Historically, the stock has rarely traded at such elevated multiples, except during periods when its Assets Under Management (AUM) growth was in the 30–40% range, CLSA wrote in its note.

Currently, growth is in the mid-20s, and the brokerage expects a CAGR of 18–20% over the next two years.

While Chola is well-positioned to benefit from a rate cut cycle, CLSA estimates that an additional 25 basis point cut would only boost its Net Interest Margin (NIM) by 7–8 basis points and EPS by about 2%.

Speaking to CNBC-TV18 earlier in March this year, Arul Selvan D, President & CFO of Cholamandalam Investment & Finance Company said that the firm aims to achieve a 20-25% increase in AUM and profitability over the next two to three years.

He said that productivity improvements and cost management measures would also contribute to profitability.

Out of the 40 analysts that have coverage on Cholamandalam Investment, 27 of them have a 'Buy' rating on the stock, nine have a 'Hold', while four others have a 'Sell' recommendation.

Shares of Cholamandalam Investment and Fin Co Ltd. are currently trading near day's low at ₹1,600, down 3.57%.

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