Cholamandalam Investment shares rise 9% after Q3 show, brokers optimistic despite asset quality concerns

Brokers broadly pointed to strong payout momentum and improvement in margins, while citing higher credit costs as one of the key factors to monitor. | Photo credit: iStockphoto

The stock rose as much as 9 percent to ₹1,740 on the NSE before earnings fell. At 10am, the stock was trading 5.5 per cent higher at ₹1,681.10.

The company posted a standalone net profit of ₹1,287.66 crore for the quarter ended December 2025, up 18 per cent year-on-year from ₹1,086.53 crore. Operating revenue rose 17 per cent to ₹7,874.94 crore, compared to ₹6,709.21 crore in the corresponding period last year.

The board also approved an interim dividend of ₹1.30 per share, with February 5 as the record date.

Brokers broadly pointed to strong payout momentum and improvement in margins, while citing higher credit costs as one of the key factors to monitor.

Motilal Oswal said Cholamandalam Investment delivered mixed operating performance, noting that a healthy increase in festive season disbursements and subsequent VAT cuts helped assets under management grow 21 percent year-on-year. The broker pointed out that credit costs remained high due to write-offs and slippages, although an improvement in Phase 2 assets could translate into better Phase 3 trends in the March quarter. It added that margins increased by about 10 basis points quarter-on-quarter due to better returns and a decline in financing costs.

Motilal Oswal reiterated its buy rating with a target price of ₹2,000, saying the stock trades at 3.7 times estimated FY27 book value and sustainable AUM growth and improvement in asset quality are needed to justify the premium valuation.

PL Capital upgraded the stock to buy from accumulation, citing better growth visibility and better credit cost prospects in Q4FY26 and FY27. The brokerage highlighted 16 percent year-on-year growth in Q3 disbursements across all segments and maintained AUM growth estimates of 22 percent and 21 percent for FY26 and FY27, respectively. While credit costs remained high at 1.8 per cent, PL Capital management said moderation is ahead and kept its price target unchanged at ₹1,850, noting that the stock had corrected 12 per cent in the past month.

JM Financial described the quarter as largely in line, with assets under management up 21 percent year-over-year and net interest income up 24 percent, helped by modest margin expansion. It noted that operating profit was affected by one-off expenses related to labor laws, while credit costs rose marginally to 1.78 percent.

While it cut its FY27 and FY28 earnings estimates by about 3 percent due to potential margin pressure from the hardening of rates, JM Financial upgraded the stock from up to down, saying the negative impact appeared limited based on current valuations. It has revised its target price to ₹1,720.

HDFC Securities also pointed to strong business momentum and margin reflation, as well as persistently high credit costs. The broker said payout growth of 16 percent year-on-year and 23 percent quarter-on-quarter in the fourth quarter is likely to increase further due to VAT cuts and an improving macro environment. However, it warned that valuations of around 3.8 times adjusted book value as of September 27 provide limited margin of safety and maintained an add rating with a revised price target of ₹1,730.

Nuvama Institutional Equities struck a more cautious tone, acknowledging strong disbursement growth led by a commercial vehicle rebound and healthy pre-provision operating profit growth, but flagged persistent non-performing loans and rising credit costs. The brokerage said improvement in asset quality remains a key monitorable factor and maintained a hold call at a target price of ₹1,650.

Published on February 3, 2026