Arul Selvan, President and Chief Financial Officer (CFO) at Cholamandalam Investment on Wednesday said that a significant portion of their business lies in vehicle finance, which operates with fixed interest rates. However, during first quarter of FY24, the cost of funds has risen.
"We expect Net Interest Margin (NIM) to improve as the cost of funds has reached its peak. Despite a large tier-II fund raise resulting in increased costs, we have maintained our asset quality and provisions in check," Selvan told CNBC-TV18 a day after the company posted reported 28 percent rise in standalone net profit at Rs 726 crore in the April-June quarter.
The Chennai-based lender had posted a net profit of Rs 566 crore in the year-ago period.
The asset quality of the company in the quarter dropped, with stage 3 levels marginally increasing to 3.06 percent, from 3.01 percent in March 2023. The gross non-performing asset (NPA) ratio as per the Reserve Bank of India's (RBI) norms was reduced to 4.30 percent in June 2023 as against 4.63 percent in March 2023, the company said.
Additionally, in new businesses, Selvan said, they received reimbursements in the form of FLDG. While these new ventures may see slightly higher non-performing assets (NPAs), he said, it won't be a major hindrance to their future endeavors.
Net NPA ratio, meanwhile, dropped to 2.82 percent in June 2023 against 3.11 percent in March 2023. NNPA is below the threshold of 6 percent prescribed by RBI as the threshold for prompt corrective action.
The board of the company approved issuance of equity shares or convertible securities by way of qualified institutions placement to eligible qualified institutional buyers up to an amount not exceeding Rs 4,000 crore in one or more tranches.
(Edited by : Anshul)
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