In a move that caught many investors' attention, global brokerage CLSA has downgraded Cholamandalam Investment and Finance Company Ltd. (Chola), a large-cap NBFC, to a Hold, with a target price of Rs 1600.

What’s behind the downgrade? Here's What CLSA Said 

• CLSA points out that Chola is currently trading at 4x Price-to-Book (FY27)—a premium valuation that leaves it just a 9% discount to the market leader, Bajaj Finance. That’s an unusually narrow gap, especially considering Chola’s historical trading range.To justify such elevated valuations in the past, Chola had to deliver 30-40% AUM growth. Today, that’s not the case.
• Currently, Chola's growth is in the mid-20s, and CLSA expects this to moderate to 18-20% CAGR over the next two years. That's solid—but not enough to sustain its premium multiples, according to CLSA.
• There is a silver lining: Chola stands to benefit in a rate cut cycle. However, CLSA notes that even an additional 25bp rate cut would only improve Chola’s Net Interest Margin (NIM) by 7-8 basis points and EPS by ~2%—not game-changing numbers

Shares OF Chola Finance Limited Trading at all time high level of ₹1,658 as of 21st April 2025. Stock has given 17% returns in last 6 months 

Disclaimer:

The information provided in this article is for educational and informational purposes only. It does not constitute investment advice or a recommendation to buy or sell any securities