/** blogpostTitle: "Chola FY26: AUM crosses Rs 2.42 lakh crore as margins improve" blogpostSlug: "chola-fy26" blogpostCoverImageDescription: "Ultra-realistic corporate finance visual: a clean desk setup with a large monitor showing a professional dashboard of line charts and bar charts. The main line chart tracks Assets Under Management rising from roughly 2.0 lakh crore to 2.42 lakh crore, alongside a second line for quarterly disbursements rising to about 32,913 crore in Q4. A small inset shows NIM improving from about 7.7% to 8.0%. Another panel shows asset quality with Stage 3 around 3.05% and CRAR about 19.21%. No logos or text labels, neutral color palette, high-detail, modern office lighting." blogpostShortTitle: "Chola FY26: 2.42 lakh Cr AUM" */

Chola FY26: AUM crosses Rs 2.42 lakh crore as margins improve

Cholamandalam Investment and Finance Company Limited closed FY26 with a larger balance sheet and stronger profitability, while also acknowledging a more uncertain external backdrop. The company reported assets under management of Rs 2,42,630 crore at March 2026, up 21% year on year. Q4 FY26 disbursements were Rs 32,913 crore, up 25% over the same quarter last year.

Profitability improved alongside scale. Net interest margin rose to 8.4% in Q4 FY26 from 8.0% in Q4 FY25, and to 8.0% for FY26 from 7.7% in FY25. Profit after tax increased to Rs 1,641 crore in Q4 FY26, up 30% year on year. For the full year, PAT rose to Rs 5,220 crore, up 23%.

The company’s commentary and disclosures also showed a clear emphasis on risk buffers and monitoring. FY26 included a management overlay of Rs 200 crore under Ind AS expected credit loss, described as a precautionary buffer against potential second-order stress from global uncertainties.

FY26 in numbers: growth with stable returns

Chola’s full-year profit before tax increased to Rs 6,961 crore, a 21% rise over FY25. Return on equity was reported at 19.7% for FY26, broadly stable versus FY25. On a quarterly basis, ROE in Q4 FY26 was 23.0%.

The balance sheet also expanded meaningfully. Total assets increased to Rs 2,45,070 crore at March 2026 from Rs 2,01,648 crore at March 2025. Loans grew to Rs 2,17,571 crore from Rs 1,81,930 crore over the same period.

A key feature of the year was the combination of scale-up and diversification. The company highlighted a product mix spanning Vehicle Finance, MSME lending (LAP, SME, SBPL), consumer loans (CSEL and consumer durables), home loans, and a newly launched gold loan business.

Segment engines: Vehicle Finance steady, MSME scaling, Consumer reshaping

Vehicle Finance remained the biggest contributor by scale, with managed disbursements of Rs 62,123 crore in FY26 and AUM of Rs 1,19,558 crore. The company reported 26% year-on-year disbursement growth in Q4 FY26 for the segment, and an 18% year-on-year rise in its AUM.

MSME lending, which the company groups as LAP, SME and SBPL, continued to expand faster. FY26 disbursements for the MSME ecosystem were Rs 29,438 crore, up 9% year on year. AUM grew 29% year on year to Rs 65,171 crore. Profitability scaled sharply, with FY26 PBT of Rs 2,201 crore, up 45%.

Within MSME, LAP remained the anchor. LAP disbursements reached Rs 20,459 crore in FY26 and AUM increased 26% to Rs 52,295 crore. LAP PBT rose 44% to Rs 1,818 crore, while the segment’s net income margin improved to 6.0% in FY26.

The consumer ecosystem was more mixed in FY26. Consumer ecosystem disbursements were Rs 20,081 crore, up 1% year on year, while AUM grew 20% to Rs 39,605 crore. FY26 PBT was Rs 1,000 crore versus Rs 1,033 crore in FY25.

Home loans added stability but disbursement momentum was muted. FY26 home loan disbursements were Rs 7,363 crore compared to Rs 7,404 crore in FY25, while AUM grew 23% to Rs 22,688 crore. Management attributed Q4 moderation in disbursements to procedural timing factors including election-related administrative slowdowns, land-record digitization mismatches, and lien-marking delays in select markets.

Gold loans emerged as a new growth lever. Management noted that the gold loan business disbursed Rs 1,130 crore in Q4 FY26. On the earnings call, management stated that average ticket size per gold loan moved down from about Rs 3 lakh at launch to about Rs 2 lakh, and that the yield in gold loans had increased to about 15.

Asset quality and provisioning: buffers raised, underwriting sharpened

Chola’s asset quality indicators showed some year-on-year movement at the overall level. Stage 3 assets at 90 DPD were 3.05% in Q4 FY26 compared with 2.81% in Q4 FY25. Under RBI norms, GNPA was 4.36% in Q4 FY26 versus 3.97% in Q4 FY25, while NNPA was 2.87% versus 2.63%.

The company’s ECL disclosures show that at March 2026, total gross assets were Rs 2,21,942 crore, with Stage 1 at 94.48%, Stage 2 at 2.47%, and Stage 3 at 3.05%. Stage 3 provisioning coverage was shown at 47.29%.

The management overlay of Rs 200 crore was positioned as a prudence measure. On the earnings call, management said this buffer was meant to address potential second-order stresses from crude and refined fuel price volatility and supply-side pressures, while core asset quality indicators remained resilient.

Management also emphasized ongoing work to improve underwriting tools. In response to questions, the CEO highlighted efforts to improve the Gini coefficient of underwriting models across divisions, which the company expects to support credit cost reduction.

Funding and capital: liquidity comfortable, Tier 1 guardrails stated

Capital and liquidity remained key themes in the presentation. CRAR stood at 19.21% in FY26 with Tier 1 at 14.73%. The company also reported an average daily liquidity coverage ratio of 157% in Q4 FY26.

On capital planning, the CFO stated on the call that if Tier 1 were to approach 13%, the company would evaluate equity-raising options. However, management also suggested that with pre-tax return on total assets around 3.5% and growth below 23% to 25%, the company expects to be largely self-sufficient through internal accruals.

What management guided for FY27

The earnings call carried explicit operating guidance. Management indicated an overall AUM growth target of 20% to 23% for FY27. Net credit costs were guided to decline from about 1.6% pre-overlay to around 1.5%, with pre-tax ROA expected to improve towards about 3.5%.

For Vehicle Finance, management guided disbursement growth of about 15% to 20% and asset growth of about 18% in FY27. Management also stated that NIMs are expected to remain around 8%, while operating expenses should remain broadly stable around 3.0% to 3.1%.

The quarter also included operational color on early delinquency behavior. Management stated that April 2026 trends in Vehicle Finance showed lower early defaults and non-starter accounts versus April 2025, and that there was no meaningful deterioration observed on the ground at that point.

Takeaways

FY26 reinforced Chola’s ability to compound AUM while maintaining healthy profitability metrics, supported by improving NIMs and stable operating expense ratios. Vehicle Finance continued to deliver scale, MSME (especially LAP) scaled profitability, and gold loans provided a new runway.

At the same time, asset quality metrics and provisioning remain areas to track. The company’s decision to carry an overlay provision signals caution, but management’s FY27 guidance points to a gradual normalization in credit costs and an improvement in pre-tax ROA, largely led by Vehicle Finance and CSEL improvements.