Cholamandalam: The 25 -Year Saga

For 25 years, this apparent combination of steadiness and growth has defined the progress of Cholamandalam Investment and Finance Company Limited (CIFCL).

The beginnings
In the late 1970s, the Murugappa Group, a family of financiers by tradition, foresaw substantial opportunities for a finance company in the private sector that could meet customer requirements more efficiently. Thus, Cholamandalam was born in August 1978, with Mr. A M M Arunachalam as the Chairman.

To give Cholamandalam an edge in a growing industry, the Murugappa Group, responding quickly to RBI's new policy of permitting banks to invest in finance ... companies, entered into an agreement with the multinational Standard Chartered Bank. StanChart remained a shareholder from 1985 until 1992

Highest Safety Rating
Cholamandalam was amongst the first NBFCs in the country to acquire a credit rating and CRISIL awarded the" highest safety" rating of FAAA based on the strength of the promoters and the company's track record in managing risks. Today, fourteen years later, the company still holds the "highest safety" ratings-MAAA from ICRA for medium-term instruments like fixed deposits and debentures and P1+ from CRISIL for short-term instruments.

Fixed Deposits
One of the company's oldest products, Fixed Deposits, has been a steady source of income since 1980. Subsequently, the company has proactively diversified its sources of funds, which now include a wid range of low-cost instruments from debentures and commercial paper to foreign currency.

Since 1981, Cholamandalam has a track record of uninterrupted dividend payments. Cholamandalam first went public in 1980 with an issue of Rs. 15 lakh. Through prudence in capital management and striking a balance between growth and shareholder value, today, the networth of the company stands at Rs.177 crore. The company's capital adequacy ratio is a healthy 13.18 per cent.

The company's credit norms are stringent, yet flexible enough to be customer-friendly. As a result, the company's NPAs are as low as 1 per cent of total risk weighted assets.

Vehicle Finance
For several years, Cholamandalam's main business was equipment finance to corporate borrowers. However, anticipating the limited potential for sustained growth in the business, the company commenced . vehicle finance in 1991. Today the company
finances a wide range of vehicles — heavy and light commercial vehicles, cars, two and three wheelers and tractors - from 161 towns across India.

Between 2000 and 2003, the vehicle finance disbursements enjoyed a CAGR of 54 per cent. In 2003, vehicle finance assets made-up 80 per cent of the total assets of Rs. 1300 crore.