Cholamandalam PBT down 88% to Rs 57 cr on one-time provision of Rs 504 cr

Disbursements were down 36% in Q4 due to Covid-19 lockdown, due to which full-year disbursement dropped by 4%

Cholamandalam Investment and Finance Company Ltd, the financial services arm of Murugappa Group, has seen an 87.65 per cent decline in profit before tax of Rs 57.38 crore during the quarter ended March 31, 2020, from Rs 464.75 crore during the same quarter last year even as the company has made one-time provisions of Rs 504 crore towards Covid-19 and other factors. The firm's total income grew to Rs 2,151.45 crore during the quarter from Rs 1,885.34 crore during same period last year.

The company has made one-time provision of Rs 504 crore towards Covid-19 and macro provisions, due to which the profit after tax declined to Rs 43 crore. PAT before the provision was Rs 418 crore, up 43 per cent YoY, the firm said.

The Company has created a one-time contingency provision of Rs 284 crore towards potential losses against loans for which the moratorium was extended. Over and above this, the company has also created a macro provision of Rs 250 crore to meet contingencies that may arise post moratorium due to the global recession and economic slowdown. In total, the company has set aside an additional provision of Rs 534 crore (including Rs 30 crore of macro provision created in FY19) to meet any contingencies that may arise in future due to the Covid-19 lockdown. 

Disbursements were down 36 per cent in Q4 due to the Covid-19 lockdown and this had caused a decline of four per cent for the full-year disbursement. Moratorium was extended to 76 per cent of customers, and most of them are expected use it in the second stage (June-August) as well, the firm said. However, the company has not availed moratorium from banks or other lenders, as its cash flow position is strong and adequate to cover up to September. Over 90 per cent of its branches have become operational till date, it said.

The Company had closed March with a cash balance of Rs 6,446 crore and also had sanctioned lines of Rs 4,462 crore. Currently, the company has cash in hand and sanctioned lines of around Rs 10,000 crore as of May 31, 2020. This adequately covers the needs of the Asset Liability Management process with no negative cumulative mismatches across all time buckets. Even after extending the moratorium to its customers, for the second phase, the cash position of the Company is adequate to meet all its maturities and fixed obligations till September, 2020. 

Arun Alagappan, managing director, stated “Given the uncertainties in the market, the company was conservative with respect to creating contingency provisions towards Covid-19 and maintaining more than adequate cash reserves. As of March 2020, while many in the industry were affected by the liquidity crunch due to Covid-19, Chola was strongly placed with sufficient liquidity to pass on the moratorium benefits to its customers, without having to avail any."

Vehicle Finance business has clocked a volume of  Rs 4,703 crore for the quarter ended March 2020 as against Rs 7,383 crore in the previous year, reporting a decline of 36 per cent. Home Equity business disbursed Rs 589 crore as against Rs 1,034 crore for the quarter ended FY19, decline of 43 per cent. Home Loan business disbursed Rs 271 crore as against Rs 392 crore for the quarter ended FY19, a decline of 31 per cent. Assets under management grew by 16 per cent to Rs 66,943 crore as compared to Rs 57,560 crore in FY19. 

For the full year, vehicle finance business has clocked a volume of Rs 23,387 crore for the period ended March 2020, as against Rs 24,983 crore in the previous year, registering a decline of six per cent. The company said that there was severe de-growth in the auto Industry across product segments, including commercial vehicles, cars, multi utility vehicles and two wheelers. With higher disbursements from Used, three-wheeler and two-wheeler products it was able to offset drop in other segments and this enabled the company to restrict the de-growth in overall disbursement to six per cent, it added.