What’s behind the Cholamandalam stock surge?

Why read this story?

Editor's note: Cholamandalam Investment and Finance Co. is no Bajaj Finserv. Its assets are less than a quarter and its top line a third that of India’s leading non-banking financial company. Yet, in 2021-22, Cholamandalam outperformed the country’s most valued NBFC on two key metrics. Its share price and profit growth outpaced Bajaj Finserv’s by 20x and 22x, respectively. These put Cholamandalam—the financial services arm of diversified business conglomerate Murugappa Group—right at the top of the sector.  They also helped Cholamandalam add 20,397 shareholders since June 2021—a 21% rise in the number of shareholders. On the face of it, the surge suggests that people are buying into the Cholamandalam growth story. But are these numbers as impressive as they are made out to be? On a closer look, they tell a different story, raising questions about Cholamandalam’s apparent success on the bourses. The picture that emerges instead is of a company trying to test its risk appetite—a move that could put its retail investors at risk.  Let’s first look at the curious surge in Cholamandalam’s stock. Soaring shares The company’s shares have …