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updated on 10 Nov 2016
Cholamandalam Invest and PI industries
CHOLAMANDALAM FINANCE: Lower cost of funds will help build margins

Cholamandalam Investment and Finance Company (CIFC) is among the biggest beneficiaries of the recent reduction in the cost of funds for non-banking finance companies. The ratings upgrade last year and improved operating performance have also contributed to a rapid decline in the firm's cost of funds, boosting net interest margin expansion.
The bank's costs are expected to fall further as nearly 48% of its nonconvertible debentures (which command a relatively higher interest) retire over the next two years and the lender further increases its share of low-cost bond borrowings.

The firm's reduced cost of funds, along with a higher share of used commercial vehicle and light commercial vehicle loan book, is expected to help sustain its margins despite increasing competition.

A strong visibility in asset quality improvement and a relatively lower exposure of the loan book to highly competitive segments should broadly offset the impact of the new guidelines that require a loan to be categorised as an NPA if payments aren't received 90 days past due date.

However, CIFC's valuation is at a significant premium to its long-term average, so investors should wait to buy on dips.
MF Holding as a % of total share capital
40 schemes hold the stock

Top 5 funds holding the stock

PI INDUSTRIES: earnings growth track justify high valuations

Agro chemicals player PI Industries continues to maintain its leadership position in the industry. Pick-up in sowing activity for the Rabi crop because of a good monsoon bodes well for the company's domestic business. Despite intensifying competition, the company's weed-killing product, Nominee Gold, continues to perform well due to its strong brand recall and efficacy.

While there are near-term concerns on the slowdown in the global agrochemical industry, analysts expect the company's custom synthesis and manufacturing (CSM) growth will accelerate from next year, given its strong order book and commissioning of new dedicated facilities. Advancement of order from global customers helped the company show a robust growth, in this segment, in the September quarter.

A healthy product mix and operating efficiencies also helped PI Industries to clock a sound margin. Pick-up in recently commercialised molecules, launch of new molecules in the domestic space and a healthy pipeline of molecules in the CSM space is expected to drive the company's future growth. While PI Industries trades at a premium to peers such as Rallis India and Dhanuka Agritech, its superior return ratios and earnings growth trajectory justify the valuations, say analysts.

MF Holding as a % of total share capital
18 schemes hold the stock

Top 5 funds holding the stock