Monday, March 8, 2010
Cholamandalam DBS ,the financial service arm of Murugappa Group is a well known name in
South India . During last two years company was in trouble due to mounting NPA in its consumer finance business and posted huge loss in 2009 which forced the company to skip even the dividend. In order to bring back the company into past glory, management decided to stop the consumer finance business and asset management business (where it was the sponsor).After streamlining the product line company is now focusing in vehicle finance,corporate mortgage finance and home loan segment with the strong support of its foreign equity partner DBS Bank of Singapore. It also planning to develop factoring business in a big way.All of its dedicated efforts are showing good signs. For the last nine months company’s disbursements up almost 80% over previous year and company back to black . Considering the history of group ,good support from the foreign partner and lessons it learned from the past ,company’s performance is expected to improve significantly in future. Moreover ,management is very liberal in dividend payment – normally paying 40-45% (except last year) which ensures reasonable dividend yield too. Buy @ CMP Rs.82.