Chola Financial (CHOLAHLDNG)

FairStock Score: 73/100 — STEADY

Score breakdown: P/E: 2/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• ROE of 18.92% with a trailing P/E of 12.96 indicates a good earnings yield on a growing book.
• Sales growth of 20.28% and profit growth of 14.21% show a well-established franchise that is still expanding.
• Piotroski F-Score of 7/9 suggests sound operations and improving fundamentals.
• Promoter holding of 46.38% keeps management aligned with public shareholders.
• Book value of ₹666.50 supports the stock, and latest quarter profit of ₹1,386 Cr confirms scale.

Concerns

• Debt/equity of 13.93 is high; sustained profitability depends on credit costs and interest rates.
• Free cash flow of -₹35,239 Cr means the business requires continual external capital to grow.
• At ₹1,574.70, the stock trades above its Graham Number of ₹1,375.09—a negative 18.84% margin of safety.
• Dividend yield of only 0.08% means investors rely almost entirely on capital gains.

AI Analysis

Chola Financial earns the kind of return I admire: return on equity of 18.92%, with a price-to-earnings ratio of only 12.96. That combination is not easy to find in the Indian market. The business is growing steadily—sales are up 20.28% and profits up 14.21%, and the latest quarter shows sales of ₹9,949 Cr with net profit of ₹1,386 Cr. Promoter holding of 46.38% means interests are aligned with minority shareholders. The Piotroski score of 7 out of 9 also suggests a company that is managing its balance sheet sensibly. But Graham would not stop after looking at earnings. He would look at liabilities. Debt-equity of 13.93 is huge. For a finance company, leverage is the raw material, but at this level a slight rise in bad loans can tear a hole in book value. Free cash flow is -₹35,239 Cr; the company is consuming capital to grow. That may be fine if the marginal loans yield good returns, but it means external funding is always needed. The dividend yield is a token 0.08%, so income seekers get nothing. I do not take the Altman Z-score of 0.61 or EV/EBITDA of 776.44 as gospel—they are misleading for financials. The Graham Number is ₹1,375.09, and at ₹1,574.70, I have a negative 18.84% margin of safety. This is not a bargain. PEG of 1.37 says growth is fairly priced, not free. In short, Chola is a quality, steady finance franchise, but leverage is high, cash generation is negative, and the price offers no margin of safety. I would wait for a better price or proof that asset quality can withstand a downturn before putting my money to work.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer