In an earlier piece, I had remarked that Cholamandalam Investment & Finance Co is the ideal low-profile and low volatility stock to which you can entrust large sums of capital. You can be sure that the stock will diligently compound your wealth, slowly but steadily.
That is also why Cholamandalam has attracted the crème de la crème of ace stock pickers. Renuka Ramnath and Brahmal Vasudvan of Creador teamed up in February 2012 to invest Rs. 106 crore each in Cholamandalam. The price that they paid for the stock was a paltry Rs. 160 per share.
At the CMP of Rs. 525, both ace investors, Renuka and Brahmal, are grinning from ear to ear at the gains of 228% in their portfolio.
As of 30th September 2014, Multiples Equity held 67,07,351 shares of Chola while Creador held 66,27,727 shares. Some other illustrious big-ticket investors in Cholamandalam include Akash Prakash’s Amansa Capital and Westbridge Capital aka Jwalamukhi Investments.
On January 14, 2015 Multiples sold a truckload of 35,86,024 (24,91,224 + 10,94,800) shares of Cholamandalam Investment to SBI Mutual Fund at Rs 495 per share.
This is the second big-ticket divestment that Renuka Ramnath has engineered. We saw a few days ago that she has completely sold off Multiples’ holding in South Indian Bank to renowned value investors Mohnish Pabrai and Sankaran Naren.
The interesting aspect is that according to many experts, Cholamandalam is the ideal investment opportunity at present because it is quoting at “cheap” valuations and will be benefitted from the turnaround in the CV financing cycle.
Motilal Oswal has issued an initiating coverage report on Chola (in Sept 2014) in which it recommends a buy of Chola on the basis that the turnaround in CV cycle will restore business momentum.
Edelweiss has put Chola in its “Top 6 stocks to buy for 2015” on the basis that Chola will be able to sustain growth in excess of 20% and RoAE of ~18% in coming years on the back of strong growth (5 year PAT CAGR of 40%). It is also emphasized that Chola is currently trading at “attractive valuation” of 2.1x FY16E book value.
HDFC Sec has put Chola in its “Model Portfolio for 2015” on the basis that “Chola is well poised to capitalise on the imminent cyclical uptick in CV financing and is available for under 2x FY17E ABV for a high quality (1.8% RoA), well capitalised (13% Tier 1), fast-growing franchise.”
So, it does appear that Renuka Ramnath must have reluctantly let go of Chola. We can be sure that it will make an appearance in her new $500M (INR 3000 cr) fund that Multiples will shortly launch.