Cholamandalam Investment & Finance Company Ltd Management Discussions

MACROECONOMIC OVERVIEW

The Indian economy in the year 2024-25 was marked by significant inflationary pressures, geopolitical tensions, and volatile global financial markets. This posed substantial risks to inflation and economic stability. The Central Governments commitment to fiscal consolidation presented challenges in balancing growth and inflation control. Despite these hurdles, the Indian economy demonstrated resilience, achieving robust GDP growth at 6.5% for FY 2024-25, driven by strong private consumption, increased government spending on infrastructure and continuing monetary easing.

The general elections in 2024 resulted in a decisive victory for the incumbent government, which continued its focus on economic reforms and infrastructure development. This political stability boosted investor confidence, supporting sustained economic growth. However, the Indian economy faced liquidity challenges in most part of the of FY25. CPI inflation fluctuated, peaking at 6.2% in October 2024 before moderating to 3.6% by February 2025. The rupee faced depreciation risks due to external uncertainties, impacting import costs and contributing to imported inflation.

The RBI maintained a cautious stance, keeping the policy repo rate unchanged at 6.50% till January 2025 to balance inflation control with growth support. To manage liquidity, the RBI conducted Open Market Operations (OMOs) and dollar/rupee swaps to stabilise the rupee, which faced depreciation pressures due to global uncertainties. The Liquidity Adjustment Facility (LAF) corridor was actively used to manage short-term liquidity mismatches, ensuring adequate liquidity in the banking system. These measures helped lower borrowing costs and stimulated investment.

In Q4, RBI adopted a fresh perspective to monetary policy, focussing on balancing growth and inflation control. In response to economic challenges and the need to contain inflation within the target range, RBI reduced the repo rate by 25 bps in February 2025 and an additional 25 bps in April 2025 taking the repo rate to 6%. The Policy stance has also been changed from neutral to accommodative. The rate cuts are expected to encourage lending and investment, stimulate demand, and strengthen overall economic activity.

INDUSTRY GROWTH PROSPECTS Automobile Industry

The Indian Commercial Vehicle (CV) industry had a degrowth of 1% in FY25 with the Heavy Commercial Vehicle (HCV) degrowing by 3% in FY25 due to the high base effect in the previous year. The Small Commercial Vehicle (SCV) degrew by 9% in FY25, due to high

inventory levels and rising vehicle costs due to BS VI transition. This segment is witnessing the second continuous year of degrowth. The Light Commercial Vehicle (LCV) segment had a growth of 3% in FY25. As per industry expectations, the CV industry in India is poised for growth in FY26, propelled by a surge in e-commerce, increasing infrastructure spending, and government initiatives to promote clean energy and domestic manufacturing. With technological advancements, particularly in electric and hybrid vehicles, the domestic CV segment is expected to reach around 10 lakh units in FY26, which might surpass the peak numbers of FY19.

The Passenger vehicle (Car & MUV) segment had a growth of 2% in FY25 which is the highest over the previous three years. The factors aiding growth in FY26 are rising income levels, penetration in rural markets, increasing urbanisation and customer shift towards utility vehicles.

The Two-wheeler industry had a growth of 9% in FY25 and the growth of this segment is expected to be driven by increasing farm income, easy access to vehicle loans and improved demand from tier 3 & 4 towns.

Construction Equipment Industry

The Construction Equipment (CE) segment had a growth of 2% in FY25. This segment is expected to grow at a moderate pace in FY26 with single digit growth supported by higher coal and iron ore mining, healthy real estate demand and increased budgetary outlay by government.

Tractor Industry

The Tractor industry had a growth of 7% in FY25. This segment is expected to grow aided by expectations of a normal monsoon, improved cash flows from Kharif output, robust rabi sowing and higher minimum support prices for the crops.

Source: SIAM, TMA, ICEMA, CRISIL, ICRA

Loan Against Property

LAP portfolio is expected to grow by 21-23% in FY26 driven by increasing property ownership, rising demand for financial products, and an expanding middle class. With attractive interest rates, flexible repayment terms, and minimal documentation, LAP has become a popular financial tool for individuals and businesses seeking funding. The market has been further propelled by the digitalisation of lending processes and the growing number of nonbanking financial companies (NBFCs) and banks offering tailored LAP products to meet diverse consumer needs.

Source: ICRA Research

Housing Finance (Home loans)

The outlook for Indias housing sector continues to be positive, fuelled by a combination of government initiatives, urbanisation trends, and technological advancements. The recent budget announcements have provided a significant boost to the sector, particularly through the expansion of PMAY 2.0, which is set to enhance the availability of affordable housing for Indias growing urban population. The development of smart cities, better public transport, and improved connectivity are likely to further stimulate real estate growth, particularly in emerging urban centres.

The housing finance services industry is expected to report a double-digit growth in revenues on the back of continued healthy demand for housing, particularly affordable housing. The housing finance services industry is likely to grow at a healthy pace on the back of a revival in demand for affordable housing and an increase in demand for mid-segment and premium-segment housing.

NBFC-HFCs on-book portfolio grew by 14% YoY in 9 months of FY25. Analysts expect disbursements portfolio of HFCs to grow by 20-22% in FY25 as well as FY26.

Source: ICRA Research

Small and Medium Enterprises (SME)

As a vital contributor to Indias industrial landscape, the Micro, Small and Medium Enterprises (MSME) sector plays a crucial role in manufacturing, exports, and employment. With 6.3 crore registered MSMEs employing more than 25 crore people, these enterprises generate a significant share of the countrys economic output. In FY 2023-24, MSME-related products accounted for 45.73% of Indias total exports, reinforcing their role in positioning the country as a global manufacturing hub. The new budgetary provisions aim to build on this strong foundation by fostering innovation, enhancing competitiveness, and ensuring better access to resources. Through these steps, the government seeks to equip MSMEs with the tools needed to expand their reach and strengthen their contribution to Indias economic growth.

Exports of MSMEs have seen substantial growth, rising from "3.95 lakh crore in FY 2020-21 to "12.39 lakh crore in FY 2024-25. The number of MSME exports has also surged from 52,849 in FY 202021 to 1,73,350 in FY 2024-25.

MSME contribution to Indias total exports has steadily grown, reaching 45.73% in FY 2023-24, and 45.79% in FY 2024-25. These trends underscore the sectors increasing integration into global trade and its potential to drive Indias position as a manufacturing and export hub.

MSMEs are the backbone of Indias economic landscape, pivotal in employment generation, entrepreneurship promotion, and economic development. Through resilience, innovation, and adaptability, MSMEs have consistently driven the nations growth, providing employment to millions and fostering inclusive development. As India strives to position itself as a global economic powerhouse, the MSME sector undoubtedly plays a central role, fostering innovation, generating employment, and enhancing export competitiveness.

Source: Press Information Bureau, Government of India

Personal Loans

The Personal Loans market has undergone significant evolution and expansion over the last few years. Unsecured lending clocked rapid growth in the past three fiscals at a CAGR of ~45% and has become the third-largest component of the overall NBFC AUM. This expansion is driven by technological advancements and changing consumer behaviour.

However, CRISIL Research Report indicates a measured normalisation reducing personal loan growth to 15-16%. This is likely to happen amidst RBI caution, asset-quality vulnerability and visible stress in early DPD buckets in the coming fiscal years.

Some of the recent developments in the industry were:

• Rising concerns around household indebtedness and asset quality risks is expected to have a bearing on growth strategies in short tenure unsecured loans.

• Industry has focused on measures related to customer protection, transparent pricing and complaints management which had necessitated process recalibration. Industry players have been proactive to constitute Self-Regulatory Organisations (SRO) and the regulator has granted license to one SRO as well.

Unsecured Business Loans

The unsecured business loan segment is facing challenges in maintaining asset quality. Lenders may need to adopt a more cautious approach to lending, focussing on risk management and compliance. The growth of the unsecured business loan segment is likely to moderate, with a shift towards more sustainable and balanced growth strategies.

Slowdown in GDP growth, weak performance of companies across multiple industries in FY25 resulted in liquidity constraints resulting in strain on sales and collection. The recent move by RBI in reducing repo rates is expected to infuse liquidity and improve market conditions.

Delinquency rates improved for individual MSMEs, while the Entity segment faced increased portfolio at risk. With over 3.6 crore MSME registrations (30% YoY growth), the sector shows potential for future growth, supported by government initiatives and financial inclusion.

Consumer Durables (CD)

As per industry reports, Indias consumer electronics and appliances sector is projected to become the 5^th largest in the world by the end of 2025. The sector posted double-digit growth in the year 2024, and is poised for outstanding growth in 2025, driven by launch of new products which are both aspirational and focussed on consumer needs. The growth will also be led by favourable policies like the Production-Linked Incentive (PLI) scheme and multiple modes of financing available to end consumers. Industry reports point to the Consumer Durables financing market growing at a CAGR of between 20%-25% for the next 5 years.

Secured Business and Personal Loan (SBPL)

The Indian lending landscape faces a unique challenge: a segment that remains largely untapped despite possessing collateral and repayment capacity. This segment, distinct from regular Loan Against Property (LAP) borrowers, encounters barriers due to financial, geographical, and profile-related norms set by prime LAP lending institutions.

An added challenge to this scenario is that many Indian households live in rural areas where banking services are scarce and inadequate. This creates an unmet demand for financial services and an opportunity for the sector to tap into. India faces high levels of financial exclusion due to factors such as low income, lack of financial literacy, high costs, and poor infrastructure. As a result, many people still rely on informal sources of credit, such as relatives, money lenders, and landlords.

SBPL offers collateral backed business and personal loans based on the credit assessment and cashflow projections of these businesses. Depending on eligibility and type of property, customers may avail loans with significantly smaller ticket sizes at low loan-to-value (LTV).

BUSINESS ANALYSIS VEHICLE FINANCE (VF)

The Vehicle Finance disbursements during the year were at "53,922 crores as against "48,348 crores in the previous year with a double-digit growth of 12%. The growth in disbursements was predominantly from the new passenger vehicle segment, which had a growth of 17% over last year followed by used vehicle segment with a growth of 13% and 11% in the new commercial vehicle segment. Assets Under Management (AUM) for the business grew by 20% to "1,01,257 crores in FY25 compared to "84,498 crores in FY24. The PBT during the year was "2,824 crores as against "2,532 crores in the previous year with a growth of 12%. The stage 3 assets were at 3.52% in FY25 compared to 3.02% in FY24 due to the sluggishness in market with respect to cash flows.

The Vehicle Finance business will continue to maintain a balanced mix of used and new vehicle loans to maintain marginal yields. The expected decrease in borrowing rates will augur well to improve net income margins (NIM) in this segment as this is a fixed rate lending model.

The credit ecosystem will be further reinforced with revamped, templated underwriting models and the use of alternate data to strengthen credit rule engines with the sole objective of reducing delinquencies at micro-cluster levels.

The VF business will benefit from its expansions in Tier 4 & Tier 5 markets over the years which will de-risk business concentration and enable last mile coverage for customer acquisition and collections. The business will realign its organisational structure

with strategic business objectives to drive efficiency & effectiveness to handle higher volume growth.

The business will focus on increasing its existing customer base through pre-approved loan offers using technology-based communication and social media platforms.

The business will design and implement GenAI solutions across value streams in various processes and expand its digital footprint for personalised collection activities at customer level which will further improve collection efficiencies.

LOAN AGAINST PROPERTY (LAP)

LAP business has achieved "17,913 crores of disbursements in FY25, which is 32% higher than FY24 disbursements. The AUM for business grew by 39% to "41,439 crores in FY25 compared to "29,859 crores in FY24.

Pan-India presence and geographical penetration into new markets, introduction of localised credit policy in line with market developments, increased contribution from rural branches have led to this growth. The entire legal process has been automated with the introduction of new Legal Module which will aid in seamless legal processing. Collateral Management System (CMS) has been developed to track all the properties mortgaged and will act as a single repository.

LAP is one of the major sources of funding for the MSME community in India. LAP business is an active contributor to MSME growth by way of lending to them for business expansion and working capital requirements. 97% of LAP disbursements in FY25 is towards Self Employed Non-Professionals (SENP) community.

As of FY25, LAP business has 630 branches in rural locations, which is 81% of total LAP branches across India. In FY25, LAP business has disbursed "6,809 crores in rural locations, amounting to 38% of total disbursements.

The business continues to focus on a systematic approach to build a healthy portfolio mix, with more than 77% of the portfolio being residential properties and an average loan ticket size of less than "51 lakhs.

The asset quality of this business has shown steady improvement with the net credit losses and Stage 3 assets coming down significantly with consistent improvement in collection efficiency. Stage 3 assets of LAP business stand at 2.02% as of March 2025 compared to 2.43% as of March 2024.

HOME LOANS (HL)

As of 31 March, 2025, the HL business had 1.5 lakh+ live accounts (39% growth YoY) with an AUM of "18,427 crores (37% growth YoY). The portfolio is from Tier II, III, IV cities and towns. The disbursements grew 16% Y-o-Y from "6,362 crores in FY24 to "7,404 crores in FY25. The target group remains the lower middle income group customer. The average ticket size is "13.2 lakhs with an average LTV of 49%. 89% of the portfolio comprises business owners with semi-formal income and significant business vintage and 21% of customers are first time borrowers. The HL business leverages

Cholas strength in reaching out and underwriting lower and middle-income borrowers across the country, penetrating to the smallest villages and towns. Chola offers loans for self-construction, purchase of new flats/independent houses, purchase of pre-owned flats/independent houses, balance transfer from other financiers, mortgage of existing houses for business use and shop loans.

Chola enjoys a significant presence in Tier II, III, IV towns and cities. The business has been strengthening the channel partner network in order to reach out to more customers. Chola Home Loans now has pan-India presence subsequent to the expansion in last financial year in Uttar Pradesh, Bihar, West Bengal, Orissa, Assam, Jharkhand and also expanded the branch network further in states previously operational. Home loans are serviced through 735 touchpoints across 22 states.

Chola continues to build a strong ecosystem of channel partners, coupled with its digital offerings for customer service and on- boarding, making it a trustworthy choice for customers pan-India.

CONSUMER & SMALL ENTERPRISE LOAN (CSEL)

As of 31 March, 2025, the CSEL business has been serving close to 14 lakh customers with an AUM close to "14,600 crores with 16% mix in the fintech partnership. Chola intends to exit the fintech partnership business in FY26.

The CSEL business has expanded across the country covering 25 states and 4 union territories with over 200+ area offices. The business has 500+ channel partners and a strong frontline team across the country in order to achieve efficient market coverage and best in class customer service.

The primary strengths of the business encompass a transparent end-to-end digital process, an exceptional customer experience journey, robust data-driven underwriting, and risk management capabilities. Coupled with the trust instilled by the Chola brand, these factors position it favourably to emerge as a leading player in this segment.

Key Differentiators:

1. Quick loan processing facilitated by a seamless end-to-end digital process.

2. Tie-ups with 500+ channel partners and a strong front-line team.

3. Multiple products and programmes to cover customers of different segments.

4. Pan-India presence in 800+ locations.

CONSUMER DURABLES LOAN (CD)

The CD lending business was launched in FY24 through a tie up with a leading mobile phone manufacturer. In FY25, the business expanded to cover 22 states across 54,000 dealers and increased its market share. In late FY25, the business also launched the Open Market consumer durables financing through direct associations with other OEMs and onboarded customers through a dedicated platform.

DIRECT TO CUSTOMER (D2C)

To target digitally savvy customers, Chola had introduced Direct to Customer (D2C) channel, to disburse loans directly to existing and new customers without any intermediaries. The business commenced in Q4 of FY23 through the Chola One app by disbursing personal loans and is currently focussed on a pre-approved loan journey servicing the existing customer base of other businesses.

There is a deep focus on continuous improvement of digital processes and customer experience, and with these as foundational pillars, the business verticals will strive to move ahead steadily with adherence to regulatory compliance, in a rapidly evolving market.

SMALL AND MEDIUM ENTERPRISES LOAN (SME)

As of 31 March, 2025, the SME business has around 9,200 MSME customers with an AUM of "6,628 crores. The business has expanded across the country, covering 20 states with over 94 branches. The business has entered into strategic partnerships with more than 18 OEMs and 8 leading fintech companies to drive greater financial inclusion in the market.

With the growing Small and Medium Enterprises ecosystem, Cholas SME loans business provides bouquets of products to meet the requirements of working capital and capex of SMEs.

Product & Customer Segment: The SME business focusses on the following product segments:

• Secured Term loan: Secured Term Loans as offered to formal SME segment with loan amounts ranging from "50 lakhs to "15 crores, backed by land & building as primary collateral. The business has further expanded to smaller ticket size loan i.e., Micro Term loan with ticket size ranging from "20 lakhs to "1 crore. End use of loan is usually for capacity expansion, branch expansion and long-term working capital requirements. Assessment is done basis audited financial statements, GST returns, banking behaviour and positive cash flow from operations with average LTV ranging from 60% to 70% of the estimated market value of the property.

• Equipment funding: These are short-term loans provided to MSME clients against hypothecation of machinery with key targeted market segments including machine tools, plastic and packaging, textiles, medical equipment, DG sets and printing industries. Chola collaborates with a select group of top OEMs in the industry to offer equipment funding facility. Assessment is done basis audited financial statements, viability of the machine, GST returns, banking conduct, with LTV offered ranging from 65% to 75% depending on the machine categorisation, OEM tie-ups and marketability of the asset.

• Vendor Invoice discounting and Channel finance: Major growth drivers for the Indian supply chain finance market include the increasing demand for working capital financing and growing adoption of digital technologies. These solutions provide short-term revolving credit facility of up to 90 days tenure with sanctions valid for one year backed by invoices to vendors or

dealers. This is largely based on anchor tie up with mid and large corporates by way of a Memorandum of Understanding (MOU). Chola intends to boost MSMEs access to working capital funds through these alliances and direct channels.

• Loan Against Securities: Loan against securities offers loans to retail and HNI investors and promoters against the pledge of securities and mutual fund units.

SECURED BUSINESS AND PERSONAL LOAN (SBPL)

As of 31 March, 2025, the SBPL business had crossed 62,000 live accounts with an AUM of "2,422 crores. The average ticket size is around "4.30 lakhs with an average tenure of 6 years. SBPL vertical is currently being distributed across 330+ branches spanning 11 states; however, the business plans to expand to 413 branches by the end of FY26, with preliminary focus on Tier 3 to Tier 6 cities. This business has digitised the entire customer loan journey for a hassle- free experience.

Key differentiators include personalised doorstep service to customers, a unique assessed income program for business owners, a transparent end-to-end digital process and customised products focussing on new-to-credit customers.

ASSET LIABILITY MANAGEMENT (ALM)

The first half of FY25 was low on momentum of economic activity due to the general elections in Q1 and monsoons in Q2 extending into Q3. GDP growth dipped in Q3 to 5.4%. This was the lowest in seven quarters. Liquidity was in deep deficit in Q3, and the credit- deposit ratio was uncomfortably high in the economy. This led to a deposit drive by banks and a considerable slowing of credit growth. Though core inflation was stable, food inflation continued to hover at high levels for much of FY25. It was in Q4 that the RBI announced many measures to inject liquidity, including open market operations, buy/sell swap of dollars, reduction of CRR and repo auctions. Due to these measures, liquidity turned surplus in March 2025.

The rupee depreciated to new lows, owing to capital flight in India. The RBI allowed the rupee to fall below "87 in February 2025, since stemming the fall would have impacted liquidity. In keeping the balance between growth and inflation, RBI leaned towards giving stimulus to growth over keeping inflation under check. Towards this end, RBI announced a much-awaited rate reduction of 25 bps. The regulatory intervention by RBI in FY24 on bank credit to NBFCs, by way of higher risk weights was reversed, giving a further impetus to growth.

Q4 FY25 was volatile for developed and emerging economies on account of tariff wars triggered by the new Government that assumed office in the US. As the US trade deficit widened, the dollar fell against developed and emerging markets and resulted in a meltdown of the global bond markets. Since Indias exports to the US is not significant, the outlook remains positive for growth, inflation, liquidity and interest rate.

The Company ensured that the liquidity risk and interest rate risk were mitigated by ensuring a pipeline of fund availability through broad basing of sources of funds, bringing in new investors and lenders. ALM was managed by borrowing an appropriate mix of long-term and short-term borrowings. Years of strong relationship with lenders, investors and intermediaries enabled the Company to meet its borrowing plan and manage the cost of funds.

RESOURCES & TREASURY

During the year, the Company raised funds from banks/financial institutions and from money markets to support the growth of its businesses at competitive interest rates without compromising the right mix of long and short-term borrowings, thereby maintaining a healthy asset liability position. The borrowing profile as at 31 March, 2025, is given below:

? Bank Term Loans

? Securitisation

Non-Convertible Debentures (Private)

? Indian Financial Institutions (IFI)

? External Commercial Borrowing (ECB) Non-Convertible Debentures (Public)

? Working Capital Demand Loans (incl CC) Sub-ordinated Debt

? Commercial Papers

Compulsory Convertible Debenture - CCD

? Perpetual Debt Instruments

BANK BORROWING

In FY25, the Company mobilised Rs 49,415 crores (net) of medium- term loans & ECB and Rs 1,900 crores (net) as working capital/cash credit/short-term loan facilities from banks. The Company continued getting support for its money market issuances from banks through subscription of Commercial Papers (CPs) and Non-Convertible Debentures (NCDs), and for Securitisation through investment in Pass Through Certificates (PTC). The Company continued to enjoy the steadfast support of the lending banks and the strong relationship helped manage the borrowing plan for FY25.

MARKET BORROWING

During FY25, the Company raised CP of Rs 13,200 crores of which "9,175 crores were repaid in FY25. CP outstanding as at the end of the year was Rs 4,025 crores. Medium and long-term secured NCDs to the tune of Rs 10,336 crores by private placement were mobilised at competitive rates. At the end of FY25, outstanding NCD stood at Rs 22,989 crores (" 18,569 crores through private placement, Rs 4,420 crores through public placement) and Compulsorily Convertible Debentures (CCD) at Rs 2,000 crores.

The Tier II borrowings raised during the year was Rs 1,000 crores of perpetual debt and Rs 4,760 crores of subordinated debt. As at the end of FY25, Tier II borrowings stood at Rs 10,621 crores.

MOVEMENT IN INTEREST COST

During the year, the availability of funds and the cost of funds spurted. The Company managed the interest cost by optimising on the mix of marginal borrowings.

As a percentage of average borrowings, interest cost stood at 8.0% in FY25 as compared to 7.9% in FY24.

CAPITAL ADEQUACY RATIO (CAR)

As at the end of FY25, the capital adequacy ratio stood at 19.75% (Tier I: 14.41% and Tier II: 5.34%).

INVESTMENTS

The Companys investments of "6,390 crores include investments in G-Sec of Rs 3,375 crores, investments in treasury bill of Rs 1,721 crores, investments in GSTRIPS of Rs 772 crores, investments in subsidiaries, joint ventures and associates of Rs 522 crores.

FINANCIAL REVIEW

The Companys aggregate disbursements grew by 14% from "88,725 crores in FY24 to Rs 1,00,869 crores in FY25. The AUM of the Company grew by 30% (YoY) and the growth of on-balance sheet assets was 26%. The business AUM (including on book and assigned net of provisions) in FY25 grew by 27% and stood at Rs 1,84,746 crores in FY25 as against Rs 1,45,572 crores in FY24.

HUMAN RESOURCES (HR)

Human Resource function at Chola continued to evolve as a strategic enabler of growth, transformation, and organisational agility. In the last financial year, HR played a central role in supporting the Company through a period of significant business shifts - anchored in structural re-alignment, the launch of new businesses and building future-ready capabilities.

Together, these initiatives reflect HRs commitment to not just enabling performance but nurturing purpose and potential - positioning Chola for sustainable success in the years to come.

Organisation restructuring:

This financial year marked a pivotal change in HR leadership with the onboarding of a new Chief Human Resources Officer (CHRO), tasked with driving transformational initiatives across the organisation. Another notable leadership addition was the appointment of Chief Business Officer for the Consumer and Small Enterprise Loans (CSEL) business.

This financial year was a defining period for Chola, characterised by significant leadership transitions and structural evolution. To align with the evolving organisational design, C-suite roles were formalised, and the grade nomenclature across the organisation was restructured. This initiative aimed to enhance clarity in roles and responsibilities, improve organisational efficiency, and foster a more streamlined and agile leadership structure, ultimately supporting strategic growth and operational effectiveness.

The Vehicle Finance business underwent a strategic reimagination, while a new business vertical, Consumer Durables, was carved out from the Consumer and Small Enterprise Loans (CSEL) business to drive sharper focus and accountability.

Talent Attraction:

Chola significantly expanded its workforce by 10,872 net additions across its various entities, reflecting accelerated recruitment aligned with its business growth and bringing the total workforce close to 65,000. This surge in talent acquisition supports the Companys strategic expansion and operational scaling.

Diversity and Inclusion:

Chola strengthened its commitment to diversity, equity, and inclusion with the launch of Sheleads, a dedicated initiative to empower women within the organisation. The "Spotlight Women of Chola" series was a key element, showcasing the journeys and achievements of female colleagues and elevating their voices across the Company. This platform has increased both internal and external recognition of Cholas inclusive culture, serving as a strategic tool to attract more women professionals and reinforce the Companys focus on gender diversity.

Collaborating with business leaders, Chola identified women-centric roles across multiple functions to provide targeted opportunities for female talent. Exclusive women-only walk-in recruitment drives were piloted across all zones, underscoring Cholas commitment to expanding diversity and creating pathways for women to succeed.

The inauguration of the first Women Empowered branch in Mawlai, Meghalaya, on 11 February, 2025, marked a significant milestone in advancing the Companys mission to support women at all organisational levels.

These initiatives are integral to embedding inclusion into Cholas core business strategy and cultivating a workplace where everyone can thrive.

Talent Development:

During FY 2024-25, the Learning & Development (L&D) function played a strategic role in enabling business performance and employee development through targeted, high-impact initiatives. All interventions were closely aligned with business objectives, focussing on capability building at scale and equipping the Companys workforce for the future.

Product and Process Training for Frontline Executives - Chola prioritised enhancing the functional expertise of the Companys frontline teams through structured product and process training. These sessions were designed to strengthen product knowledge, streamline operational workflows, and drive overall process efficiency.

Digital Adoption Training Programs - To accelerate the organisations digital journey, L&D implemented specialised programs aimed at improving digital fluency. These initiatives enabled employees to confidently adopt and utilise new digital tools, contributing to increased productivity and seamless business execution.

Performance Booster Training Programs for Frontline Executives - In pursuit of operational excellence, performance- focussed training interventions were introduced to address identified gaps. These sessions provided practical strategies and actionable tools, equipping executives to enhance productivity and achieve performance goals.

Profitability Maximisation Training Programs - To strengthen financial acumen and drive business outcomes, SBU-specific training modules were conducted. These programs focussed on educating employees on key profitability levers and empowering them to optimise Profit Before Tax (PBT) within their respective markets.

Leadership Development Programs - A series of targeted leadership initiatives were rolled out to build future-ready leaders. These programs focussed on strengthening core leadership capabilities, fostering succession readiness, and building a strong leadership pipeline across the organisation.

Technical Skill Building Training Initiatives - Chola launched structured technical upskilling initiatives and these included training in emerging technologies and agile methodologies, with strong participation from Business Enabler functions, underscoring Cholas commitment to a tech-enabled future.

Customer Reiteration Training - To elevate customer experience, training interventions were delivered across business verticals with a focus on resolution speed and service excellence. These programs empowered frontline executives to proactively resolve issues and deliver consistent customer satisfaction.

Digital Regulatory & Compliance Modules - To reinforce the Companys governance standards, a suite of interactive, self-paced digital modules was launched. Covering essential areas such as KYC & AML, POSH, Fair Practice Code, and Cybersecurity, these modules ensured widespread awareness and compliance readiness across the workforce.

These initiatives reflect the Companys commitment to continuous learning and excellence, positioning the organisation for sustained success in a dynamic environment.

Fostering a Culture of Care and Connection:

Cholas people strategy is centred on fostering a culture of care, connection, and continuous learning. The "Leader as a Sculptor" initiative empowered leaders to reflect on their roles, invest in team development, and nurture future talent. Mental well-being was addressed through programs like "Paralysis to Power," while team spirit was strengthened via "Sweet Karam Koffee" sessions and festive celebrations featuring creative, game-based, and cultural activities. Monthly themes inspired by core values encouraged participation in fitness and mindfulness challenges. Employee achievements in sports and arts were highlighted through "Chola Got Talent," and the "Harvest" platform facilitated knowledge sharing within the HR community. Together, these initiatives deepened employee engagement and helped create a vibrant, inclusive workplace.

Chola continued its commitment to holistic development by launching Inner Engineering, a transformative initiative designed to enhance emotional resilience, self-awareness, and inner balance. In partnership with Isha Yoga, more than 2,700 employees successfully completed the Inner Engineering program in FY25. This initiative has not only supported individual growth and mental wellness but has also fostered a culture of mindfulness, empathy, and purpose throughout the organisation, strengthening team cohesion and overall workplace wellbeing.

TECHNOLOGY INITIATIVES

Digital at the Core

The technology landscape is undergoing a tectonic shift with GenAI being the foremost driver of this change. Advancements like GenAI have far reaching impact across the different constituents of the business - customers, lines of business, enabling functions, and digital technology function. In parallel, with the rapid expansion and adoption of Digital Public Infrastructure (DPI), the lending technology arena is further altered by the efforts of ecosystem players, government, and regulators.

As a result of these initiatives coupled with launch of ULI - a platform for delivery of frictionless credit - technology is becoming central to organisations objective of customer-centricity, focussed product launches, and optimised processes across the entire lending value chain. Reflecting on this shift, Chola has been on a rapid journey transforming a company that leverages technology to digitise its business processes into one that is fundamentally driven by digital innovation.

Chola One and Gaadi Bazaar - Cholas key customer facing and vehicle ecosystem related platforms are being continuously enhanced to deliver more personalised, contextual, and efficient customer experiences. Chola One continues to serve as the integrated digital solution for customers providing loan origination, repayment and other seamless servicing options. Similarly, Gaadi Bazaar, provides a broad array of functionality to support dealers & broker partners to utilise features such as buy and sell vehicles, participate in vehicle auctions, and avail ecosystem specific capabilities for dealers like trade advance.

A two-pronged approach of using both in-house-developed and best-of-breed off-the-shelf solutions has been adopted to deliver a combination of agility and control across different systems of engagement and records. In areas where agility is key, Chola has adopted an in-house approach for better flexibility and improved responsiveness while tapping the best industry-wide practices and controls available in off-the-shelf applications. Chola also believes that software development lifecycles will transform radically with usage of GenAI assisted code development, code review, testing, documentation, and modernisation. Similarly, from an infrastructure perspective, the Company adopts a hybrid cloud approach to balance the multiple objectives of time-to-market, scalable compute, vendor & provider agnostic design, and cost- effective innovation.

As organisations become increasingly data-driven, access to quality information in a timely manner is critical for organisations to take judicious decisions. Cholas enterprise data platform is an initiative to achieve that objective to democratise and make quality data available, with appropriate access control, for analysis and decision making across different business and functions.

Cyber guardrails continue to be a core area of activity to ensure infrastructure reliability, service continuity, and data integrity are maintained. Here again, optimal mix on internal talent and external cyber domain experts are engaged to manage and mitigate risk across the entire digital landscape. The objective here is to have clear operational visibility and control across the endpoint, network, application, data, and server layers. At the same time, Chola maintains an unwavering focus on regulatory compliance and data privacy by continuously adapting tools & practices to align with evolving data protection laws and ensure responsible handling of customer information across the layers.

The near-term goal is to embed innovation and digital thinking at the heart of everything we do. By nurturing a digital workforce with future-relevant skills and designing intelligent scalable purpose- built solutions, Chola aims to unlock sustained business growth using technology.

RISK MANAGEMENT

The risk management process of the Company is driven by a strong organisational culture and sound operating procedures involving corporate values, attitudes, competencies, internal control culture, effective internal reporting and contingency planning.

The risk governance structure is as below:

Organization structure setup to ensure effective governance

The risks associated with the Companys business and scale of operations are strategic, financial, operational, reputation, compliance, liquidity & capital, cyber security, credit, fraud, people, market, emerging risks and others. The process for management of such risks broadly comprises the following steps:

Key emerging risks- climate, social etc.

Capital & Liquidity risk

• Risk Identification

• Risk measurement

• Risk monitoring

• Risk reporting

• Risk control/ Mitigation/ Improvement

The respective risk related policies, viz. credit policy, market risk policy etc., define the steps to be followed for risk identification, tools / techniques/ indicators to be used. Risk parameters are applied on capital adequacy ratios, NPA ratios, liquidity ratios, profitability ratios, etc. for measuring risks and tolerance limits fixed for various risks against which the risk levels are monitored. Control / mitigation measures are tracked for different risks.

The Material Risk Identification aims to provide the senior management with appropriate information pertaining to the risk profile of the Company in a comprehensive and timely manner. The performance indicators are risk metrics and/or statistics that provide insight into the Companys risk exposure.

Key Performance Indicators (KPIs) provide insight into the status of operational processes to evaluate operational weaknesses, failures, and potential loss. Escalation triggers provide alerts when risk levels approach or exceed thresholds or limits and prompt mitigation plans.

Risk Identification is a dynamic and a continuous process. Risk Management function works with the product process owners to identify the risks and controls and records them in the risk register. The Internal Audit reports / Loss events data, if any, are also considered to identify any new risks.

Business process mappings identify the key steps in business processes, activities, and functions. The key risk points in the overall business process are documented. Process maps reveal individual risks, risk interdependencies, and areas of control.

The Risk Management function co-ordinates these activities and provide support in identifying risks and controls. Once the risk universe is identified, the materiality of risks is assessed, and all material risks are covered in the ICAAP framework. The categorisation of each identified risk to various materiality levels requires identifying the criteria and assessing size, complexity etc.

The Company periodically revisits the risk universe and update appropriately. In case of product changes and additions, the respective teams apprise the Risk Management function of the new risks faced.

CREDIT RISK

The Companys credit risk management builds on the principles of -

1. appropriate risk diversification within the scope of the mission;

2. thorough risk assessment at the credit appraisal stage;

3. risk-based pricing and risk mitigation;

4. continuous risk monitoring at the individual counterparty level as well as portfolio level;

5. avoidance of undesirable risks to the extent possible.

Credit risk is defined as the potential loss arising from a borrower or counterparty failing to meet its obligations in accordance with the agreed terms. The Company is exposed to credit risk in both its lending and treasury activities, as borrowers and treasury counterparties could default on their contractual obligations.

Credit risk may also materialise in the form of rating downgrades, cross-default on payment obligations or during the transaction settlement process. Overall, credit risk is a function of the amount of credit exposure and the credit quality of the borrower or transaction.

The key parameters to access the credit risk are the Expected Credit Loss (ECL) and the Net Non-Performing Assets which are regulatory parameters.

OPERATIONAL RISK

The Companys operational risk management focusses on proactive measures in order to ensure business continuity, the accuracy of information used internally and reported externally, a competent and well-informed staff and its adherence to established rules and procedures as well as security arrangements to protect the Company.

The Company focusses on the following core procedures to manage the operational risk faced by the Company:

• Development of manuals, standard operating procedures and providing appropriate training on procedures to staff to create the risk culture through-out the organisation;

• Emphasis on process design that has a maker-checker mechanism and sound internal audit system;

• Ensure appropriate complaints handling mechanism and emphasis on the whistle blower policy;

• Internal Audit of branches, frequency and coverage based on grading determined by key factors;

• Process of fraud investigation and action on employees;

• Independent Disciplinary Committee to take decisions on fraud related matters.

IT AND CYBER RISKS

The Companys risk management strategy focusses on identifying, assessing, and mitigating risks associated with information technology and cybersecurity.

Continuous monitoring and identification of potential IT and cyber threats, including data breaches, malware, phishing attacks, and system vulnerabilities by conducting regular risk assessments helps prioritise risks based on their potential impact and likelihood.

Firewalls, encryption, multi-factor authentication, regular software updates and documented response plan ensures readiness to contain and remediate any security incidents with minimum potential damage.

The Company thus aims to protect the critical information assets, maintain stakeholder trust and ensure support to the long-term business objectives.

FRAUD RISK

To mitigate fraud risks, stringent internal controls, thorough background checks and a culture of integrity and transparency are adopted as sine qua non for Companys work ethics. The fraud prevention measures include employee training programs, fraud detection systems, and regular audits.

Whistleblower policy and its awareness through periodic trainings/ mailers ensure swift action to investigate and address any suspected fraud, minimising potential damage.

COMPLIANCE RISK

Compliance risk is the risk of legal or regulatory breaches, material financial loss or loss of reputation the Company may suffer, as a result of its failure to comply with laws, regulations, rules and codes of conduct, etc. The Company has processes and controls in place to ensure compliance with the regulatory framework prescribed by the Reserve Bank of India (RBI), SEBI and other relevant authorities.

The Company follows a robust process for timely dissemination of regulatory updates to all relevant stakeholders and implementation of the same. In the day-to-day operations, the Company adopts

the three lines of defense model with well-defined roles and responsibilities for managing the compliance risk in the Company. The first line of defense lies with businesses who are primarily responsible for ensuring the implementation of regulations. The second line of defense lies with Compliance and Risk function, who are responsible for identification assessment and mitigation of compliance risk. The Compliance function identifies the compliance risk, disseminate and monitor the same and ensures robust compliance culture is established across the organization. The Risk Management function assesses and monitors all material risks at enterprise level, including inherent compliance risk and ensures effectiveness of key controls in place to mitigate the same. The third line of defense is the Internal Audit function which provides an independent assurance of the adequacy of the compliance framework in place. Additionally, a comprehensive Compliance Testing Programme is carried out periodically to evaluate adherence to critical regulatory requirements.

FINANCIAL RISK

Financial risk refers to the potential for a company to experience losses due to various factors such as market fluctuations, credit defaults, or operational failures. It encompasses several types, including credit risk, market risk, and operational risk. The Company undertakes specific focus for effective management of financial risk by identifying potential threats, assessing their impact, and implementing strategies to mitigate them and the risks are graded based on financial impact of the risk event. Escalations and remedial actions are aligned with severity of risk grading to ensure minimum impact.

LIQUIDITY RISK

Liquidity risk is the risk that a company will not be able to meet its short-term financial obligations due to an inability to convert assets into cash quickly without incurring significant losses. This can arise from market liquidity issues or funding liquidity constraints. The Company ensures proper liquidity risk by maintaining sufficient cash reserves and keeping access to credit to meet its operational and financial commitments. The risk metrics are monitored keeping in view the coming time periods so that there is sufficient leg room to plan course corrections prior to actual occurrence of a liquidity risk event.

REPUTATION RISK

Reputational risk refers to the potential for negative publicity, public perception, or uncontrollable events to adversely impact a companys reputation, thereby affecting its revenue and market value. This risk can arise from various sources, including the actions of the Company, its employees, or external parties. Good governance practices, transparency, and social responsibility, mechanisms for prompt damage control, measures are undertaken to prevent/mitigate impact of events. The Company focusses on abiding by Murugappa Five Lights and extends its surveillance to cover all forums from where such an impact could come.

RISK GOVERNANCE AND REPORTING

The Company has strong governance arrangements consistent with other principles and guidance embedded in the risk data aggregation capabilities and risk-reporting practices.

The Company has a robust Management Information Reporting (MIS) to provide the Board and senior management in a clear and concise manner with timely and relevant information concerning the risk profile. Senior management is informed of the assumptions behind and limitations inherent in specific risk measures.

These measures are developed to improve the senior managements ability to evaluate the impact of various types of economic and financial shocks that could probably affect the Company.

They are flexible, adaptable and responsive to changes in the Companys underlying risk assumptions and incorporate multiple perspectives of risk exposure to account for uncertainties in risk measurement. It helps in ensuring that appropriate actions are initiated before the risk in providing threshold-based limit trading.

RISK APPETITE AND STRATEGY

The Board approved Risk Appetite Statement addresses the following key elements:

• The articulation in written form of the aggregate level and types of risk that the Company is willing to accept in the pursuit of its strategic objectives and business;

• Quantification of risk limits in terms of earnings (earnings perspective);

• The level of risk that the Company is willing to take for each material risk;

• The limits and thresholds for monitoring the risk appetite of the organisation;

• The quantitative measures that can be translated into thresholds for risk limits applicable to the entire Company;

• The qualitative statements for non-quantifiable risks.

The Company has defined its risk appetite and tolerance limits within its Risk Management Policy Framework for specific organisational objectives.

RESULT OF O PE RATI ONS

The Compa nys balan ce s heet size h as steadily g rown, co m pared to the previous year. A summarised version of the same is given

below: Rs in crores

STATEMENT OF PROFIT & LOSS Rs in crores

Particulars	Mar-24	Mar-25	Growth %
Disbursements	88,725	1,00,869	14%
Income	19,216	26,055	36%
Cost of Funds	-9,231	-12,485	35%
Net Margin	9,986	13,570	36%
Operating Expenses	-4,082	-5,339	31%
Provisions and Losses	-1,322	-2,494	89%
Profit Before Tax (PBT)	4,582	5,737	25%
Current and Deferred Tax	-1,159	-1,478	28%
Profit After Tax (PAT)	3,423	4,259	24%

BALANCE SHEET Rs in crores

Particulars	Mar-24	Mar-25	Growth %
Assets
Business Assets	1,44,424	1,81,930	26%
Cash & Bank Balances	4,320	9,401	118%
Other Liquid Assets	3,578	5,869	64%
Other Assets	4,129	4,448	8%
TOTAL	1,56,451	2,01,648	29%
Liabilities
Net worth	19,556	23,627	21%
Borrowings	1,10,692	1,48,280	34%
Securitisation	23,782	26,667	12%
Other Liabilities	2,421	3,074	27%
TOTAL	1,56,451	2,01,648	29%

KEY OPERATING MEASURES

Particulars	Mar-24	Mar-25	Change*
Net Income Margin	7.5%	7.7%	0.2%
Operating Expenses to Assets	-3.1%	-3.0%	0.1%
Return on Total Assets - PAT	2.6%	2.4%	-0.2%
Return on Equity - PAT	20.6%	19.8%	-0.8%
Profit Before Tax to Income	23.8%	22.0%	-1.8%
Total Assets under Management - Rs in crores	1,53,718	1,99,876	30%
Gross Stage 3 Assets	2.5%	2.8%	0.3%
Stage 3 (Net off ECL) Assets	1.3%	1.6%	0.2%
Provision Coverage	46.5%	45.3%	-1.2%
Earnings Per Share - Basic in "	41.2	50.7	23%
Book Value Per share	232.6	281.0	21%
Price to Book Ratio (no. of times)	5.0	5.4	9%
Market Capitalisation - Rs in crores	97,227	1,27,785	32%
CAR	18.6%	19.7%	1.2%

Note: *With respect to values, it is growth between periods and with respect to ratios, it is movement between periods.

CONSOLIDATED RESULTS

The consolidated profit after tax for the year under review was Rs 4,462.72 crores, as against Rs 3,420.05 crores in FY24.

On behalf of the Board

Place : Chennai Date : 25 April, 2025

Vellayan Subbiah

Executive Chairman