The first tranche of non-convertible debentures is being issued by Cholamandalam Investment and Finance Company Limited. These NCDs have ICRA and IND ratings of AA+/Stable. The NCDs are being issued in six series, with varied tenures of 22 months, 37 months, and 60 months, with yields ranging from 8.25% to 8.40% p.a. The NCDs are redeemable and secured in nature. The minimum investment is 10,000. The Issue opening date is July 28, 2023, and the closing date is August 10, 2023.
| Issue Open | Jul 28, 2023 – Aug 10, 2023 |
| Security Name | Cholamandalam Investment and Finance Company Limited |
| Security Type | Secured, Redeemable, Non-Convertible Debentures (Secured NCDs) |
| Issue Size (Base) | Rs 500.00 Crores |
| Issue Size (Shelf) | Rs 5,000.00 Crores |
| Issue Price | Rs 1000 per NCD |
| Face Value | Rs 1000 each NCD |
| Minimum Lot Size | 10 NCD |
| Market Lot | 1 NCD |
| Listing At | BSE, NSE |
| Credit Rating | ICRA AA+ (Stable) by ICRA Limited and IND AA+ (Stable) by India Ratings & Research Private Limited |
| Tenor | 22, 37 and 60 months |
| Series | Series I to VI |
| Payment Frequency | Annually and Cumulative |
| Basis of Allotment | First Come First Serve Basis |
| Debenture Trustee/s | IDBI Trusteeship Services Ltd. |
Ratio of Allocation
The allocation ratio is calculated using the SEBI criteria. Before the allocation ratio can be made public, it must be approved by the SEBI. After the IPO subscription time has concluded, applications will be categorised into numerous categories. When an IPO is issued, the category-wise allocation percentage is always decided and published. The Allocation Ratio will be used to allot units to applicants. The application ratio for Cholamandalam Investment and Finance Company Limited can be seen in this pie chart.
Analysis of issues
Pros
The NCD has a stable outlook and an AA+ security rating.
The coupon rate is substantially higher than FDs, ranging from 8.25% to 8.40%.
Cons
Net NPA has been very close to the regulators’ specified limit.
Liquidity
By the end of 2022, CIFCL had Rs. 74.07 billion in cash and liquid investments and Rs. 27.07 billion in unused bank lines indicate a healthy level of on-balance-sheet liquidity.
About CIFCL
The financial services division of the Murugappa group, with its headquarters in Chennai, Cholamandalam Investment and Finance Company Limited (CIFCL), was established in 1978. The company’s two primary business segments are vehicle finance (64%) and HE loans (21%). The majority of the remaining loans in the portfolio are housing and small and medium enterprise (SME) loans. Within the consumer and SME ecosystem, CIFCL has entered three new business sectors, namely CSEL, SBPL, and SME. It will be intriguing to observe how these sectors perform and how they integrate into the entire portfolio. The firms belonging to the Cholamandalam Finance Holdings Limited and Ambadi Investments Ltd group held 45.4% and 4.1%, respectively, of the Murugappa group’s 51.5% stake in CIFCL as of 3QFY23.
As of December 2022, the company has 1,166 branches scattered over 29 states making up a sizable network.
- In 3QFY23, the leverage (debt/equity) was 6.6x (FY22: 5.9x; FY21: 6.7x).
- Pre-provision operating profit buffers to credit expenses for CIFCL increased to 4.3x in 9MFY23 (from 4.4x in FY22 and 2.5x in FY21).
- In 9MFY23, the GNPA- was 5.4% (FY22: 6.8%, 9MFY22:8.5%).
- In 3QFY23, NNPA- was 3.51% (3QFY22: 5.85%; FY22: 4.37%)
Competitive Advantages
- Strong focus on retail with an extensive product portfolio.
- Vast distribution network with an emphasis on semi-urban and rural sectors.
- Strong analytical capabilities and a technology platform.
- Knowledgeable management group.
Goals of the IPO Issue
In accordance with the policies it formulates from time to time, the Company’s management will be able to deploy the proceeds from this Tranche II Issue with discretion. The company intends to provisionally invest funds as may be approved by the Board of Directors or a committee thereof in accordance with applicable law pending the use of the proceeds from this Tranche II Offering for the above-mentioned purposes. Such an investment would be in accordance with the Company’s investment policy, duly endorsed by the Board of Directors or any of its committees, and applicable law for General Business Objectives.
NCD Ratings
For the NCDs that are planned to be issued in accordance with this Issue, the firm has been rated ICRA AA+ (Stable) by ICRA Limited and IND AA+ (Stable) by India Ratings & Research Private Limited.
Financial Performance
Cholamandalam Investment and Finance Company Limited announced consolidated total income and net profits for the previous three fiscal years as follows: Rs. 8,712.63 crore/Rs. 1,053.72 crore (FY20), Rs. 9,639.72 crore/Rs. 1,521.39 crore (FY21), and Rs. 10,231.81 crore/Rs. 2,158.89 crore (FY22). As a result, the company’s top and bottom lines showed a trend towards growth.
Company’s Strengths
- A portfolio of vehicle finance investments that are well-diversified (3QFY23: 64.3% of assets under management (AUM), FY22: 68.8%, and FY21: 72%)
- A substantial player in the loan against property (LAP) market, with a greater emphasis on small-ticket LAP loans (3QFY23: 20.9% of AUM).
- Connections to the Murugappa group, which owns 51.49% of CIFCL through its group organisations.
Company’s Weakness
Being a service-based business, CIFCL has little direct exposure to environmental risks and serious physical and climatic concerns. Lending institutions may be indirectly affected by environmental issues through their asset portfolio; 64% of CIFCL’s portfolio is committed to financing vehicles.
Mode of Applying
Applications are submitted via the ASBA Process (for all candidates). Retail Individual applicants who submit applications with a value of up to Rs. 5 lakhs via the Stock Exchange’s app or website or through middlemen (Syndicate members, Registered Stock Brokers, Registrar and Transfer agents, and Depository Participants) may use the UPI mechanism to block funds.
How do I apply on the BondsIndia website?
Apply quickly by following the guidelines below
- From the Public Issue Bonds list, choose the series,
- Full PAN and Demat account information,
- Type your UPI account number,
- Accept the payment order.
The Takeaway
The Murugappa Group’s financial services division is Cholamandalam Investment and Finance Company Limited (Chola). The business offers stock broking, investment consulting services, stock financing, SME loans, house loans, home equity loans, and other financial services. With more than 1166 locations around India, Chola has more than INR 1,03,789 Crores in assets under management. Over 21 lakh consumers use the company across India. Investors looking for a stable income can store money with this investment due to its ICRA AA+ (Stable) rating from ICRA Limited and IND AA+ (Stable) rating from India Ratings & Research Private Limited. However, seasoned investors might consider making medium- to long-term investments for profits.