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Cholamandalam Inv April 23 NCD Tranche-I issue review (Apply)

Cholamandalam Investment and Finance Company Limited Logo

•    This is the maiden debt offer from CIFCL under Tranche-I.
•    The aggregate size of the issue is Rs. 1000 cr. including a green shoe option of Rs. 500 cr.
•    The company has a shelf limit of Rs. 5000 cr. for the debt offers.
•    This issue is rated IND AA+ / Stable by India Rating and ICRA AA+ / Stable by ICRA Ltd.
•    Investors looking for steady returns may consider parking funds for the medium to long term.

Cholamandalam Investment and Finance Co. Ltd. (CIFCL) is a non-banking finance company, incorporated in 1978 as the financial services arm of the Murugappa group, with more than 122 years of existence. The Company is categorized as an NBFC-ICC. It commenced business as an equipment financing company and has since expanded operations to offer vehicle finance, loan against property, home loans, loans to small and medium-sized enterprises ("SMEs"), consumer and small enterprise loans and secured business and personal loans. 

The company also offers stock broking and various other financial services to customers through its Subsidiaries. As of December 31, 2022, it had 22.70 lakhs active customers across India. As of December 31, 2022, it had 1,166 branches across 29 States and Union Territories in India. As of December 2022, it had 13277 employees on its payroll. 

It has leveraged knowledge and experience in the vehicle finance industry coupled with its relationships with OEMs and dealers to grow operations and expand its operating network. In addition, being a part of the Murugappa group it has been able to derive significant synergies by leveraging its brand and existing customer base.

The company is coming out with a maiden debt issue under Tranche-I to mobilize Rs. 1000 cr. as an aggregate amount. It has planned a secured NCD issue with a base size of Rs. 500 cr. and has a green shoe option to retain oversubscription to the tune of Rs. 500 cr. It has a shelf limit of Rs. 5000 cr. The company is issuing secured, redeemable non-convertible debentures having a face value of Rs. 1000 each. A minimum application is to be made of 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (i.e. Rs. 1000) thereon, thereafter. The issue opens for subscription on April 25, 2023, and will close on or before May 09, 2023. Post allotment, NCDs will be listed on BSE and NSE. CIFCL is spending Rs. 8.92 cr. for this Rs. 1000 cr. NCD issue and from the net proceeds, it will utilize at least 75% for the purpose of onward lending, financing, repayment of existing borrowings, and a maximum of up to 25% for general corporate purposes. 

The company has allocated 20% for Institutional, 25% for Non-Institutional, 25% for HNIs and 30% for Retail investors. The issue is solely lead managed by A K Capital Services Ltd. and KFin Technologies Ltd. is the registrar of the issue. IDBI Trusteeship Services Ltd is the debenture trustee. 

This NCD issue has tenors of 22 months, 37 months and 60 months. It offers a coupon rate ranging from 8.25% to 8.40% with interest payment options of Annual or Cumulative, as per the series opted by the investors. The allotment will be in demat mode only and will be done on a "First come - First Served" basis.  

This debt offering is rated IND AA+ / Stable by India Ratings and Research Pvt. Ltd. and ICRA AA+ / Stable by ICRA Ltd. Instruments with this rating are considered to have an adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk. 

The rating provided by the Credit Rating Agencies may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating. These ratings are not a recommendation to buy, sell or hold securities and investors should take their own decisions. 

On the financial performance front, for the last three fiscals, CIFCL has (on a consolidated basis) posted a total income of Rs.8774 cr. / Rs. 1054 cr. (FY20), Rs. 9639 cr. / Rs. 1521 cr. (FY21), and Rs. 10232 cr. / Rs. 2154 cr. (FY22). For 9M of FY23, it earned a net profit of Rs. 1810 cr. on a total income of Rs. 9271 cr. Thus it has posted steady growth in its top and bottom lines. As of December 31, 2022, its net worth stood at Rs. 13530 cr. 

CIFCL's net NPA for the last three fiscals has been 2.22% (FY20), 2.21% (FY21), and 2.64% (FY22). For 9M of FY23, its net NPA stood at 2.07%. Its debt-equity ratio as of December 31, 2022, at 6.58 will stand enhanced to 6.94 post this issue. 

Conclusion / Investment Strategy

This is the maiden debt offer from CIFCL - a Murugappa group finance arm. Murugappa group has fancy among investors. The offer has AA+ / Stable rating from India Ratings and ICRA that goes well with the market fancy. The company is offering lucrative coupon rates for the issue. Investors looking for steady returns may park funds for the medium to long term.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on April 20, 2023

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

The Cholamandalam Investment NCD Tranche I April 2023 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Cholamandalam Investment NCD Tranche I April 2023 worth investing. The Cholamandalam Investment NCD Tranche I April 2023 Note sets the NCD expectations in systematic way which tells you if Cholamandalam Investment NCD Tranche I April 2023 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Cholamandalam Investment NCD Tranche I April 2023 by providing NCD recommendations i.e. subscribe, avoid and neutral.