Cholamandalam Finance to raise Rs 5,000 cr through NCDs

Cholamandalam Investment and Finance Company, the financial services arm of the diversified Murugappa Group, on Thursday announced its maiden public issue of debt sales worth Rs 5,000 crore in multiple tranches with an opening issue pegged at Rs 1,000 crore.

Cholamandalam Finance said the move is to diversify its funding source which currently is heavily skewed towards banks. The Rs 1,000-crore first tranche will open on April 25 and close on May 9, offering an annual coupon of up to 8.40 per cent for 60 months and 8.25 per cent for 22 months. The first tranche includes a base issue of Rs 500 crore with an option to retain oversubscription of up to Rs 500 crore, D Arulselvan, President and Chief Financial Officer of the Chennai-based company, told reporters.

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The AA-rated NCDs will be listed on the BSE and NSE, and the primary investor target (up to 85 per cent) is retail customers, he said. Arulselvan said that the company’s asset under management (AUM), which is heavily auto-loans driven, rose over 20 per cent in FY23. It crossed the Rs 1 lakh crore mark with a customer base of 22.7 lakh and operates across 29 states with 1,160 branches, of which 80 per cent are in small towns. In December 2022, its AUM was Rs 95,467 crore. The non-deposit-taking NBFC posted a net profit of Rs 2,400 crore in the first three-quarters of the past fiscal. In FY22, its net profit was Rs 2,100 crore and AUM stood at Rs 76,907 crore.

The company has an outstanding debt of Rs 95,000 crore, he said, adding, on average, it borrows around Rs 7,000 crore every month. According to him, at present, 57 per cent of its funding come from banks, 16 per cent from privately issued NCDs, 4 per cent from external commercial borrowings and the rest from securitisation, commercial papers and other means. We plan to draw at least 10 per cent of funds from publicly issued debt over the next 3-4 years, Arulselvan said. He said at least 75 per cent of the proceeds will be utilised for onward lending, financing and for repayment of interest and principal of existing borrowings and the rest for general corporate purposes. The 122-year-old Murugappa Group launched Cholamandalam Finance in 1978 as an equipment financing firm.