High Yield | AA+/Stable Rated | Minimum Investment: 10k Only

Cholamandalam Investment and Finance Company Limited is issuing the 1st tranche of Non-Convertible Debentures. These NCDs are AA+/Stable by ICRA and IND ratings. The NCDs are being issued in six series: yield ranges from 8.25% to 8.40% p.a. and different tenures of 22 months, 37 months and 60 months. The NCDs are secured and redeemable in nature.

Cholamandalam Investment and Finance Company Limited NCD IPO: Coupon rates and effective yield for each of the series

Allocation Ratio

The allocation ratio is prepared based on norms laid down by SEBI. Before announcing the allocation ratio, the same has to be approved by SEBI.  Once the IPO subscription closes, applications will be divided into different categories. The category-wise allocation ratio is always decided and declared during the launch of the particular IPO. Considering the Allocation Ratio, units will be assigned to applicants. Refer to the chart to know the application ratio for Cholamandalam Investment and Finance Company Limited NCD-IPO.

Investment Process for Cholamandalam Investment and Finance Company Limited NCD IPO

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If the investment amount is  less than & up to 10 lakhs, retail investors can apply for an IPO online.

If the investment amount is more than 10 Lakhs.

Financial Overview

Snapshot stating the Assets, Equity, Net Profit, Return on Average Assets and Tier 1 Capital

Ratio Analysis

Issue analysis

Pros 

• The NCD is AA+ rated security with a stable outlook.
• The coupon rate is between 8.25% to 8.40% which is much higher than FDs.

Cons 

• Net NPA has been very close to the limit set by the authorities

Liquidity

With cash and liquid investments of Rs. 74.07 billion as of December 2022 and Rs. 27.07 billion in unused bank lines, CIFCL maintains a healthy level of on-balance sheet liquidity;

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About Cholamandalam Investment and Finance Company Limited;

CIFCL, founded in 1978, is the financial services arm of the Murugappa group, headquartered in Chennai. Vehicle finance (64%) and HE loans (21%) are the company’s two main business segments. Small and medium enterprise (SME) loans and housing loans make up the majority of the portfolio’s remaining loans. CIFCL has entered three new business sectors—CSEL, SBPL, and SME—within the consumer and SME ecosystem. It will be interesting to see how these areas perform and how they fit into the overall portfolio. As of 3QFY23, the Cholamandalam Finance Holdings Limited and Ambadi Investments Ltd group businesses held 45.4% and 4.1% of the Murugappa group’s 51.5% holding in CIFCL, respectively.

As on December 2022

• A large network of 1,166 branches spread across 29 states.
• The leverage (debt/equity) stood at 6.6x in 3QFY23 (FY22: 5.9x; FY21: 6.7x).
• CIFCL’s profitability buffers (pre-provision operating profit buffers to credit costs) improved to 4.3x in 9MFY23 (FY22: 4.4x; FY21: 2.5x).
• GNPA- stood at 5.4% in 9MFY23 (FY22: 6.8%, 9MFY22:8.5%).
• NNPA- stood at 3.51% in 3QFY23 (3QFY22: 5.85%; FY22: 4.37%)

Strengths

• Well-diversified vehicle finance portfolio (3QFY23: 64.3% of assets under management (AUM), FY22: 68.8%; FY21: 72%)
• A significant player in the loan against property (LAP) segment (3QFY23: 20.9% of AUM) and has increased its focus on small ticket LAP loans
• Linkages with the Murugappa group, which, through its group entities, holds a 51.49% stake in CIFCL

Weakness

• Given that CIFCL is a service-oriented company, its direct exposure to environmental hazards and severe physical climate concerns is minimal. Through their asset portfolio, lending institutions may be indirectly exposed to environmental concerns; 64% of CIFCL’s portfolio is allocated to financing vehicles.

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About GoldenPi Expert

Abhijit Roy | CEO & CO-Founder GoldenPi

With over 15 years of experience across fixed income and debt markets, he brings deep domain expertise along with a strong focus on investor education and transparency. An alumnus of IIT Kharagpur and IIM Calcutta, his views are personal and should not be considered investment advice.

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