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

 

Cholamandalam Investment and Finance Company Limited is issuing the Non-Convertible Debentures. These NCDs are AA+/Positive by ICRA and AA+/Stable by IND ratings. The NCDs are being issued in six series: yield ranges from 8.44% to 8.60% p.a. and different tenures of 24 months, 36 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.

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Financial Overview

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

Issue analysis

Pros 

• The NCD is AA+ rated security with a positive outlook.
• The coupon rate is between 8.45% to 8.60% which is much higher than FDs.

Cons 

• Net NPA has been very close to the limit set by the authorities
• Interest coverage ratio also remains less than the set limits.

Liquidity

As of October 31, 2023, CIFCL has undrawn bank lines of about Rs. 2,535 crore and cash and liquid investments worth Rs. 8,583 crore. Its November 2023–January 2024 debt payment commitments (including interest) are around Rs. 11,758 crore. 

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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.

Strengths

• CIFCL has an established position in the vehicle finance market backed by its strong franchisee base and diversified product portfolio. As of September 2023, it had 1,267 branches in India.
• Disbursements grew by 87% in FY2023 and 49% YoY in H1 FY2024, driven by healthy demand across segments and contribution from new businesses
• AUM grew by 38% YoY in FY2023 and 42% YoY in H1 FY2024 (17% YTD in H1 FY2024) compared to 10% YoY in FY2022.
• 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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Source– Tranche IV Prospectus January 16, 2024

Disclaimer – The information is published as on date 24/01/2024 based on information available on Tranche IV Prospectus January 16, 2024. The information may be subject to change in case of change in terms of prospectus or any other reason as the case maybe. Contents which are exclusively for educational information/knowledge sharing on capital market concepts and has no influence the investment/sale decisions of any investors