Cholamandalam Finance July 2023 NCD Public Issue Review
Cholamandalam Investment and Finance Company Limited (Chola) has launched Tranche II of its public issue of NCDs on 28th July, 2023 to raise funds from the debt market. Read further to know more about the business of Chola.
About the Issue
|Issuer||Cholamandalam Investment and Finance Company Limited|
|Type of Instrument||Rated, Secured, Listed, Redeemable, Non-Convertible Debentures|
|Issue Size (Tranche II)||Rs. 500 crs (Base Issue) + Rs. 1,000 crs (Green Shoe Option)|
|Face Value||Rs. 1,000|
|Tenure||22 months to 60 months across Series I-VI|
|Yield||8.25% to 8.40% across Series I-VI|
|Application size||Minimum Rs. 10,000/- (10 NCDs) and in multiples of 1 NCD thereafter|
|Security Cover||Minimum 100% security cover or higher on the principal outstanding plus interest thereon|
|Credit Rating||ICRA AA+/Stable & IND AA+/Stable|
|Issue Open Date||28-July-23|
|Issue Close Date||10-Aug-23|
The terms of multiple series of the NCDs are set out below:
|Series 1||Series 2||Series 3*||Series 4||Series 5||Series 6|
|Frequency of Interest Payment||Annual||Cumulative||Annual||Cumulative||Annual||Cumulative|
|Nature of Instruments||Secured NCDs|
|Tenor||22 Months||22 Months||37 Months||37 Months||60 Months||60 Months|
|Coupon (% per Annum)||8.25%||NA||8.30%||NA||8.40%||NA|
|Effective Yield (% per Annum)||8.26%||8.25%||8.30%||8.30%||8.39%||8.40%|
|Amount on Maturity (Rs.)||1000||1156.64||1000||1279.15||1000||1497.41|
*The Company shall allocate and allot Series 3 NCDs wherein the applicants have not indicated the choice of the relevant NCD Series.
About Cholamandalam Investment and Finance Company Limited
Cholamandalam Investment and Finance Company Limited (Chola) was incorporated in the year 1978 as the financial services arm of the Murugappa group, which has more than 122 years of existence. The Chennai based company is categorized as an “Upper Layer” NBFC-ICC (Investment and Credit Company).
Chola commenced business as an equipment financing company and have since expanded operations to offer vehicle finance, loan against property, home loans, loans to small and medium-sized enterprises, consumer and small enterprise loans and secured business and personal loans. The company operates 1,191 branches across 29 States and UTs with 25.1 lakh active customers throughout India as of March 2023. AUM of Rs. 1,06,498 crore comprises of Vehicle Finance (62.85%), Loan Against Property (20.27%), Home Loans (7.94%), and New Businesses (8.94%). Chola is well diversified across India, with a branch network of less than 30% in each region.
About Murugappa Group
Founded in 1900, the Murugappa Group is one of India’s leading business conglomerates. The Group has 29 businesses including ten listed Companies traded in NSE & BSE.
The Group holds leadership position in several product lines including Abrasives, Technical Ceramics, Electro Minerals, Auto Components & Systems, Power Conversion Equipment, Transformers & Reactors for the Power T&D segment, Solutions for Railways in Rolling Stock & Signalling Equipment, Bicycles, Fertilizers, Sugar, Tea, and Spirulina (Nutraceuticals). The Group has forged strong alliances with leading international companies such as Groupe Chimique Tunisien, Foskor, Mitsui Sumitomo, Morgan Advanced Materials, Yanmar & Co. and Compagnie Des Phosphat De Gafsa (CPG). It has a wide geographical presence all over India and spanning 6 continents.
Operational Industry Overview
Vehicle loans, which traditionally form the largest component of NBFCs’ retail portfolio, had declined during financial year 2021-22. Accordingly, the share of vehicle and auto loans, which accounted for about 45 per cent of NBFCs’ retail portfolio at the end of March 2021, dropped to around 40 per cent at end-March 2022. CareEdge Research expects the domestic automobile industry sales volume to grow by 20% in FY23.
Micro, Small and Medium Enterprises (MSME) sector, as per SIDBI, contributes in a significant way to the growth of the Indian economy with a vast network of about 6.34 crore enterprises. This sector contributes to around 30% of India’s GDP, over 45% of India’s exports, while creating employment for about 11.1 crore people. According to the latest TransUnion CIBIL-SIDBI MSME Pulse report, credit exposure to MSMEs is at ₹ 25.3 lakh crores as of September 2022, reflecting a YoY growth rate of 10.6%. Disbursements Q2FY23 to Micro, small and medium enterprises grew at 54%, 23% and 8% in YoY, respectively.
Company Financials (Standalone)
|Net Worth (₹ in Cr)||14,296||11,708||9,560||8,172|
|Debt (₹ in Cr)||97,356||69,174||63,730||55,006|
|AUM (₹ in Cr)||1,06,498||76,907||69,996||60,549|
|PAT (₹ in Cr)||2,666||2,146||1,514||1,052|
|Debt to Equity||6.82||5.88||6.64||6.71|
*Increase in GNPA due to new RBI norms on NPA
- The company’s leverage is high at 6.82x as of March 2023 resulting in a low CRAR of 17.13% which is a cause of concern. As per the offer details, the post issue leverage is expected to increase further to 6.97x.
- The AUM has seen robust growth of ~52% since FY21 in absolute terms which translates into a CAGR of ~23%.
- Profitability has shown an uptrend along with an increase in profit margins since FY20.
- Asset quality as indicated by GNPA, though high, has improved from 6.82% in FY22 to 4.63% as of March 2023, which is a positive sign.
Top Ten Equity Shareholders of the company as of June 2023
|Sr No||Name of shareholder||% Shareholding|
|1||Cholamandalam Financial Holdings Limited||45.35|
|2||Axis Mutual Fund Trustee Limited||4.91|
|3||Ambadi Investments Limited||4.10|
|4||HDFC Trustee Company Ltd – A/C – HDFC Mid-Cap Opportunities Fund||2.05|
|5||SBI Arbitrage Opportunities Fund||1.63|
|6||Smallcap World Fund, Inc.||1.58|
|7||Government Pension Fund Global||1.39|
|8||Canara Robeco Mutual Fund A/C Canara Robeco Equity||1.14|
|9||Aditya Birla Sun Life Trustee Private Limited||1.09|
|10||UTI Nifty 200 Momentum 30 Index Fund||0.94|
Borrowings (As on June 2023)
|Nature of Borrowings||Amount (₹ in Cr)||%|
Peer Comparison (March 2023)
|Particulars||Chola Finance||Shriram Transport Finance*||Sundaram Finance|
|AUM (₹ in Cr)||1,06,498||1,85,683||34,552|
|Net Worth (₹ in Cr)||14,296||43,202||7,737|
|Debt to Equity||6.8||3.7||4.2|
|PAT (₹ in Cr)||2,666||5,979||1,088|
*Entity has merged with group companies to form a new entity called Shriram Finance
|Rating Agency||Chola Finance||Shriram Transport Finance||Sundaram Finance|
|India Ratings||AA+/Stable||AA+/Stable||Not Rated|
- One of the top players in the country in Vehicle Finance Segment
- Geographically well diversified AUM across India as of March 2023
- Increase in AUM & Profitability
- Backed by a strong promoter group
- High leverage of 6.82x as of March 2023 and post issue leverage of 6.97x
- Moderate Asset Quality
- Vehicle Finance sector remains susceptible to any economic downturn
- Moderation in capital buffers on account of robust portfolio growth