Cholamandalam Investment and Finance is coming up with secured NCD bonds now that would open for subscription on 25th April and closes on 9th May, 2023. Cholamandalam Finance provides vehicle loans, home loans, SME loans etc., Should you invest in Cholamandalam Investment and Finance NCD issue of April, 2023? What are the risk factors one should consider before investing in Cholamandalam Finance NCD 2023?
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About Cholamandalam Investment and Finance Limited
Cholamandalam Investment and Finance Company Limited is part of Murugappa Group that provides vehicle finance, home-loans, home equity loans, SME loans, investment advisory services, stock broking, and other financial services.
Cholamandalal Finance has 1166+ branches across India with AUM above Rs 1,03,789 Crores. It has over 21 lakhs customers spannning across India.
Cholamandalam Finance NCD Apr-23 issue details
|Security Type||Secured, Rated, Listed, Redeemable, Non-Convertible Debentures|
|Issue Size (Base)||Rs 500 Crores|
|Issue Size (Oversubscription)||Rs 500 Crores|
|Total Issue Size – Tranche-I||Rs 1,000 Crores|
|Total issue size (Shelf Limit)||Rs 5,000 Crores|
|Issue price||Rs 1,000 per bond|
|Face value||Rs 1,000 per bond|
|Minimum Lot size||10 bonds and 1 bond there after|
|Tenure||22, 37 and 60 months|
|Interest Payment frequency||Yearly or Cumulative|
|Listing on||Within 6 working days on BSE/NSE|
Cholamandalam Investment NCD Interest Rates – April-23 Issue
|Frequency of Interest Payment||Annual||Cumulative||Annual||Cumulative||Annual||Cumulative|
|Tenor (in months)||22||22||37||37||60||60|
|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 (In Rs.)||1,000||1,156||1,000||1,279||1,000||1,497|
What are the credit ratings for these NCDs?
Cholamandalam Investment and Finance NCD’s are rated as ICRA AA+ (Stable) by ICRA Limited and IND AA+/Stable by India Ratings & Research Private Limited. Securities with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such securities carry very low credit risk.
How is the company doing in terms of profits?
Its consolidated profits are as below:
FY2020 – Rs 1,054 Crores
FY2021 – Rs 1,521 Crores
FY2022 – Rs 2,158 Crores
9 months ended Dec-22 – Rs 1,821 Crores
Why to invest in these NCDs?
1) Cholamandalam Finance NCD’s offer attractive interest rates where investors can get interest up to 8.4% per annum.
2) Cholamandalam profits are growing at higher pace. Investing in companies that are generating consistent margins reduces the default risks.
3) It issues secured NCDs. In case a company gets wind-up/shut down for some reason, secured NCD investors would get preference in repayment of capital along with interest as those backed up by assets of the company. Hence, it is safe to invest in such secured NCD options.
Why not to invest in these NCDs?
1) Cholamandalam Investment NCD offers up to 8.4% interest rates. Currently even small finance banks are offering high interest rates up to 8.5% for regular investors and 9% for senior citizens.
2) Company might face disruption in its sources of funding which can affect growth of the company.
3) Company growth prospectus depends on overall Indian automotive market and, in particular, demand for LCVs, HCVs and cars and MUVs. Any down trend in such segments can affect company performance.
4) The volatility in interest rates and other market conditions can affect company financials.
5) Company business operations involve transactions with relatively high-risk borrowers. This can increase NPA’s and affect company financials.
6) Refer NCD prospectus for complete risk factors.
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Should you invest in Cholamandalam Finance NCD of April-23 issue?
Cholamandalam Investment and Finance Upcoming NCD offers high interest rates. These NCDs are rated as AA+ by ICRA and India Ratings and Research. It offers short to medium term tenure NCDs which are good for investment.
On the other side, small finance banks are offering similar interest rates, hence investors may get attracted towards FDs too. There are risks involved in investing in NBFC company NCD which I keep re-iterating in all these reviews.
Investors who understand all these pros and cons can invest in these NCDs.
Source: Cholamandalam Investment and Finance Apr-22 NCD issue Prospectus
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I think at 8.40% (yearly interest payment) with a AA+ rating is a very low interest rate. Even some banks are offering better rate with deposit guarantee upto Rs. 5 lakkhs. There are other NBFCs having broadly same rating of ‘AA’ are giving much better interest than this.