INFORMATION
2023-12-04T12:38:20
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2023-12-04T12:38:20 | 2 Mins to read
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n the bustling landscape of financial markets, the Cholamandalam Investment and Finance Company Limited (Chola Finance) IPO presents an intriguing opportunity for investors. Here’s a detailed exploration of key facets, ranging from the issuer’s background to the intricacies of the issue structure.
| Tranche III Issue opens: |
Tuesday, November 28, 2023 |
| Tranche III Issue closes: |
Monday, December 11, 2023** |
| Allotment: |
First Come First Serve Basis |
| Face Value: |
Rs.1,000 per NCD |
| Issue Price: |
Rs.1,000 per NCD |
| Nature of Instrument: |
Secured Redeemable Non-Convertible Debenture (“NCDs”) |
| Minimum Application: |
10 NCDs (Rs.10, 000) & in multiple of 1NCD |
| Listing: |
BSE & NSE |
| Rating: |
The NCDs proposed to be issued under the Issue have been rated [ICRA]AA+ (Stable) and IND AA+ / Stable for an amount of ₹ 5,000 crores by ICRA Limited and India Ratings & Research Private Limited |
Issuer Information: Chola Finance, a part of the esteemed Murugappa group, is set to launch its IPO with a base issue size of Rs. 500 Crs and an option to retain oversubscription, potentially aggregating up to Rs. 1000 Crs. The issue opens on 28th November 2023 and closes on 11th December 2023.
Instrument Nature: Investors will be dealing with Secured Redeemable Non-Convertible Debentures (NCDs) with a face value of Rs. 1000 each. The tenure spans up to 60 months, offering a coupon and yield of up to 8.60%.
Application and Listing: Investors can apply for a minimum of 10 NCDs (Rs. 10,000.00) and in multiples of 1 NCD thereafter. The NCDs are set to be listed on both BSE and NSE, enhancing liquidity and accessibility.
Credit Rating: Chola Finance’s NCDs have garnered a credit rating of “[ICRA] AA+/Stable IND AA+/Stable,” reflecting a robust credit profile and stability.
Allotment and Listing Dates: Allotment for the NCDs is slated for 15th December 2023, with a listing expected on 19th December 2023.
Market Position: Chola Finance boasts a strong market position in the vehicle financing segment, constituting over two-thirds of its total financing business. With a five-year CAGR of around 19%, the company’s assets under management (AUM) have surged to Rs 106,412 Crs as of September 2022.
Support from Murugappa Group: Backed by the Murugappa group, Chola Finance enjoys significant equity and management support. The group, holding a majority equity stake of 51.7%, has demonstrated consistent support during challenging times, reinforcing the financial and managerial strength of Chola Finance.
LAP Business Challenges: Challenges persist in Chola Finance’s Loan Against Property (LAP) business, evident in the relatively high gross NPAs of 6.9% as of June 2020. Efforts are underway to address credit quality challenges, emphasizing recoveries and proactive measures to mitigate risks.
LAP Delinquencies: Investors should be mindful of the challenges in the LAP portfolio, particularly the high gross NPAs. The company’s strategy to address these challenges will be crucial in determining the impact on investor returns.
Economic Factors: External economic factors, such as interest rate fluctuations and regulatory changes, could influence the performance of Chola Finance. Investors should stay attuned to macroeconomic trends.
Minimum Application: Investors looking to participate in the Chola Finance IPO can start with a minimum application of 10 NCDs, equivalent to Rs. 10,000.00, and then apply in multiples of 1 NCD.
Understanding Credit Ratings: Investors with an appetite for moderately high-risk investments and a keen understanding of credit ratings may find Chola Finance’s NCDs an appealing addition to their portfolios.
Diversification Opportunity: For investors keen on diversifying their portfolios, considering BondsIndia alongside IPO investments can offer a balanced approach. Bonds provide a fixed-income component, potentially mitigating volatility associated with equities.
BondsIndia facilitates a seamless process for applying and managing bond investments. Investors can leverage the platform to access a diverse range of bonds, including those issued by Chola Finance. This holistic approach allows investors to tailor their investment strategy according to their risk tolerance and financial goals.
The Chola Finance IPO presents a unique blend of opportunities and challenges. Investors keen on leveraging the company’s market dominance in vehicle financing and the backing of the Murugappa group should carefully assess their risk appetite. The LAP business’s credit quality issues demand a discerning eye, emphasizing the need for a balanced approach to portfolio construction.
As with any investment, due diligence is paramount. Scrutinizing Chola Finance’s credit strengths, weaknesses, and the economic backdrop is key to making informed decisions. Additionally, exploring the potential synergy of combining IPO investments with fixed-income instruments through platforms like BondsIndia can enhance portfolio resilience.
In conclusion, while the Cholamandalam Investment and Finance Company Limited IPO holds promise, investors should approach it with a comprehensive understanding of its dynamics. A diversified strategy, coupled with a cautious evaluation of risks, will empower investors to navigate this opportunity with prudence and potentially unlock value in their investment journey.
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