Murugappa group arm raises Rs 400 crore from CDC Group via masala bonds

Incorporated in 1978, CIFCL offers vehicle finance, business and home loans.

Cholamandalam Investment and Finance Company (CIFCL), the financial services arm of the Chennai-headquartered Murugappa group, has raised Rs 4 billion (Rs 400 crore) from CDC Group Pie (CDC), the United Kingdom’s development finance institution and impact investor through the issuance of unsecured, subordinated, rupee denominated masala bonds. This is CIFCL’s maiden masala bond issue which may be listed on London Stock Exchange or any other international stock exchanges in future.

Incorporated in 1978, CIFCL offers vehicle finance, business and home loans. It has more than 1,000 branches across India, with a diversified loan portfolio spanning 1.2 million customers. CIFCL caters to small and medium road transport operators for new and used commercial vehicles with over 50% of the portfolio in low income states.

Arun Alagappan, MD of CIFCL, said: “CDC and CIFCL have joined hands to address the business credit requirements of small and medium road transport operators and MSME customers. CDC’s investment in CIFCL’s masala bonds will support the extension of loans to driver-turned-owners and micro and small enterprises in underserved rural and semi-urban areas of India. We look forward to working with CDC in promoting the economic and social well-being of our customers.”

The majority of CIFCL’s customer segment is self-employed borrowers or entrepreneurs and small manufacturers, with nearly one-third of the portfolio constituting first-time borrowers, thereby facilitating access to the formal capital market and promoting financial inclusion.

Srini Nagarajan, CDC managing director and head of Asia, said: “CDC’s commitment to CIFCL demonstrates our value as a development financial institution with long-term patient capital. Our investment will enable CIFL to extend loans to small vehicle owners and facilitate the availability of credit to rural and semi-urban markets and support the company with subordinated-debt in this tight liquidity environment. CDC has been investing in India for over 30 years and we look forward to the start of a productive long-term relationship with CIFCL and the wider Murugappa group.”

CDC supports businesses that can make goods and services more affordable and accessible for people in Africa and Asia who really need them. The investment will help generate self-employment opportunities for low to middle-income customers helping to meet the sustainable development goal for decent work. CDC’s commitment to CIFCL contributes to meeting the UN’s Sustainable Development Goal for decent work and economic growth.

As of September 30, 2019, close to 74% of CIFCL’s portfolio comprises vehicle loans, 21% loan-against-property to MSME sector, and the balance 5% in affordable home finance and others. Listed on the Bombay Stock Exchange and National Stock exchange, the company has a market capitalisation of approximately $ 3.5 billion which is equivalent to 3.7x of its book value. The company carries a local currency credit rating of AA+ / Stable from India Ratings (a Fitch group company) and AA+ from Icra, Crisil and Care for its long-term instruments.