Cholamandalam Finance to raise Rs 400 crore tier-II debt

Diversified financial services company Cholamandalam Investment and Finance Company Ltd (CIFCL) on Friday said it has raised 57 million Canadian dollars (Rs 400 crore) through its maiden rupee denominated masala bonds for on lending. It raised the money from CDC Group Plc, the UK’s development finance institution and impact investor, a release said.

“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 the country,” CIFCL Managing Director Arun Alagappan said.

The financial services arm of the Murugappa Group caters to small and medium road transport operators for new and used commercial vehicles with over 50 per cent of the portfolio in low income states.

CDC Managing Director and Head (Asia) Srini Nagarajan said, “Our investment will enable CIFCL 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 Group plc is wholly owned by the UK Government. It invests in Africa and Asia, helping generate self-employment opportunities for low to middle-income customers. In the half year ended September 2019, CIFCL’s assets under management (AUM) grew 23 per cent to Rs 64,409 crore compared to Rs 52,486 crore in the year-ago period.

Its capital adequacy ratio (CAR) in the second quarter of 2019-20 was at 17.09 per cent against the regulatory requirement of 15 per cent. As of September-end, approximately 74 per cent of its portfolio comprised of vehicle loans, 21 percent of loan-against-property to MSME sector, and the balance 5 per cent of affordable home finance and others.