Cholamandalam Investment and Finance Company Limited has successfully allotted unsecured subordinated non-convertible securities aggregating ₹1000 crore. The issuance includes a substantial ₹500 crore green shoe option, reinforcing its long-term funding strategy via private placement.
Reader Takeaway: Capital base boosted by ₹1000cr NCDs; interest servicing costs to be monitored.
What just happened (today’s filing)
Cholamandalam Investment and Finance Company Limited (Chola Finance) confirmed the allotment of ₹1000 crore worth of unsecured subordinated non-convertible securities on February 23, 2026. The company also exercised a ₹500 crore green shoe option, increasing the total capital raised to ₹1500 crore.
These securities carry a resolveed coupon rate of 8.66% per annum and have a tenure of 7 years, maturing on February 23, 2033. The allotment was conducted via private placement on the NSE Electronic Bond Platform (EBP).
Why this matters
This capital infusion significantly augments Chola Finance’s capital base, providing substantial long-term funding. The 7-year tenure offers predictable financing costs for a significant portion of its capital structure, supporting its ongoing growth and business expansion plans.
The backstory (grounded)
As a prominent Non-Banking Financial Company (NBFC) and a key entity within the Murugappa Group, Chola Finance has a well-established practice of raising capital to fuel its operations. The company is a leading provider of vehicle finance, home loans, and other credit products, requiring robust capitalisation to support its expanding Assets Under Management (AUM).
NBFCs routinely access debt markets, including issuing Non-Convertible Debentures (NCDs), to fund their lfinishing activities. Chola Finance has a history of such issuances to manage its growth trajectory and regulatory capital requirements.
What modifys now
- Enhanced Capital Base: The ₹1000 crore issuance (potentially ₹1500 crore with the green shoe) directly strengthens the company’s equity and capital adequacy ratios.
- Long-Term Funding Secured: The 7-year maturity provides stable funding for a considerable period, reducing near-term refinancing risks for this tranche.
- Diversified Funding Sources: Continues Chola Finance’s strategy of leveraging debt markets for growth capital.
Risks to watch
As explicitly mentioned in the company’s filing, a key financial risk to monitor is any delay or default in interest or principal payments exceeding three months from the due date.
Peer comparison
Peer NBFCs like Bajaj Finance and Shriram Finance frequently raise funds through NCDs and similar debt instruments to support their operations and growth. These issuances typically vary in coupon rates and tenure based on market conditions and the issuer’s credit profile.
NBFC bonds, in general, offer interest rates that are often higher than bank resolveed deposits, providing attractive yields for investors, with rates influenced by credit ratings and market dynamics.
Context metrics (time-bound)
- The company reported a Capital Adequacy Ratio (CAR) of 19.75% as of March 31, 2025, well above the regulatory minimum of 15%.
- Overall gearing stood at 7.7x as of March 31, 2025, indicating a significant reliance on debt for its capital structure.
- Assets Under Management (AUM) have revealn strong year-on-year growth, reaching approximately ₹1.99 lakh crore by March 31, 2025.
What to track next
- Performance of Debt Instruments: Investors will monitor the timely servicing of interest payments and the principal repayment on maturity.
- Capital Deployment: How effectively the newly raised capital is deployed into income-generating assets and its contribution to future profitability.
- Future Funding Needs: Whether further capital raises, equity or debt, will be required to meet projected growth.
- Interest Rate Environment: The impact of prevailing interest rates on borrowing costs for future issuances and overall profitability.
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