Cholamandalam Investment to raise Rs 315 cr from IFC

Cholamandalam Investment and Finance Company (Chola Invest), the non-banking financial company (NBFC) of the Murugappa Group, plans to raise Rs 315 crore (about $50 million) from the International Finance Corporation (IFC).

The money will be infused in the form of a Tier-II debt investment by subscribing to unsecured non-convertible debentures to be issued by the company.

Chola Invest is primarily focused in the rural and semi-urban sector with 90 per cent presence across Tier-III and Tier-IV towns. It has a loan portfolio of approximately Rs 22,000 crore. The core business segments include vehicle finance, home equity loans, corporate finance, stock broking and distribution of financial products.

Chola Invest is backed by PE funds including Norwest Venture Partners, Creador Capital, Multiples Alternate Asset Management, Amansa Capital Private Limited, Aquarius Investments and IFC.  The proposed investment comes at a time when there is significant stress in the economy, impacting the commercial vehicle sector. The investment will provide capital support to Chola Invest and help the company diversify its sources of funding and scale up its operations in several low-income states, IFC said.

IFC, which is already an equity investor in Chola, said its continued support to the company will reinforce the sustainability of financing micro, small & medium enterprises (MSMEs) in low-income states to other market players. Besides, it will also allow Chola to meet its funding requirements from a diversified source and help reduce reliance on bank borrowings.

During the third quarter, the company reported a profit of Rs 92 crore against Rs 81 crore reported in the corresponding year-ago quarter, an increase of 13 per cent. Total income was at Rs 844 crore compared to Rs 666 crore in the third quarter of FY13, registering a growth of 27 per cent.

Vellayan Subbiah, managing director at Chola Invest had recently said that vehicle finance would be under pressure since the supply side was affected. At the same time, home equity reported strong growth and SME also helped the company during the third quarter. He noted the third-quarter numbers were helped by diversification.

During the quarter, the disbursements in vehicle finance were flat while those in home equity loans grew by 31 per cent compared to the same period last year.

The company disbursed Rs 2,587 crore in vehicle finance against Rs 2,574 crore in the third quarter of FY13 and disbursed Rs 688 crore in home equity loans against Rs 525 crore. Disbursements from new businesses were Rs 61 crore for the quarter. The aggregate disbursements of the company for the quarter are Rs 3,336 crore against Rs 3,113 crore in the third quarter of FY13, registering a growth of seven per cent.