Cholamandalam to raise Rs 1,000 cr by selling largest private perp bond

By Divya Patil

Cholamandalam Investment and Finance Co. will raise Rs 1,000 crore ($119 million) through a perpetual bond, the largest such debt sale by an Indian private financier.
 

The note, which doesn’t have a maturity date, is being arranged by Axis Bank Ltd. and carries a coupon of 9.50 per cent, according to people familiar with matter. The AA rated bond can be recalled by the issuer at the end of 10 years, they said, asking not to be identified. 
 

The transaction will give an impetus to the market, where only Rs 890 crore of perpetual bonds have been sold this year by non-bank firms, according to data compiled by Bloomberg. That’s 69 per cent lower from the year-ago period.
 

Few shadow lenders in India are able to issue perpetual bonds due to the higher risk they pose for investors. The issuer isn’t liable to service the debt if the minimum capitalization norm is breached, and must obtain regulatory approval to repay the bonds in the event of a loss. 
 

The issuance is a second offering of riskier debt by the Chennai-based firm in less than a month, and comes as it boosts capital buffers to fund the double-digit credit growth. The non-bank firm’s loans grew 22 per cent in the June quarter from a year ago, and its profit jumped 30 per cent to Rs 940 crore for the period.
 

Cholamandalam last month raised Rs 2000 crore through seven-year bonds, also the country’s largest subordinated issuance by a private shadow lender. Axis Bank was also the sole manager for the deal.