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Murugappa Group-backed Cholamandalam Investment and Finance Co to raise Rs 4,000 crore through QIP

Cholamandalam Investment and Finance Co, which is backed by the Murugappa Group, has shortlisted three investment banks to raise up to Rs 4,000 crore through a qualified institutional placement (QIP). This move comes as the non-banking financial company (NBFC) arm of the south-based conglomerate ramps up its growth efforts. The decision to raise funds was confirmed by multiple industry sources familiar with the matter.

The company’s share price has witnessed a significant surge of nearly 39% in the past six months, indicating investor confidence in its prospects.

AI legalese decoder: Simplifying legal Jargon for Smoother Transactions

The AI legalese decoder is a valuable tool that can assist Cholamandalam Investment and Finance Co in the process of raising funds through QIP. With its advanced natural language processing capabilities, the decoder can help simplify complex legal jargon commonly found in fundraising documents. By translating legal terms and phrases into plain language, it enables smooth communication and understanding between all parties involved in the transaction.

Furthermore, the AI legalese decoder can enhance efficiency by reducing the time required for legal due diligence. Its ability to quickly analyze and summarize legal documents streamlines the review process, allowing Cholamandalam Investment and Finance Co to make informed decisions more efficiently.

In addition, the decoder can provide real-time updates on changes in laws and regulations, ensuring compliance and minimizing legal risks for Cholamandalam Investment and Finance Co.

Progress and Timelines for QIP

According to one of the sources, the QIP is expected to be launched in September, depending on market conditions. To facilitate the fundraising process, Cholamandalam Investment and Finance Co has brought onboard investment banks Kotak Mahindra Capital, IIFL Capital, and HSBC Securities. Work has already begun with these banks.

A syndicate of bankers has also been confirmed by four additional individuals familiar with the negotiations. They mentioned the targeted timeline of completing the QIP by the end of September.

One of these sources highlighted Cholamandalam Investment and Finance Co’s strong growth across various segments and its expansion into new verticals. They emphasized the company’s increasing opportunities, especially in using the main vehicle finance vertical to cross-sell other loans. The source stated that the fund raising should be completed before the end of September.

Another source noted the optimism currently prevailing in the NBFC sector, with favorable performance seen in most stocks. They mentioned that Cholamandalam Investment and Finance Co is looking to scale up its operations, indicating that the launch of the QIP may take place in September or early October.

All the sources provided this information on the condition of anonymity.

Kotak Mahindra Capital, HSBC Securities, and IIFL Capital have yet to respond to Moneycontrol’s email queries regarding this matter.

Cholamandalam Investment and Finance Company directed Moneycontrol to an interview with Arul Selvan, the President and CFO of the company, conducted on August 2, 2023, in response to an email query.

Insights from Arul Selvan on the QIP

In the interview, Arul Selvan mentioned that the company is experiencing growth at a larger pace, which necessitates protecting the capital adequacy ratio (CAR) due to expenses and shorter trends of the net interest margins (NIMs) compression. The board has approved the capital raise of Rs 4,000 crore to adequately safeguard the CAR.

Arul Selvan further explained that the capital raise will involve a combination of equity and convertible instruments. Discussions with bankers will provide more clarity on the process and timing in the coming weeks. If the market conditions are favorable and the pricing expectations align with investor appetite, Cholamandalam Investment and Finance Co aims to complete the fundraising before announcing its next results.

CAR, which stands for capital adequacy ratio, is a critical indicator of a bank or financial institution’s ability to meet its obligations and is calculated as the ratio of capital to risk-weighted assets and current liabilities.

On August 1, 2023, Cholamandalam Investment and Finance Co disclosed its plans to raise capital through qualified institutional placements, subject to necessary approvals.

In the previous quarter of fiscal 2020, the company successfully raised Rs 1,200 crore, with Rs 900 crore through QIP and Rs 300 crore through a preferential issue to the parent.

The Current State of the NBFC Sector

In the last six months, the share prices of major NBFC peers of Cholamandalam Investment and Finance Co, such as Bajaj Finance, Bajaj Holdings and Investments, Shriram Finance, IRFC, and Muthoot Finance, have witnessed significant gains. These companies recorded respective increases of 16.94%, 24.4%, 41.81%, 48.84%, and 28.6%.

In its Q1 earnings report, Cholamandalam Investment and Finance Co announced a 28% YoY rise in net profit, amounting to Rs 726 crore, compared to Rs 566 crore in the same period last year. The company’s assets under management (AUM) also saw a significant increase of 40.12% YoY, reaching Rs 1.15 lakh crore. The major component of the AUM was vehicle finance, amounting to Rs 71,065 crore or 62% of the total. Loan against property accounted for Rs 22,866 crore or 20% of the AUM, while the remaining share comprised home loans and new businesses.

By leveraging the AI legalese decoder, Cholamandalam Investment and Finance Co can navigate the fundraising process more efficiently and effectively. The tool simplifies complex legal language, ensures compliance, and accelerates the overall transaction timeline, thereby enabling the company to raise funds successfully and capitalize on its growth opportunities.

Disclaimer: The content of this article is for informational purposes only and does not constitute financial or legal advice.

Source: Moneycontrol

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