The International Finance Corporation (IFC) has reportedly proposed to invest around $75million in first rupee-denominated offshore bond (Masala bond) of Cholamandalam Investment and Finance Company (CIFCL).
IFC would play a catalytic anchor role in the proposed $125-200million bond placement by the company. Its support should enable the company to launch its first off-shore local currency bond for international investors and open the platform to more such solid, reputable but below international investment grade issuers to access the market.
This is positive news for the company as it would improve its capital position to provide CIFCL the next leg of growth. The masala bond issuance with IFC’s support will open an entirely new funding source (foreign investors) for the company, which it can tap into further its diversification plans.
Cholamandalam Finance (CIFC) is well placed among NBFCs to deliver healthy growth with improving return ratios and asset quality likely remaining under control. Strong underlying growth in vehicle finance, pickup in the home equity segment, and momentum in new products are likely to drive AUM growth in the medium term.
We estimate ROA to expand from 4.8% in FY17 to 5.5% in FY20E. Expansion in ROA and ROE would drive 23% EPS CAGR through FY20E