Should You Invest in Cholamandalam Finance NCDs? A Comprehensive Review


When it comes to fixed-income investments, non-banking finance companies (NBFCs) have been offering enticing options for investors seeking stable returns. Cholamandalam Investment and Finance is one such NBFC that is back with a new non-convertible debenture (NCD) offer targeted at retail investors. In this article, we will provide a comprehensive review of Cholamandalam’s NCD offer, analyzing its key features, safety ratings, attractive coupons, and the overall investment landscape. By the end, you will have the information you need to make an informed investment decision. Let’s explore Should You Invest in Cholamandalam Finance NCDs? A Comprehensive Review.

Understanding Cholamandalam Investment and Finance

Cholamandalam Investment and Finance is primarily involved in vehicle financing, making it a key player in this segment. However, the company also operates in other lending verticals, including loan against property (LAP), home loans, consumer and small enterprise loans, secured business and personal loans, and small and medium enterprises loans. With a well-diversified client base, Cholamandalam has demonstrated robust business metrics, including healthy asset under management (AUM) growth and improving asset quality.

The NCD Offer: Safety Ratings and Attractive Coupons

Cholamandalam’s NCD offer comes with high safety ratings, alleviating concerns about the repayment of principal and interest. Both India Ratings and ICRA have rated the issue as AA+ (stable), indicating a low credit risk. This is an important factor to consider when evaluating fixed-income investments.

The NCD offer is available in three tenors: 24 months, 36 months, and 60 months. For each of these tenors, investors have the choice between annual interest payouts or cumulative options. The coupons offered by Cholamandalam range from 8.4% to 8.6%, depending on the tenor and payout option. These coupons are reasonably attractive, especially when compared to the prevailing yields in the corporate bond market.

Here is a breakdown of the effective yields for each tenor and payout option:

  • 24 months with annual payout: 8.39% effective yield
  • 36 months with annual payout: 8.49% effective yield
  • 60 months with annual payout: 8.59% effective yield

Investors looking for regular cashflows can opt for the annual interest payout options, while those who can reinvest the interest can choose the cumulative option. It’s worth noting that starting from April 1, 2023, tax is deducted at source on coupon payments in NCDs, and all interest payouts are taxed at your slab.

Cholamandalam’s Robust Financials

To assess the viability of an investment, it’s crucial to evaluate the financial health of the issuing company. Cholamandalam has demonstrated strong performance in several key areas:

AUM Growth and Disbursements

As of September 2023, Cholamandalam’s AUM registered an impressive increase of 42% year-on-year, reaching Rs 124,246 crore. This robust growth can be attributed to the company’s diversified lending portfolio and its ability to attract a wide range of borrowers.

Furthermore, Cholamandalam’s disbursals grew by 49% in the first half of FY2024 compared to the same period in the previous year, amounting to Rs 41,557 crore. This indicates a healthy demand for the company’s financial products and services.

Capital Adequacy and Net Interest Margin

Maintaining an adequate level of capital is crucial for any financial institution to sustain its operations and absorb potential losses. Cholamandalam boasts a reasonable capital adequacy ratio of 16.62% as of September 2023. This indicates that the company has sufficient capital to meet its financial obligations and continue its growth trajectory.

Additionally, Cholamandalam’s net interest margin (NIM) stood at a healthy 7.4% in the first half of FY24, slightly lower than the 7.8% recorded in the previous year. A robust NIM demonstrates the company’s ability to generate profits from its core lending activities.

Asset Quality

One of the critical factors to consider when investing in an NBFC is the quality of its assets. Cholamandalam has been steadily improving its asset quality, as evidenced by the decline in gross non-performing assets (GNPA) and net non-performing assets (NNPA).

As of September 2023, Cholamandalam’s GNPA stood at 4.07%, down from 5.84% in the same period the previous year. Similarly, the NNPA decreased to 2.59% from 4.07% over the same period. These improvements reflect the company’s proactive measures to manage credit risk and maintain a healthy loan portfolio.

Evaluating the Investment Opportunity

Considering the robust financial performance of Cholamandalam and the attractive coupons offered in the NCDs, it may be an opportune time for investors to explore this investment opportunity. However, it’s essential to consider a few factors before making a decision:

Interest Rate Environment

The interest rate environment plays a significant role in determining the attractiveness of fixed-income investments. Currently, interest rates are at elevated levels, which provides an opportunity to secure higher returns. However, it’s important to note that interest rates can be influenced by various factors, including inflation, government policies, and global economic conditions. Investors should carefully monitor these factors to assess the sustainability of the current interest rate environment.

Risk Appetite and Investment Horizon

Every investment carries a certain level of risk, and investors must align their risk appetite with their investment choices. While Cholamandalam’s NCDs come with high safety ratings, it’s important to evaluate your risk tolerance and investment horizon before committing funds. NCDs typically have a fixed maturity date, and premature withdrawal may result in penalties or loss of interest.

Diversification and Asset Allocation

Diversification is a key principle of investment management. Investors should consider allocating their funds across various asset classes to mitigate risk and maximize returns. While Cholamandalam’s NCDs may offer attractive coupons, it’s important to assess how they fit into your overall investment portfolio and ensure that you maintain a well-diversified asset allocation strategy.


Cholamandalam Finance’s NCD offer presents an attractive investment opportunity for retail investors seeking stable returns in the current interest rate environment. The company’s robust financial performance, high safety ratings, and reasonably attractive coupons make it a compelling option. However, it’s crucial to evaluate your risk appetite, investment horizon, and overall asset allocation strategy before making an investment decision. By carefully considering these factors, you can make an informed choice and potentially benefit from the stability and returns offered by Cholamandalam’s NCDs.

Disclaimer: The information provided in this article is for informational purposes only and should not be considered as investment advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.

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