Shadow lender Cholamandalam to sell largest India perpetual bonds by a non-bank

Cholamandalam Investment and Finance Co., a prominent shadow lender in India, intends to raise up to ₹20 billion ($209 million) through the issuance of perpetual bonds, making it the largest such debt sale by a private entity in the country, according to sources familiar with the matter. Perpetual bonds lack a maturity date but can be called by the issuer after a 10-year period, the individuals stated, declining to be identified as the terms are not yet public.

The company intends to solicit bids for the issuance as early as next week, with the coupon rate and other details yet to be determined. If successful, Cholamandalam's bond sale would match the largest perpetual debt ever sold by an Indian financier, following REC Ltd.'s issuance of ₹20 billion via such a bond in April 2023. Cholamandalam has not yet responded to inquiries seeking comment.

The bond sale will bolster India's perpetual bond market, where issuances by non-bank firms have plummeted by 90% to ₹4.6 billion so far this year, according to Bloomberg data. Due to the high risk associated with these bonds, few banks and shadow lenders in India can issue them. Under India's regulations, a company is not obligated to service the debt if its capitalization falls below the minimum required and must seek regulatory approval to repay the bonds in the event of a loss.

With a market capitalization of ₹1.6 trillion, Cholamandalam is among the top five non-bank finance companies in India. The planned perpetual bond sale will enable the Chennai-based firm to bolster its capital buffer and maintain its double-digit credit growth. The company's loans expanded by 22% in the three months to June compared to the previous year, and its profit surged by 46% to ₹16.5 billion.