Cholamandalam Plans Record ₹20 Billion Perpetual Bond Sale

NEW DELHI — Cholamandalam Investment and Finance Co., one of India’s major shadow lenders, is planning to raise up to ₹20 billion ($209 million) through the issuance of perpetual bonds, according to people familiar with the matter. If completed, the transaction will mark the largest perpetual debt sale by a private financier in the country.

The company plans to seek bids for the issuance as early as next week, sources stated, adding that the coupon rate and other deal details are yet to be finalized. The terms indicate that the perpetual bonds do not have a maturity date and are callable by the issuer after 10 years.

A successful completion would match the largest ever perpetual debt sold by an Indian financier, a milestone previously set by state-run REC Ltd. when it raised ₹20 billion via a similar bond in April 2023. Cholamandalam did not immediately respond to emails and phone calls seeking comment on the planned issuance.

The proposed bond sale arrives at a time when India's market for perpetual bonds has seen a significant slowdown. Issuances by non-bank firms have slumped by 90 percent to ₹4.6 billion so far this year, according to market data.

Perpetual debt issuances remain rare among Indian banks and shadow lenders due to the elevated risk profile for investors. Regulatory guidelines in India dictate that a company is not liable to service the debt if its capitalization drops below the minimum required threshold. Furthermore, firms must secure regulatory approval to repay these bonds in the event of a loss.

Chennai-headquartered Cholamandalam sits among the top five non-bank finance companies in India, boasting a market capitalization of ₹1.6 trillion. The capital raised from the planned perpetual bond sale is intended to boost the firm's capital buffer, supporting its ongoing double-digit credit growth. Recent financial performance indicates robust expansion, with the company's loans growing 22 percent in the three months leading up to June compared to the previous year, while net profit jumped 46 percent to ₹16.5 billion.

"Cholamandalam's move to raise capital through perpetual bonds highlights the strong credit demand and financial health of leading non-banking financial companies in India. While perpetual bonds carry higher risks for investors due to regulatory conditions around capitalization and loss-absorption, a successful issuance of this scale will significantly bolster the company's capital buffer and support its sustained loan growth in a recovering debt market." — Dr. Shishir Gupta, Founder & CEO, StartupLanes