Cholamandalam Investment and Finance is set to raise ₹2,000 crore through a perpetual bond sale, the largest by a private lender. This capital is intended to support the company's 23% asset growth. Investors should be aware of the specific risks tied to perpetual bonds, which have no fixed maturity date and are subject to strict regulatory conditions.
Cholamandalam Investment and Finance Co. (CIFCL) has announced plans to raise up to ₹2,000 crore through the issuance of perpetual bonds. This move represents a significant milestone for the non-banking financial company (NBFC), as it would be the largest debt issuance of this type by any private lender in India. The company intends to use this capital to strengthen its balance sheet and support its ongoing credit growth.
The demand for credit has been strong for the firm, with its Assets Under Management (AUM) growing by 23% year-on-year to reach ₹2,54,392 crore as of June 30, 2026. This expansion highlights the company's aggressive strategy in the lending space, supported by a robust financial performance. In its most recent quarterly results for the period ending June 30, 2026, the company reported a consolidated net profit of ₹1,656 crore, reflecting a 46% increase compared to the previous year.
Perpetual bonds differ from standard loans because they do not have a fixed maturity date. Instead, they essentially stay on the company's books indefinitely unless the company exercises a call option to repay the debt. For this issuance, the company is expected to include a call option that allows it to redeem the bonds after a decade. While these instruments help companies boost their capital base without diluting equity, they carry distinct characteristics that investors should note.
Regulatory authorities in India maintain strict rules regarding perpetual debt to ensure financial stability. Companies are required to meet specific capitalization levels and obtain necessary approvals, especially if the company incurs losses, which can affect the repayment of interest. Because these bonds are considered subordinated debt, they rank lower than other forms of debt in the event of liquidation, which is why they are considered a higher-risk investment compared to standard secured bonds.
The market for perpetual bonds by non-bank finance companies has been relatively quiet this year, reflecting a cautious environment among investors. Cholamandalam's decision to enter this space with a large issuance indicates its intent to secure long-term capital for its lending operations. The company’s stock, with a market capitalization of approximately ₹1.55 lakh crore, has been trading near ₹1,838. The final interest rate, or coupon, for these bonds will be determined based on market conditions during the bidding process, which is expected to begin shortly. Investors will likely watch for the final coupon rate and how the company manages the interest costs associated with this long-term capital.