Chola Investment launches Rs 4,000-crore QIP, Jefferies says ‘slightly EPS dilutive’

The floor price for Cholamandalam Investment’s QIP is set at a nearly 2 percent discount to Thursday’s closing price.

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Shares of Cholamandalam Investment and Finance Company opened a percent higher on September 29 after the company floated a Rs 4,000-crore qualified institutional placement (QIP) issue to raise funds. However, the stock erased early gains and was trading flat at 10:30 am.

The stock was quoting at Rs 1,216.55 on the NSE, lower by 0.27 percent from previous close.

Brokerage firm Jefferies sees the capital raise as 7-9 percent accretive for Chola’s book value, even though it may be slightly EPS (earnings-per-stock) dilutive. Moreover, the brokerage also believes that the return on investment (RoE) for Cholamandalam may fall marginally to 20-21 percent over FY24-25 in the aftermath of the fund raise.

Moneycontrol also reported citing sources that the QIP will be split into an equity component of Rs 2,000 crore and Rs 2,000 crore in Compulsory Convertible Debentures (CCD).

The floor price for the QIP is set at Rs 1,200.51 per share, which reflects a nearly 2 percent discount to Thursday’s closing price of Rs 1,219.80. The company, at its discretion, may offer a discount of not more than 5 percent on the floor price.

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The company’s board will hold another meeting on October 4 to consider the issue price.

On August 5, Moneycontrol was the first to report that Cholamandalam Investment was planning to launch a QIP in September to raise upto Rs 4,000 crore and had picked 3 investment banks as advisors for the proposed deal.

Also Read | Cholamandalam Investment launches Rs 4,000-crore QIP

The company reported a 28 percent year-on-year rise in net profit in the June quarter to Rs 726 crore as against  Rs 566 crore in the year-ago period. It’s assets under management (AUM) also spiked 40.12 percent on-year to Rs 1.15 lakh crore.

On September 29, shares of Chola Investment settled nearly 2 percent higher at Rs 1,129.80 on the NSE.

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