Chennai: Cholamandalam Investment and Finance Co. Ltd will raise 500 crore through convertible preference shares.

The Chennai-based company informed the stock exchange on Monday that the board of directors at a meeting on 26 July had approved a preferential issue of 50 million compulsorily convertible preference shares (CCPS) of 100 each aggregating to 500 crore.

The capital raised will enable the non-banking financial company to fund business growth and augment its capital adequacy ratio.

CCPS are preference shares that include an option for the holder to convert the preferred stock into common shares after a predetermined date.

Cholamandalam’s CCPS will bear a dividend coupon of 1% per annum payable from the date of allotment till the date of conversion into equity shares. The CCPs shall be converted into equity shares at the expiry of 12 months from the date of allotment, or earlier, at the discretion of the company’s board.

The entire CCPS issue will be subscribed by funds advised by the global private equity firm Apax Partners.

The proposed preferential issue is subject to the approval of the shareholders of the company and any other applicable regulatory approvals.

“We believe in the long-term secular growth runway of Indian retail financial services and Cholamandalam is well positioned in this space, with an outstanding management team and exposure to attractive lending segments," said Shashank Singh, managing director and head of Apax’s India office.