When the managing director of Sundaram Finance Limited, the Chennai based NBFC and the leading player in the commercial vehicle and car finance business, TT Srinivasaraghavan says, ?I believe in the India dream,? you have to take him seriously. His company has reported a net profit of Rs 150.73 crore for the year ended March 31, 2009. In a year when the commercial vehicle market crumbled spectacularly, Sundaram Finance?s income from operations crossed Rs1,000 crore.
The disbursements for the year were Rs 4,540 crore. Capital adequacy at 14.65 % was well above the statutory requirement of 12%. Net NPA stood at 0.75% as against 0.49% in the previous year. The company opened 24 new branches during the year, taking the branch network to over 450.
Commenting on the company?s performance, Srinivasaraghavan said, ?It has been a difficult year for the global economy, which in turn has had a significant impact on the Indian economy, especially the auto sector. Our philosophy over the years has been ?Growth with Quality?. What is heartening is that we have improved our market share in all key areas of our business and our asset quality remains the best in the industry, as evidenced by the numbers.?
How did they do it when finance companies globally have bitten the dust? ?My provisioning has gone up. It is 0.75. We would have been happy if it had been only 0.5. But we recalibrated our liability baskets and so we are ok,? is Srinivasaraghavan?s rather terse reply. He explains, ?We don?t outsource any part of our business. We examine every loan we give. A representative from our company goes to every customer. A concept like KYC (know your customer) that has become very popular now, is something we have known for 55 years of our existence. We also stand by our customer during good times and bad times.? For example, when vehicle manufacturer Ashok Leyland does not pay its transporters for three months, Sundaram Finance doesn?t expect its customer to be making regular installment payments. ?If triple A companies delay payments, how will the transporter pay up? We go to extreme steps like repossession only if we know there is willful default,? he says.
There are signs of cautious optimism emerging among many South Indian businessmen. In fact R Thyagarajan, chairman of the Rs 4,000 crore Shriram group of companies?which among other things runs one of the country?s largest chit fund companies, a finance company for used trucks and a consumer finance business?says he has not really seen the meltdown affecting their businesses: ?We collect Rs 250 crore in chit funds each month. These numbers haven?t come down at all. In consumer finance, we deal largely with SMEs. Many of our customers are shop and small restaurant owners. We have had no issues with installment dues.?
South Indian businessmen are by their very nature cautious. They are not given to exuberant enthusiasm. But most people one has spoken to are seeing some silver lining. Those who have well-diversified businesses and are not entirely dependent on the export markets of the US and Europe have not felt the pinch so much. Among SMEs, forging and machine tool units have felt orders dry up. Although the commercial vehicle market is not expected to improve any time soon, the fact that the car and two wheeler markets have picked up more than expected has come as a relief. The auto component manufacturers who had a grueling few months last year are seeing signs of recovery, although they are reluctant to admit this, true to their conservative nature.
Take the case of Sundram Fasteners, the country?s largest manufacturer of high tensile fasteners. It became the dedicated supplier of radiator caps to General Motors in 1993. It was the first Asian company to become a dedicated supplier to the now bankrupt auto giant. But how things change. Today Sundram Fasteners can survive quite well without this order. A press release from the company says, ?The sales to GM do not contribute a sizeable portion of its overall business, so GM?s bankruptcy will not affect the company?s performance.? In a difficult year, gross profit before interest depreciation and provision for taxation was at Rs 163.78 crore on a turnover of Rs 1,265.63 crore. The previous year, the turnover was Rs 1,207.76 crore and gross profit was Rs 150.58 crore. The net profit has come down steeply to 17.4 crore compared to Rs 69.48 crore. Company sources say that growth may not be great this year but it will certainly be moderate and profits better.
There are pockets of misery in the South. Textiles and some parts of IT business have suffered more than others. But business is learning to live with the downturn and deal with it. Says Sundaram Finance?s Srinivasaraghavan on the outlook for 2009-10: ?It remains muted and we don?t see any significant change in the market scenario for at least another 3-6 months. We have to wait for policy directions from the government, which will hopefully emerge when the budget is presented. Our hope is that things will start improving from the third (October-December 2009) quarter this year.?