Non-banking financial company (NBFC) Sundaram Finance has been able to strike a good balance between growth, asset quality and profitability in the first quarter of FY24, with disbursements recording a growth of 32% while assets under management (AUM) rising 22%. In an exclusive interaction with Sajan C Kumar, company’s MD Rajiv Lochan said he remains focused on extending market share across all asset classes and geographies. As inflation stabilises and the monsoon normalises, he believes that the economic activity would gather momentum, especially with the upcoming festival season. Excerpts:
What all the loan verticals of the company contributed to disbursement growth in first quarter?
In Q1FY24, we have done well across all verticals. More than the disbursement aspect, in the last 12-18 months we have been really focused on driving market share as something we should look at and not only the budget achievement or growth. Growth is not entirely in our control, if the growth grows, it is great, but if the market declines we should still get what we think as the appropriate share. We have been driving the notion of market share which I think is now beginning to take root.
What kind of plans do you have to achieve increased market share?
In different geographies, current versus planned market share will vary, as different asset classes have different portfolio presence in various states. Hence it would not be possible to give an easy answer. If you look at the south market, where we have been traditionally quite strong, our position is high where we have high double digit market share in medium & heavy commercial vehicles (M&HCV) loan segment. We want to hold that position, going forward. Up north, where we are still building our presence, the market share will be a bit lower and we have a target to be achieved, going forward. So, in nutshell, in south, we want to retain the the high double digit market share in M&HCV. In small commercial vehicles, we want to get to double digit market share. In tractors and cars, we want to get to 5% plus market share.
What are your views on growing the assets under management (AUM)?
At the end of Q1FY24, we had a growth of 22%, year-on-year in AUM, partly due to low base and partly driven by the additional disbursement. In Q1FY24, the disbursements recorded a growth of 32% to Rs 6,489 crore as compared to Rs 4,915 crore. The assets under management (AUM) stood at `37,255 crore as against `30,552 crore, up by 22%. If you look at the AUM growth in the previous three years, it has been almost flat. Now, we have re-established the growth trajectory. If you look at the CAGR for last 20 years of the company, it has been around 15-16%. We want to take it bit further and operate at around 16-20%.
Now, almost into mid of second quarter, what is your sense of outlook for FY24?
As second quarter is also monsoon quarter where rains were there in multiple parts of the country, Q2FY24 tends to be somewhat slower compared to first and third quarters. In Q1, there will be spill-over business from the previous fourth quarter. Significantly, Q3 will be a festival season, so things begin to pick up.
And usually Q4 tends to be a strong quarter, but this year with elections round the corner, I think it would not be as robust as in the previous years. Code of conduct and other poll-related limitations are likely to have an impact on the demand scenario.
Have you reached pan-India, in terms of network presence?
Barring Jammu and Kashmir, Uttar Pradesh, north eastern states, Jharkhand and Bihar, we are present everywhere. We are operating in a fairly large geography with lots of runways to penetrate. Even in a place like Andhra Pradesh, where we have been present for the last 65 plus years, there is a lot to do. In general, my view is that, there is a lot to do in places we already operate.
Any equity raising plans?
Our capital adequacy rate is at 21.5% and are adequately capitalised. We went public in 1972 and till date we have not raised equity capital. We have not diluted equity in the last 51 years. Personally, I don’t see any need to raise equity capital at all. On the liability side, we are triple A rated and have good relationships with our set of bankers. So, there are no challenges for us for raising capital on the liability side and more than 50% of our liability comes from the capital market. That means that we are not reliant only on bankers, but have well diversified source of funds. Deposits are growing quite well and we accreted `700 crore plus last year.