Key takeaways of the meet

Disbursement of the company for the year 2012-13 grew by 6%yoy to Rs 9991 crore. Growth in disbursal for the fiscal 2012-13 came even while the sales of M&HCV for the same period de-grew by sharp 23%yoy. Given SIAM's forecast of 6-8% growth for all categories of vehicle and 1-3% growth for M&HCV vehicles in 2013-14, the company expects its disbursal to grow at a modest pace in the current financial year. The growth in disbursal will be at best in single digit for 2013-14 as a whole. Disbursement in Q1FY14 grew by 15%yoy.

The company consistently believes that growth should be accompanied in equal measures by quality and profitability.

Globally 1/3^rd of OEM sales is by captive financing. In Indian that is not up to that level and there is enough room for players such Sundaram Finance in an expanding pie, despite recent temporary aberration.

The company has increased its market share in the M&HCV segment. In a subdued market, increase in market share was possible as the company has gone to fill the vacuum allowed by the competing players. Typically the aggressive competing players shift their focus on collection giving a pause for disbursal when they are stretched by dip in portfolio quality. Since the company is focused on strict credit acceptance norms always, it could fill the space vacated by the players picking up good clients.

The company's asset quality continues to be best in the industry given its continued focus on strict credit acceptance norms and superior collection skills.

Currently there is overall stress in the CV market. There is surplus capacity in the road transportation fleet. Moreover cash flow is under strain or lengthened for fleet operators. Though agricultural output can help, the pressure of surplus capacity continues to put pressure on recovery in industrial output. The current purchases are made with lot of caution and induced by discounts offered by CV OEMs compared to mad rush in earlier down cycle in 1990's. Despite this the company's portfolio is doing well. Some delay in payment & increase in delinquency but nothing is alarming.

RBI's draft guidelines (based on the Usha Thorat Committee Report on Issues and Concerns in NBFC Sector, released on Dec 2012) propose/decided to make the asset classification and provisioning norms (including asset provisioning norms) of all registered NBFCs irrespective of size, similar to that of Banks in a phased manner. The same will be implemented in phases i.e. a 120 day norm (from current 180 days) shall be applied from April 01, 2014 to March 31, 2015 and a 90 day norm thereafter. Further, it is proposed to raise the provisioning for standard assets from 0.25% to 0.40% of the outstanding amount w.e.f March 31, 2014 for all NBFCs.

In view of imminent tightening of regulations, the company has made a provision of Rs 15.81 crore on assets whose installments are overdue for 120 days and above in 2012-13. Further, the company foresees emerging stress on commercial vehicle operators, occasioned by the difficult economic environment and has a measure of prudence, made an additional provision of Rs 20.91 crore during the year. Resultant to more stringent provisions made by the company, the Gross NPA and Net NPA as at March 31, 2013 stood at 1.04% and 0.45% respectively. If things ease out and CV segment does well at-least in second half of the year, no further provisioning will be required.

The company has switched to 120 days norm effective March 2013 and with staffs are adequately informed to follow up the collections.

Net accretion to public deposits during the year 2012-13 was Rs 216.15 crore, highest ever in a single financial year in the history of the company. Thus the deposit outstanding at the year end March 31, 2013 was Rs 1476.99 crore.

The average tenure of the loan has increased from 29 months to 41 months.

The company's dividend pay policy is to be 22-25%, considering the dividend distribution tax. The company maintained that in 2012-13 as well.

Investment in Techtran Polylenses has come into the books of the company with the merger of Sundaram Financial Services (SFS) with the company. SFS has invested in Techtran Polylenses, which is listed in BSE. The company has no intention of holding its investment in the company and at appropriate time will divest its stake in Techtran Polylenses.

Higher NIM is largely due to combination of factors i.e. High yielding portfolio such as tractors etc., cost efficient funds and control on costs.

Of the loan book about 50-55% is CV, 30% is passenger cars & utility vehicles, 6% construction equipment and balance are tractors. Of the total CV portfolio about 15-17% will be of used CV.

The recent RBI restriction on issue of NCD for NBFC is amended to remove the cap of 2 issues a year. Now the board of NBFC can decide on number of issues.

Diminution in value of investment amounting Rs 26.63 crore in 2012-13 in Sundaram BNP Paribas Fund Services (SBPFS), a subsidiary company jointly promoted with BNP Paribas Securities Services, France is largely due to delay in commencement of business by SBPFS. The delay in Commencement of business by SBPFS is largely due more than anticipated time to transfer of information/data from existing RNT agents i.e. CAMS and Karvy in case of Sundaram Mutual Fund. Now SBPFS armed with sophisticated software and two accounts of Sundaram Mutual and Fortis Mutual has commenced business. SBPFS's capability to offer value added services such as Fund Accounting Services etc are expected to bring in more AMCs to its fold. The company is talking to another 2-3 mutual funds for business.

PAT of Associate Companies – Rs 2 crore at Axles India –; Rs 140 crore in Turbo Energy; RS 3.75 crore in Sundaram Dynacast, a loss of Rs 63 lakh in Transenergy; a loss of Rs 9.84 crore and Rs 4.43 crore in Flometallic India and Sundaram Hydraulics. Flometallic and Sundaram Hydraulics have commenced operations recently and has to achieve scale and size and once that is achieved they are expected to earn profits.