SUNDARAM FINANCE LIMITED
ANNUAL REPORT 2009-2010
Ladies and gentlemen,
It gives me great pleasure to welcome you all to the fifty seventh Annual
General Meeting of your Company. The company's annual report and audited
accounts for the year ended 31st March 2010 have been with you for some
time now and with your permission, I shall take them as read.
Uncertainty continues to cloud the shape and pace of global economic
recovery. Just as the US seemed to be emerging from its worst recession
since the Great Depression, Europe finds itself in the midst of a major
crisis. Private spending in advanced economies continues to be constrained
and inflation remains generally subdued, making it likely, that fiscal and
monetary stimuli in these economies will continue for. an extended period.
Emerging market economies, on the other hand, seem to be significantly
ahead on the recovery path, but some of them are also facing inflationary
pressures. This has prompted central banks in some of these countries to
begin phasing out their accommodative monetary policies.
In India, the economic recovery, which began around the second quarter of
2009-10, has since shown sustained improvement. Industrial recovery has
become more broad-based and is expected to continue in the wake of rising
domestic and external demand. Reversing a nearly yearlong decline, exports
and imports have both grown since November 2009. Flow of credit from both
bank and non-bank sources has picked up and overall business sentiment has
turned distinctively positive. India's GDP growth in 2009-10 has been
estimated at 7.4%, driven by growth in the industrial and services sectors.
The abundance of liquidity in the system ensured that interest rates
remained reasonable for most part. The fiscal deficit for 2009-10 stood at
6.6% of GDP, slightly below the full year's estimate of 6.7%. In the Budget
for 2010-11, the fiscal deficit for FY 2011 has been estimated at 5.5% of
GDP, a reduction of 1.2% from last year's estimate. However, the windfall
mobilisation through the recent 3G auction might further reduce the
deficit. The developments on the inflation front are, however, far from
encouraging. The wholesale price index (WPI) inflation climbed steeply from
1.5% in October 2009 to 10.2% by May 2010.
Your company's hire purchase and loan disbursements at Rs.5834 crores
during the year, registered a significant growth of 29%, over the previous
year's figure of Rs.4540 crores, led by a 51% growth, in unit terms, in the
Medium &, Heavy Commercial Vehicle (M & HCV) segment, against the industry
growth of 33%, resulting in significant market share gains during the year.
Your Company also achieved a strong 25% year on year growth, in unit terms,
in Car Finance. The company's continuing focus on asset quality and its
finely honed credit appraisal and collection skills have ensured that the
portfolio is possibly 'Best in Class'. Gross receivables under management
by the Company, including assets sold or securitised stood at Rs. 10219
crores as of 31 March 2010, as against Rs.9203 crores in the previous year.
The net profit for the year was Rs.201.36 crores (excluding the one-time
profit of Rs.25.39 crores on sale of shares in WABCO-TVS (INDIA) Limited)
as against Rs. 150.73 crores in the previous year, registering a growth of
34%. Gross and net NPA's stood at 1.26% and 0.45% respectively, as against
1.64% and 0.75% in the previous year. As a measure of prudence and with a
view to strengthen the balance sheet, a general provision of 0.40% of
Standard Assets, amounting to Rs.31.62 crores has been made during the
year. The company's net worth stood at Rs.1316.36 crores as on 31 March
2010, while the consolidated net profit and net worth stood at Rs.273.62
crores and Rs.1472.36 crores respectively, as at 31 March, 2010.
I am happy to inform you that the total number of branches has crossed 500,
with a significant number of them in tier 2 and 3 towns. This will ensure
last mile delivery to large numbers of retail customers and represents your
company's continuing commitment to the larger national goal of Financial
The net accretion to public deposits during the year 2009-10, was Rs.154.85
crores, taking the deposits outstanding at the year end to Rs. 1094.91
crores. I thank our depositors, many of whom have been with us for several
decades, for the high degree of confidence reposed in the Company and
assure them of our constant endeavour to maintain the highest standards of
safety, efficiency and personalised service for which your Company is
Your directors are pleased to recommend a final dividend of Rs.4/- per
share, which together with the interim dividend of Rs.6A per share paid in
February 2010, aggregates to a higher dividend of Rs.10/- per share for the
financial year ended 31 March 2010, on the paid-up capital of Rs.55.55
crores. The total payout, including dividend tax of Rs.7.74 crores,
amounted to Rs.63.29 crores.
The current financial year has started off on a strong note. The automotive
sector has posted strong year on year growth, albeit on a low base. Sales
of commercial vehicles, passenger cars and utility vehicles in the first!
quarter have been robust, enabling your Company to register a healthy
growth in disbursements. The off take of commercial vehicles is expected to
remain buoyant in the second quarter as well, driven by improved freight
availability, better freight rates and advancement of purchases, ahead of
the implementation of new emission norms, from October 1, 2010. The strong
growth in the car segment and the momentum that was witnessed in the
previous year is expected to be maintained during the current year, aided
partly by the launch of several new models in recent months, with a few
more to follow. A revival in infrastructure projects across the country
also bodes well, not only for the road transport and construction equipment
sectors, but for the economy as a whole.
GDP growth for the financial year 2010-11 is projected at 8.5%, based on
strong growth in the manufacturing sector, expansion in exports, sharp
upturn in the capital goods sector and a reasonable expectation of a
However, it is to be hoped that the irrational exuberance of a few years
ago, which led to excess capacity creation in the CV segment, is not
repeated. While the infrastructure sector presents great opportunities, it
is ironically one of the key concern areas as well, with the power
situation, in particular, threatening to spoil the growth story.
Uncertainties in terms of global events and volatility in commodity and oil
prices could pose problems for the Indian economy, while inflation
continues to be a worry, domestically. Introduction of the Base Rate and
hardening of the policy rates are likely to exert upward pressure on
SUBSIDIARIES AND JOINT VENTURES:
Your company's subsidiaries and joint ventures have reported good results
for the year under review. Sundaram BNP Paribas Asset Management reported
higher profits of Rs.20.84 crores, against Rs.10.68 crores during the
previous year. Notably, in the mid and small-cap space, the funds of
Sundaram BNP Paribas Mutual Fund outpaced both benchmarks and peer group by
comfortable margins. Sundaram BNP Paribas Home Finance Limited, despite the
challenges posed by the volatility and uncertainty in the operational
environment and stiff competition, managed to turn out a good performance
during the year 2009-10, aided by an upswing in business during the second
half of the year. Royal Sundaram reported a higher net profit of Rs.30.97
crores, against Rs.5.66 crores during the previous year, making this year
its best in its first decade of operations.
The global acquisition of the Fortis Group by BNP Paribas resulted in their
acquiring interest in the Fortis asset management business in India.
Consequently, your Company and BNP Paribas have, after careful
consideration of the available options, amicably agreed to disengage from
the asset management joint venture and for your Company to acquire their
49.9% stake therein. This will, however, have no impact on the other joint
ventures between your Company and the BNP Paribas Group.
LEGISLATIVE AND REGULATORY ISSUES:
I would like to reiterate our long pending demand to RBI for a reduction in
the risk weightage on assets with lower risk profiles, like commercial
vehicles and cars, to differentiate them from other classes of assets which
carry inherently higher risks. I also renew my appeal for a structured
funding mechanism, especially for small and medium Asset Finance Companies,
who have played a vital role in delivering credit to the Road Transport
sector. I would also reiterate our submissions to the Ministry of Finance
to treat asset financing companies on par with banks and housing finance
companies with regard to tax treatment of income recognition and
provisioning in respect of Non-Performing Assets.
On behalf of the Board and on my own behalf, I place on record my sincere
appreciation and gratitude to our customers, depositors, shareholders,
bankers and mutual, funds for their continued support and the confidence
they have reposed in the Company. I record my special appreciation of the
sterling efforts and untiring commitment of the loyal band of employees who
make up Team Sundaram. I thank you for your attention.
Sri S. Viji