Steady Show By Sundaram Fin

While most NBFCs are expected to show a huge drop in profits, it should not come as a surprise that Sundaram Finance has come out with a satisfactory performance for the year ending March 1997. Inspite of the slowdown in the economy and tough business conditions over the last one year, income from operations increased by 25.79 per cent to Rs 391 crore. Net profit increased marginally by 5.76 per cent to Rs 68.67 crore.

Higher other income and an additional amount through the lease equalisation account benefited the company to some extent. Other income increased by 56.79 per cent to Rs 27.23 crore contributing 28.73 per cent to profit before tax(PBT).

 

The company has charged a depreciation net of lease equalisation account of Rs Rs 58.91 crore, up 38 per cent from last years figure of Rs 42.57 crore.

Profit on sale of investments, which was Rs 5.11 crore in 1995-96, has declined to Rs 1.83 crore reflecting the slump in the capital markets.

Tax liability is up 30.5 per cent to Rs 26.1 crore paid at an effective rate of 27.54 per cent.

The company has stuck to its core competence of truck financing, and the indications are that the company continues to be strong in this area. With truck sales doing well last year, Sundaram should be reporting a strong increase in its asset base.

Though the coming year is likely to cause problems for NBFCs, especially after the CRB fiasco, Sundaram Finance has a strong brand equity that may see it through with depositors.

Falling interest rates may also prove to be a problem. Fresh disbursements will have to be made at lower rates while the source of funds will continue to be high-cost deposits. The mutual fund floated by the company during the year managed to garner around Rs 17 crore, and the fund unit continues to report average performance. Given that the company sticks to its core competence, Sundaram faces a good future. However, the market conditions may force it to enter other areas of business in order to maintain spreads.