X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Sundaram Finance: Challenges ahead - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jun 10, 2002

    Sundaram Finance: Challenges ahead

    Sundaram Finance (SFL) has reported a steep 12% decline in full year revenues and a 36% drop in fourth quarter topline. However, excluding the amount of Rs 863 m, which was included in the previous year's income on account of a change in method of income recognition, total income in FY02 was higher by 6%. Consequently, financial performance of the company in FY02 is not strictly comparable.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Income from Operations 1,904 1,212 -36.4% 5,271 4,617 -12.4%
    Other Income 29 42 45.1% 54 111 103.2%
    Interest & depreciation 921 797 -13.4% 3,246 3,241 -0.1%
    Net interest income 984 414 -57.9% 2,025 1,376 -32.1%
    Other Expenses 186 148 -20.7% 591 592 0.1%
    Operating Profit 798 267 -66.6% 1,434 784 -45.3%
    Operating Profit Margin (%) 41.9% 22.0%   27.2% 17.0%  
    Provisions and Contingencies 549 130 -76.3% 693 298 -57.0%
    Profit before Tax 277 178 -35.7% 795 597 -25.0%
    Tax (126) 59 - 90 193 114.7%
    Profit after Tax/(Loss) 403 119 -70.5% 705 404 -42.8%
    Net Profit Margin (%) 21.2% 9.8%   13.4% 8.7%  
    No. of Shares (m) 24.0 24.0   24.0 24.0  
    Diluted Earnings per share* 67.2 19.9   29.4 16.8  
    P/E Ratio   6.7     7.9  
    *(annualised)            

    SFL has achieved a growth of 18% in hire purchase and loan disbursements in FY02. Its gross disbursements grew at a CAGR of 20% in the last three years to Rs 12.2 bn. The company has consciously been reducing its exposure to the corporate sector, specifically to plant and machinery financing. Accordingly, leasing disbursements to this segment, which amounted to Rs 1 bn in the previous year declined to Rs 280 m in FY02. Improvement in quality of assets reduced its net NPA ratio to 2.4% of total loan assets from 4% in the previous year.

    During the year, the company's cost to income ratio jumped to 40% from 28% in the previous year, due to higher establishment expenses and less than proportionate decline in interest cost. Its effective tax rate too increased to 32%, as the company provided Rs 181 m on account of deferred tax liability. Non-performing assets provisions, on the other hand, was lower as the company resorted to aggressive write-offs in the previous year, in the wake of the merger of its subsidiaries.

    Among other new initiatives, SFL has entered into an agreement with SBI Life to distribute life insurance products. It has already started offering general insurance products in alliance with Royal and Sun Alliance. The company's home loan subsidiary has also booked advances worth Rs 2 bn. These new ventures are however, unlikely to contribute significantly to the company's profits in the near term.

    At the current market price of Rs 133, Sundaram Finance is trading at a P/E of 8x and price to book value ratio of 0.7x. The company has traded in the average price to book value ratio of 1-1.5x in the last three years. With an aggressive entry of banks into retail financing, NBFC's are facing pressure on their business. SFL's peers including Kotak Mahindra has also reported decline in interest income. Although, NBFC's have expertise in hire purchase financing, their higher cost of funds compared to banks are trimming the growth in earnings. Consequently, it will be a tough task for SFL to improve business volumes in the coming years.

     

     

    Equitymaster requests your view! Post a comment on "Sundaram Finance: Challenges ahead". Click here!

      
     

    More Views on News

    HDFC: Red Flag in Developer Loans (Quarterly Results Update - Detailed)

    Aug 10, 2017

    HDFC starts FY18 on robust loan growth but asset quality slips on increased exposure to developer loans.

    Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds (Quarterly Results Update - Detailed)

    Jun 22, 2017

    Demonetisation led slowdown coupled with shift to stringent bad loan norms keep Shriram Transport Finance on a slow wicket.

    Power Finance Corp: Alignment with RBI Norms Knocks Down FY17 Earnings (Quarterly Results Update - Detailed)

    Jun 14, 2017

    Power Finance Corporation earnings hit by RBI mandated higher provision on state government power generation projects where the recovery continues to be 100%.

    IDFC: Ends FY17 on a Healthy Note (Quarterly Results Update - Detailed)

    May 30, 2017

    IDFC regains its tempo in FY17 post the demerger of the banking business.

    HDFC: Conservative Provisioning tempers down FY17 earnings (Quarterly Results Update - Detailed)

    May 9, 2017

    HDFC ends FY17 on a tepid note as it remains conservative on the asset quality front.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    SUNDARAM FINANCE SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK SUNDARAM FINANCE

    • Track your investment in SUNDARAM FINANCE with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MORE ON SUNDARAM FINANCE

    SUNDARAM FINANCE - MAHINDRA FINANCE COMPARISON

    Compare Company With Charts

    COMPARE SUNDARAM FINANCE WITH

    MARKET STATS