Sundaram Finance: Focus remains on auto financing

Prabhudas Lilladher | Feb. 7, 2014, midnight

Focus remains on auto financing; desire to increase used portfolio: SUF’s focus remains on Auto financing business, but having said that HFCs & other business focus have been very independent. In products, SUF increased focus on tractor (yields of 19-20%) and expect to take used vehicle financing share to 25% of loan book from 13% currently as they believe the as used vehicle financing perceived by comparatively lower risk than new vehicle financing and it will provide stability to loan book. SUF is targeting FY15 loan growth of 10-12% YoY and grew by 6% YoY in H1FY15, but expects AUM growth to remain flattish in FY15 over FY14.

- Asset quality pristine, to remain under control on move to 90day recognition:GNPA were at 1.2% as of Q2FY15 which is quite low compared to peers and SUF attributes pristine asset quality to the unique business model they follow where person who sources business is also responsible for collections and monitoring leading to responsible lending and has linked compensation. Credit evaluating process also remains in-house and market intelligence data is gathered to flag erratic movements in exposure segments. SUF is currently at 120days of NPA recognition which is much ahead of RBI’s timeline of 120days recognition by FY17. SUF is likely to move to 90days recognition by FY16 which is expected to increase NPAs by 1-1.5% over existing levels but then should improve over next two years.

Auto industry undergoing immense changes:SUF is witnessing immense changes in the Auto industry with newer products being introduced. It sees Midsized CVs being phased out over time as OEMs have been introducing higher tonnage vehicles. Higher tonnage (HCV) will be used for zone to zone use or city to city transportation, but LCVs & ICVs (7.5-11 tonner) will be used for last mile connectivity and will replace MCVs. Also within the MCV space fleet operators are upgrading to higher tonnage vehicle.

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