The looming trade wars and growth uncertainties in their wake have induced city-based Sundaram Finance Ltd., a non-banking finance company, to focus on newer and growing opportunity areas such as construction, light commercial vehicle (LCVs) and tractors.
Indicating this at the annual general body meeting of the shareholders here on Friday, chairman S. Viji said that the company took note of assorted developments within and outside the country before drawing up its plan for the year. Striking a note of caution, Mr. Viji said that global developments, notably the looming trade wars, could add a layer of uncertainty to economic growth. “Diesel prices continue to remain stubbornly high. Coupled with higher interest rates, these could prove a dampener from the point of view of the transport operator’s viability, and, consequently, on commercial vehicle off-take. With inflation numbers trending upwards and liquidity tightening, interest rates have already shown an upward bias in the first quarter of the current financial year. The RBI, for the first time in almost two years, raised the policy rate by 25 basis points in June this year. It is widely predicted that further increases are likely in the coming months,” he said.
While concentrating on its core markets and product segments, he saw significant opportunities for SFL in the rapidly growing construction equipment segment, as also the LCV and tractor segments. “Rising interest rates and intensifying competition are likely to exert pressure on margins. We expect to manage this through financing an appropriate mix of higher and lower-yielding assets, while ensuring that the asset quality continues to remain best in class,” he said.
Mr. Viji also touched upon the government’s move to increase the maximum safe axle weight of commercial vehicles (CVs) which could result in a 14-18 % increase in the load-carrying capacity of trucks. The move is ostensibly intended to reduce logistics costs in the country. The load-carrying capacity of tractor trailers has also been increased. “While a prospective application of the new axle load limits is unlikely to have an impact on sale of new CVs, making them applicable to existing vehicles could have negative implications for new CV off take in the near-term,” he said.
T.T. Srinivasaraghavan, managing director, said that the company’s disbursements last year grew by 18% and loan book by close to 20%. “Sundaram Finance has always followed a policy of prudent growth. We embrace a philosophy which combines growth, quality and profitability. We remain rooted in our ideal of protecting and enhancing shareholder value and will continue to do that,” he added.