Sundaram Finance eyes ‘decent’ growth in FY22 amid limited stress

Sundaram Finance Ltd, a leading NBFC in the country, said it continues to see accounts from a few segments seeking restructuring and delinquency rates move northwards amid improving business.

Though business is returning to pre-second wave levels, there are still accounts up for restructuring, especially in the education and school bus segment, which is a fairly big portfolio for the company. Tourist buses have been impacted, as have inter-State buses.

In the car segment, tourist taxis have been impacted. In pockets, market load operators on haulage have been affected, said Rajiv Lochan, Managing Director, Sundaram Finance, in an exclusive interaction with BusinessLine.

As of March 31, the company had restructured 4.2 per cent of its portfolio, and this financial year it has further restructured 2.6 per cent. That is higher than industry. Delinquency rates increased to 4.2 per cent by the end of June.

“We are still quite good compared to the industry,” he added.

Growth complications

The first round of restructuring last year was in the commercial vehicle (CV) and bus segments.

Many who expected recovery in Q4 did not opt for it. Some school bus operators, inter-State bus operators and tourist buses expected recovery this year, but the second wave hit them hard and they have come for restructuring now.

The other complication is that viability of operators has been impacted. Freight rate has not increased in the last six months, there has been excess capacity in the system, return trips have been empty, and diesel prices have gone up. There are also Covid-related temporary issues.

Rallying business

Nevertheless, business has been picking up and getting better every succeeding month. September is also trending well.

“Compared to FY20, we will still do decent, especially if the third wave does not hit us too badly. We have to go granular. In terms of growth, that’s the thrust. We are seeing steady progress,” Lochan said.

There are a few segments that promise a favourable growth outlook for the company in the coming years. The tipper and construction equipment (CE) segments have picked up on the back of infrastructure activities.

Also see: Sundaram Finance presents favourable near-term outlook amid caution

“I expect a secular positive growth in the next three years in CE, which constitutes over 10 per cent of our business. It has gained momentum in the last three years and I see it gaining even more traction going forward. The agri-related segment (tractors or farm equipment) that constitutes about 7-8 per cent is doing well. Going forward, we expect to see double digit growth in this segment,” said Lochan.

Within the CV segment, the company has diversified into the intermediate CV, used CV, light CV and small CV segments over the last decade, and these are witnessing growth driven by e-commerce.

“We are seeing a nice momentum in this space. There is real action for us in these three asset classes. In the passenger vehicle segment, which constitutes 25 per cent of the business, we will ride with the wave,” Lochan added.