Mr. S. Viji, Chairman, Sundaram Finance Ltd., has stated that the company sees significant opportunities in the rapidly growing construction equipment segment, as also the LCV and tractor segments. On the Government increasing the maximum safe axle weight of commercial vehicles, he feels that making them applicable to the existing vehicles could have negative implications for new CV offtake in the near term.
Addressing the 65th AGM of the company, Mr. Viji said the main thrust of the Union Budget for 2018-19 is on the rural economy and strengthening of the agriculture sector, healthcare for the economically less privileged, infrastructure creation and improvement in the quality of education. The increased allocations are expected to have a salutary impact on the Indian economy as a whole and the rural economy in particular.
The Society of Indian Automobile Manufacturers (SIAM) expects the growth momentum of commercial vehicle sales to continue at 10-12% in 2018-19. The Government’s sustained emphasis on infrastructure and a recovery in the mining sector bode well for sales of tippers. Sales of passenger vehicles are expected to grow at 8-10% (utility vehicles at 14-15% and cars at 8-9%). As per a report by CRISIL, tractor sales are projected to increase by 11-13% in 2018-19, assuming a normal monsoon and increased Government support.
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 and, coupled with higher interest rates, could prove a dampener from the point of view of the transport operator’s viability and consequently on commercial vehicle offtake. 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. 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.”
Mr. Viji disclosed that the company has drawn up its plans for the year taking these factors into account “While concentrating on our core markets and product segments, we see significant opportunities 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.”
On Government increasing the maximum safe axle weight of CVs, he said: “The Government has increased the maximum safe axle weight of commercial vehicles resulting in a 14-18% increase in the load-carrying capacity of trucks, in a move that is 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 offtake in the near term.”
Answering a query on its strong focus on vehicle financing, Mr. TT Srinivasaraghavan, Managing Director, Sundaram Finance Ltd., said: “For 65 years, Sundaram Finance has involved itself in building a deep expertise in vehicle financing. Through this period, the company has seen several regulatory and market changes. We have had the knowledge and strength to navigate this.”
On the company’s growth philosophy, he said: “Our disbursements last year grew by 18% and our loan book by close to 20% which is a very healthy growth. 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 the shareholder value and will continue to do that.”
During the year, Sundaram Finance was chosen for the Mahindra Transport Excellence Award instituted by Mahindra & Mahindra Ltd., in the category, ‘Enablers of Social Change’, in recognition of the outstanding contribution made by the company, in fostering and developing the transport ecosystem, especially single truck owners and small fleet owners, over several decades.