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G. Madhan

THE fixed deposit programme of Sundaram Finance (SFL) is open for investment. The interest rates on offer are lower than other auto finance companies such as the Ashok Leyland Finance but higher than the bank deposits by 50 to 75 basis points.

Given the company's strong fundamentals and good track record for timely interest payment and repayment of principal, an investment in any of the options can be considered.

Schemes and features: SFL offers cumulative and non-cumulative deposit schemes. Under the latter, the interest rate is paid is at quarterly and monthly rests. The monthly option is, however, available for three-year deposits only. The interest rate for both cumulative and non-cumulative (quarterly) options is the same (see table).

For the cumulative scheme, the annual yield is 6.1 per cent for one year, 6.9 per cent for two years and 7.7 per cent for three years. The minimum deposit for each of these schemes is Rs 10,000. Further details can be obtained from SFL's head office at 21, Patullos Road, Chennai - 600 002.

Business prospects: Sundaram Finance is in the business of hire-purchase and lease financing of commercial vehicles, cars and machinery finance. It also undertakes short-term activities such as bill discounting and commercial mortgage lending. Its credit quality is good.

Given the strong growth registered by the auto sector, the company has good prospects for growth as far as the disbursements go. However, this may not necessarily improve the earnings significantly, given the increasing competition seen in this industry.

Financial performance: For the six months ended September 2003, the company's income from operations dropped by 14.6 cent to Rs 191.6 crore from the corresponding previous period.

The net profit during the period, however, rose by 23.7 per cent to Rs 28.3 crore. This, to a large extent, was due to the sharp drop in the financial expenses during the same period. The net profit margin for the period stood at 14.8 per cent (10.2 per cent).

The company's disbursements, as on March 2003, stood at Rs 1,532 crore, higher by 25.6 per cent from that of the corresponding previous year.

The capital-to-risk assets ratio was 17.3 per cent, well above the statutory requirement of 12 per cent. The net non-performing assets for the period was at 1.45 per cent against 2.37 per cent registered in the corresponding previous period.

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