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G. Madhan

INVESTORS can park their money in the fixed deposit programme of Sundaram Finance. The rates are on a par with other auto finance companies such as Cholamandalam Investment and Finance.

Considering the good track record for timely interest payment and repayment of principal, an investment in any of the options can be considered.

Schemes and features: Sundaram Finance offers cumulative and non-cumulative schemes. Since the interest (see table) on cumulative deposits is compounded at quarterly rests, the annual yields for the same are 6.14 per cent for one year, 6.88 per cent for two years and 7.71 per cent for three years.

Under the non-cumulative scheme, the interest is paid at quarterly and monthly intervals. The monthly option, which offers an interest rate of 6.96 per cent, is available for three-year deposits only.

The minimum deposit amount for each of these schemes is Rs 10,000. Further details can be obtained from the company's head office at 21, Patullos Road, Chennai - 600 002.

Business Prospects: The company's earnings hinge on the fortunes of the automobile industry as Sundaram Finance is in the business of hire-purchase and lease financing of commercial vehicles, cars and machinery.

The company also undertakes short-term activities such as bill discounting and commercial mortgage lending.

Considering the robust growth registered by the auto sector, the company has good prospects for growth as far as loans go.

However, this may not necessarily lead to an improvement in earnings and profitability, given the stiff competition in this industry.

Financials: Sundaram Finance's disbursements grew 37 per cent to Rs 2,104 crore compared to the corresponding previous period.

The revenues, however, dropped by 4.6 per cent to Rs 348.3 crore. Profit before interest, depreciation and tax, also dropped by 4.9 per cent to Rs 258.5 crore and operating margins by about 20 basis points to 74.2 per cent.

Earnings, however, rose by 21.8 per cent to Rs 55.6 crore, on the back of a sharp drop in interest outgo.

The company is well-placed to ensure payment of interest and repayment of the deposits as the interest coverage ratio is at 1.53 per cent (against 1.35 in 2002-03).

The net NPA has also dropped to 0.83 per cent (1.45 per cent). The interest-spread compression that is underway, however, will be a cause for concern.

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