The Hindu Business Line : Sundaram Finance plans more branches

Coimbatore, Sept. 20 Sundaram Finance Ltd (SFL), an asset financing company, plans to open 200 branches in the current fiscal. It has also expressed fear that the slowdown in the sale of commercial vehicles in the first quarter of current fiscal might be an indication of a ‘cyclical slowdown’ in this segment.

Speaking at the 54th AGM of the company, Mr S.Viji, Chairman, SFL, said that during 2006-07, the company opened 61 branches, taking their total number to 224.

Cyclical slowdown

He said the outlook for the automotive sector “would appear to be mixed” in the current year. Sales of commercial vehicles in the first quarter of the current fiscal were reported to be lower than that in the corresponding period last year. He said while this could be partly attributed to the hike in interest rates, it could “well signal the beginning of a cyclical slowdown.”

With bigger multi-axle vehicles hitting the roads, there has been a significant increase in tonnage capacity in the past few years leading to possible excess capacity and monsoon would hold the trump card for this sector

JV with BNP Paribas

The SFL Chairman said subject to regulatory approvals, Union de Credit pour le Batiment SA (UCB), a wholly owned subsidiary of BNP Paribas SA of France, would acquire 49.90 per cent stake in Sundaram Home Finance Ltd (SHFL) for a total consideration of Rs 196.98 crore, of which Rs 146.98 crore would be payable to SFL. with the balance being directly invested in SHFL. After the completion of this transaction, SFL’s holding in SHFL would be 50.10 per cent of the enhanced paid-up capital of SHFL and this would “significantly strengthen SHFL and enable it to enhance its product offerings to its customers.”

He expressed happiness over the decision of Reserve Bank of India to introduce a new classification called Asset Financing Company (AFC) following which SFL has been re-classified as an AFC-deposit taking He renewed his request to the Finance Ministry to bring AFCs on par with banks and housing finance companies with regard to tax treatment of provisioning and deferral of income in respect of NPAs.