Sundaram Finance Limited: history, ownership, mission, how it works & makes money

A Brief History of Sundaram Finance Limited

Sundaram Finance Limited (SFL), established in 1954, is a financial services company based in Chennai, India. It operates primarily in the areas of vehicle financing, asset management, and insurance. The organization was founded by M. Vasudevan, a visionary in the Indian financial services sector. Initially, the company focused on financing the purchase of commercial vehicles. Over the years, it expanded its offerings to include a range of financial products.

As of FY 2023, Sundaram Finance reported a consolidated revenue of approximately ₹7,909 crore, reflecting a growth trajectory fueled by increased demand for vehicle financing and asset management services.

In 2007, Sundaram Finance acquired the remaining stake in Sundaram BNP Paribas Asset Management, further enhancing its portfolio in asset management. The asset management arm recorded an Assets Under Management (AUM) of around ₹40,000 crore as of March 2023, illustrating its significant market presence.

Sundaram Finance has also made strides in the insurance sector. It entered into a joint venture with the Insurance Australia Group (IAG) in 2001 to form Sundaram General Insurance. By FY 2023, the general insurance segment reported a gross written premium of about ₹1,400 crore.

The company has consistently focused on technology and innovation, introducing digital platforms for smoother customer experiences. This transition has been well-received, with over 1 million downloads of its mobile app, enabling customers to manage their financial transactions efficiently.

Financial performance metrics over the past five years highlight Sundaram Finance's resilience and growth:

The company continues to evolve, focusing on sustainable growth through diversification and innovation in its service offerings. Such strategic moves have enabled Sundaram Finance to cultivate a robust customer base, ensuring its position as a leader in the Indian financial sector.

A Who Owns Sundaram Finance Limited

Sundaram Finance Limited, a prominent financial services company based in India, has a diversified ownership structure. The ownership of the company is primarily divided among institutional investors, promoters, and retail shareholders.

According to the latest data from September 2023, the shareholding pattern is as follows:

The promoter group, which holds a significant stake in Sundaram Finance, includes the well-known TVS Group, a major player in the Indian automotive sector. This longstanding affiliation has contributed to the company's financial stability and credibility in the marketplace.

In terms of market capitalization, Sundaram Finance Limited is valued at approximately INR 20,000 crore (around USD 2.4 billion) as of early October 2023. The company’s shares have been trading in the range of INR 1,600 to INR 1,800 over recent months, showcasing resilience amidst market fluctuations.

Additionally, the company's performance metrics reveal its robust financial health. In the fiscal year ending March 2023, Sundaram Finance reported:

• Total Revenue: INR 4,500 crore
• Net Profit: INR 600 crore
• Return on Equity (ROE): 14%

With a consistent focus on asset quality and prudent lending practices, Sundaram Finance maintains a healthy capital adequacy ratio of 17.5%, significantly above the regulatory requirement of 15%.

Furthermore, the retail investor segment has gained traction due to the company's strong dividend policy, offering dividends of INR 22 per share for the fiscal year 2023, which translates to a dividend yield of approximately 1.4% based on recent trading prices.

This well-rounded ownership structure reflects the confidence that various stakeholders have in Sundaram Finance Limited, underscoring the company's position in the financial services sector in India.

Sundaram Finance Limited Mission Statement

Sundaram Finance Limited, established in 1954, aims to be a trusted player in the financial services sector with a commitment to providing customers with financial solutions tailored to their needs. The company's mission statement emphasizes integrity, customer satisfaction, and sustained growth for all stakeholders.

Key components of Sundaram Finance's mission include:

• Delivering high-quality financial solutions.
• Maintaining strong ethical standards.
• Enhancing customer relationships through transparency and reliability.
• Fostering long-term growth and profitability.
• Contributing to the sustainable development of the communities served.

The company has effectively positioned itself as a major player in the financial services landscape. With a focus on customer-centric solutions, Sundaram Finance Limited has achieved a compounded annual growth rate (CAGR) of approximately 14% in revenue over the last four years.

As of 2023, Sundaram Finance Limited's assets under management (AUM) have reached approximately INR 1,31,000 crores, showcasing the company's robust financial health and commitment to sustainable growth. The company offers a diverse range of services including vehicle finance, housing finance, and asset management.

With a workforce of over 6,500 employees and a strong presence across India, Sundaram Finance is committed to employee development and community engagement, reflecting its mission to contribute positively to society.

The firm maintains a focus on innovation, integrating technology to enhance customer experience and operational efficiency, aligning with its mission to be a trusted financial partner in every customer's journey. In its latest earnings report, Sundaram Finance Limited reported a return on equity (ROE) of 16.5%, indicating effective management and profitable operations.

How Sundaram Finance Limited Works

Sundaram Finance Limited (SFL) is a prominent player in the Indian financial services sector, primarily engaged in vehicle finance, insurance, and asset management. Founded in 1954, the company operates through a network of over 600 branches across India, serving a diverse clientele. As of March 2023, Sundaram Finance Limited reported a total income of approximately ₹7,293 crores, showcasing the robustness of its operations.

The company’s core business segments include:

• Vehicle Financing
• Insurance Services
• Asset Management
• Loan and Lease Financing

Vehicle Financing

Sundaram Finance is a leader in the vehicle financing segment, providing loans for various types of vehicles such as commercial vehicles, two-wheelers, and passenger cars. As of the latest reports, the company has financed over 3.5 million vehicles cumulatively. The vehicle finance business constituted approximately 70% of the total revenue in FY2023.

Insurance Services

The company also operates in the insurance space through its subsidiary, Sundaram Insurance. The insurance segment has shown significant growth, contributing around ₹800 crores to the total revenue. The range of products includes motor, health, and property insurance, catering to both individual and corporate clients.

Asset Management

In the asset management domain, Sundaram Finance Limited manages assets worth approximately ₹40,000 crores as of March 2023. The company offers various mutual fund products, focusing on equity, debt, and hybrid categories.

Loan and Lease Financing

In addition to vehicle financing, Sundaram Finance provides loan and lease financing to both individuals and businesses. The loan book reached ₹25,000 crores in FY2023, with a year-on-year growth rate of 12%.

Sundaram Finance maintains a strong focus on risk management, with a Non-Performing Asset (NPA) ratio of 1.8% as of March 2023, demonstrating effective credit management practices. The company has also invested significantly in technology to enhance customer service, with mobile and web applications facilitating seamless loan applications and management.

In terms of market position, Sundaram Finance operates in a competitive space, competing with major players like HDFC Bank and Mahindra Finance. However, its long-standing reputation and strong customer relationships provide a competitive edge. The company’s stock performed well in FY2023, with a year-to-date increase of approximately 25%, reflecting investor confidence.

In summary, Sundaram Finance Limited’s diversified offerings across vehicle financing, insurance, and asset management, coupled with a strong operational framework, position it as a key player in the Indian financial services industry.

How Sundaram Finance Limited Makes Money

Sundaram Finance Limited generates revenue through a diversified business model that encompasses various financial services. The company's primary segments include finance, insurance, and investments, each contributing significantly to its top line.

Finance Segment

The finance segment mainly includes vehicle financing, loans against property, and commercial loans. As of the fiscal year ended March 2023, Sundaram Finance Limited reported a disbursement of approximately ₹19,600 crore in various loan products, marking a growth of 14% compared to the previous year.

Insurance Operations

Sundaram Finance Limited has a stake in the insurance sector through its subsidiary, Sundaram Insurance. In FY 2023, the insurance segment contributed approximately ₹1,050 crore in premium income, reflecting a growth of 10% year-over-year. The company's focus on motor, health, and life insurance products proved fruitful, accounting for the majority of the premium income.

Investment Income

Investment income is another critical area for Sundaram Finance. The company maintains a diversified portfolio, including equities, fixed-income securities, and mutual funds. For the fiscal year 2023, Sundaram Finance reported an investment income of ₹650 crore, which was driven by capital gains and interest income. This represents a 8% increase from the previous fiscal year.

Fee-Based Income

In addition to traditional financing, Sundaram Finance earns fee-based income from various services such as loan processing, insurance premiums, and asset management. The company generated approximately ₹480 crore in fee-based income in FY 2023, which is up by 15% compared to the prior year.

Market Positioning

Sundaram Finance's competitive advantage lies in its established brand, robust customer base, and extensive distribution network. The company operates over 650 branches across India, facilitating access to its services. This expansive reach, combined with a focus on customer service, has helped the company retain a strong foothold in the financial market.

Financial Metrics Overview

Overall, Sundaram Finance Limited continues to diversify its revenue streams while maintaining a strong operational efficiency. The combination of vehicle finance, insurance, investments, and fee-based services positions the company as a formidable player in the Indian financial services landscape.