Your Directors have pleasure in presenting the 70th Annual
Report together with audited accounts for the year ended 31st March
2023. The summarised financial results of the Company are presented hereunder:
FINANCIAL RESULTS: STANDALONE
Particulars |
Year ended March 31, 2023 |
Year ended March 31, 2022 |
Revenue from Operations |
4,046.46 |
3,870.03 |
Other Income |
63.74 |
20.43 |
Total Revenue |
4,110.20 |
3,890.46 |
Less: Total Expenses |
2,690.24 |
2,713.56 |
Profit before exceptional items and tax |
1,419.96 |
1,176.90 |
Add: Exceptional item |
NIL |
NIL |
Profit before tax |
1,419.96 |
1,176.90 |
Profit after Tax |
1,088.31 |
903.41 |
Other Comprehensive Income |
(2.39) |
(14.26) |
Total Comprehensive Income for the Year |
1,085.92 |
889.15 |
Dividend |
|
|
- Final 2020-21 |
|
66.66 |
- Interim 2021-22 |
|
111.10 |
- Final 2021-22 |
111.10 |
|
- Interim 2022-23 |
133.32 |
|
DIVIDEND
Your Company paid an interim dividend of Rs. 12/- per share in March
2023. Your Directors are pleased to recommend a final dividend of Rs. 15/- per share,
which, together with the interim dividend, would aggregate to a total dividend of Rs. 27/-
per share (270% on the face value of Rs. 10/-), representing a dividend pay-out of 27.6%.
The Dividend Distribution Policy, formulated in accordance with the
provisions of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015, has been disclosed on the website of the Company under the web link
https://www.sundaramfinance.in/assets/app_docs/investor-info/corporate_governance/policies/sebi/sfl_policy_for_distribution_of_dividends.pdf
.
CORPORATE GOVERNANCE
Your Company has always focused on ensuring the highest standards for
prudence, ethics and transparency in corporate governance over decades. The Board of
Directors serve as stewards of the performance and health of your Company. The
Board's mandate is to oversee your Company's strategic direction, monitor your
Company's & Group companies' performance, maintain highest ethical standards
of governance, assess the adequacy of risk management measures, evaluate internal
financial controls, authorise and monitor strategic investments, facilitate and review
Board and senior management succession planning and oversee regulatory compliance and
corporate social responsibility activities. Their collective experience has been brought
to bear to guide the Company through various challenges, including the recent
pandemic-related complications. The Directors' deep industry knowledge, functional
specialization and decades of experience has helped your Company handle complex issues
related to macroeconomic uncertainty, regulatory changes, technological & digital
developments, market volatility & risk management and information security &
cybersecurity threats.
The Corporate Governance Report of the Company provides information
about the corporate philosophy, details of the Directors and their other directorships,
number of Board Meetings and Committee Meetings held during FY2023, various other details
which evidence the fact that the Company is customer-oriented, respectful in letter and
spirit of all the regulatory provisions, mindful of high quality standards in all areas
and, above all, follows a time-tested approach that balances growth with quality and
profitability.
A detailed report on corporate governance, together with a certificate
from the Secretarial Auditor, in compliance with the relevant provisions of SEBI (Listing
Obligations and Disclosure Requirements), Regulations 2015, is attached as part of this
report, vide Annexure I.
Compliance reports in respect of all laws applicable to the Company
have been reviewed by the Board of Directors.
RELATED PARTY TRANSACTIONS
All transactions with related parties were in the ordinary course of
business and on an arm's length basis. The Company did not enter into any material
transaction with such related parties, under Section 188 of the Companies Act, 2013,
during the year. Form AOC-2, as required under Section 134 (3) (h) of the Act, read with
Rule 8 (2) of the Companies (Accounts) Rules 2014, is attached as part of this report,
vide Annexure
II (i). The Company's Policy on Related Party Transactions is
attached as part of this report, vide Annexure II (ii).
The Company did not have any transactions with any person or entity
belonging to the promoter or promoter group and holding 10% or more shareholding in the
Company.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company, along with its subsidiaries and associates, has always
proactively invested in a responsible manner to the growing needs of the communities in
which it operates and has responded swiftly to health-related complications, weather &
catastrophic events and other unexpected challenges that have impacted these communities.
During the year, your Company has, in consonance with the CSR Policy of the Company,
undertaken a number of initiatives that contribute to society at large, in the areas of
healthcare, education, environmental sustainability and ecological balance, and
preservation of the country's rich culture and heritage. The highlights of the CSR
activities are:
1. Average Net Profit computation in accordance with Sec.135(5) : Rs.
97,201.58 lakhs.
2. CSR Budget, Amount spent in CSR, amount un-spent if any and amount
to be set off in the financial year, if any.
Particulars |
Amount |
|
(Rs. in lakhs) |
Total CSR Obligation for FY2023 |
19,44.03 |
Less: Set off from FY2022 |
2,31.37 |
Net CSR Obligation for FY2023 |
17,12.66 |
CSR spent during FY2023 |
24,17.82 |
Administrative overheads (including expenses incurred towards
Impact Assessment) |
95.46 |
Amount spent in excess of the requirement |
8,00.62 |
The Annual Report on CSR Activities undertaken by the Company for the
FY2023, is attached as part of this report, vide Annexure III.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
A Business Responsibility and Sustainability Report as required under
Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements),
Regulations 2015, is enclosed as part of this report, vide Annexure IV.
DISCLOSURE UNDER THE PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
POLICY'
The Company has in place a policy for prevention of sexual harassment,
in line with the requirements of The Sexual Harassment of Women at the Workplace
(Prevention, Prohibition & Redressal) Act, 2013. An Internal Complaints Committee
(ICC) has been set up to redress complaints. All employees (permanent, contractual,
temporary, trainees) are covered under this policy. No complaints were received during the
financial year nor were any pending unresolved as on 31st March 2023.
SECRETARIAL AUDIT
In terms of Section 204 of the Companies Act, 2013 and the Rules
thereunder, the Company has appointed M/s Damodaran & Associates LLP,
Practising Company Secretaries, as the Secretarial Auditor of the Company. The Secretarial
Audit Report and Secretarial Compliance Report, as provided by them, are attached as part
of this report, vide Annexures V(i) and (ii) respectively.
REMUNERATION TO DIRECTORS / KEY MANAGEMENT PERSONNEL
Disclosure pursuant to Rule 5 (1) of Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 is attached as part of this report, vide
Annexure VI.
SUNDARAM FINANCE EMPLOYEE STOCK OPTION SCHEME (SFESOS)
Based on the recommendations of the Nomination, Compensation and
Remuneration Committee, the Board has granted, subject to regulatory approvals where
necessary, 21,878 Stock Options to select eligible employees, on 26th
May 2023. The disclosure required under SEBI (Share Based Employee Benefits and Sweat
Equity) Regulations, 2021 is furnished, vide Annexure VII.
EXTRACT OF ANNUAL RETURN
As required under Section 92 (3) of the Companies Act, 2013, read with
Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, the link for the
Extract of the Annual Return in E-form MGT-7 is
https://www.sundaramfinance.in/assets/app_docs/downloads/annual-reports/2022-2023/eformmgt72223.pdf
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
During the year under review, no significant and material orders were
passed by the regulators, courts, or tribunals against the Company, impacting its going
concern status or its future operations.
INFORMATION AS PER SECTION 134 (3) (m) OF THE COMPANIES ACT, 2013 READ
WITH RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014
Your Company has no activity relating to conservation of energy or
technology absorption. During FY2023, expenditure in foreign currencies amounted to Rs.
0.08 cr. There were no earnings in foreign currency during the year.
APPOINTMENT OF INTERNAL OMBUDSMAN
During the year, Mr. A.S. Narayan, B.Sc., CAIIB, a retired General
Manager from State Bank of India, was appointed as the Internal Ombudsman of your Company
for a period of 3 years with effect from 12th May 2022, in accordance with the
Circular dated 15th November 2021 issued by the Reserve Bank of India.
MANAGEMENT DISCUSSION AND ANALYSIS Global Economy
On the global front, economic activity remained largely resilient
during FY2023, amidst geopolitical tensions & hostilities, persistence of inflation at
elevated levels, tight financial conditions and turmoil in the banking system in some
advanced economies (AEs).
The year started with the impact of the Russia-Ukraine war that
resulted in a sharp commodity price surge, leading to inflationary pressures. This was
over and above the existing layer of global inflation, due to COVID-related stimulus
measures, and a post-pandemic resumption of full-fledged economic activity across
countries. The persistence of inflation at elevated levels across economies, caused by the
disruption of global supply chains due to the pandemic and compounded by the spike in
crude oil prices in the wake of the war, coupled with continuing geopolitical
uncertainties and tightening financial conditions, took their toll on global economic
activity. Consequently, most central banks across the globe remained in tightening mode
and focussed on aggressive rate hikes to cool demand and consequently bring down high
inflation.
Given that the pace of rate hikes in the US were the steepest since the
1970's, there emerged a market concern around US recession risks and a resultant
impact on global markets. Therefore, for most part of FY2023, the global markets were
bracing for the onset of recession. However, towards the end of FY2023, global macro
(especially US and Europe) witnessed surprising strength that led to significant easing of
recessionary fears. As this recessionary trend was settling down, the banking turmoil in
the US and Europe during March, involving the closure of three banks in the US and sale of
a Swiss bank, and the accompanying concerns about financial stability in the regions,
rattled the global financial markets. Increased risk aversion triggered flight to safety
and the expectations of an early reversal of the monetary tightening cycle led to a sharp
decline in sovereign bond yields across maturities, correction in equity prices and jump
in market volatility indicators. The US Federal Reserve responded swiftly with measures
that directly addressed the concerns around contagion through various assurances, easing
market fears.
In the second half of calendar year 2022, global growth was stronger
than anticipated, reflecting pent-up demand, accumulated household savings, labour market
gains, easing supply bottlenecks and sharp corrections in energy prices. According to the
IMF's estimates released in January 2023, global growth is expected to moderate from
3.4 per cent in 2022 to 2.9 per cent in 2023, and 3.1 per cent in 2024, with a sharper
deceleration projected for advanced economies, relative to emerging market and developing
economies. Alongside, global trade is expected to decelerate in 2023.
Overall, the slowing global growth, geopolitical tensions, upsurge in
financial market volatility and tightening global financial conditions continue to be
causes for concern for the growth outlook of economies across the world.
Indian Economy
Against the backdrop of an unstable global economy, India's
economic growth in FY2023, which was the first year of uninterrupted functioning of the
economy after two years of widespread disruption caused by the Covid-19 pandemic, was
robust. Domestic economic activity exhibited resilience, particularly in H2 of FY2023 and
the National Statistical Office's second advance estimates placed real gross domestic
product (GDP) growth at 7.0 per cent for FY2023, driven primarily by private consumption
and investment.
Despite the downward revision, the FY2023 growth estimate for India is
higher than almost all major economies and even slightly above the average growth of the
Indian economy in the decade leading up to the pandemic. Among the various measures
initiated by the Government of India to counter the disruption caused by the pandemic, the
vaccination coverage across the country has not only saved lives, but also played a
crucial role in serving as a health stimulant to raise consumer sentiments, boosting
private consumption, and helping in the recovery and growth of the economy.
The country's level of inflation was a cause for concern, rising
from 5.5% in FY2022 to 6.7% during FY2023, largely due to rising international commodity
prices, as well as local weather conditions like excessive heat and unseasonal rains,
which kept food prices high. Unlike global inflation which was the result of demand-side
drivers, inflation in India in FY2023 was driven by supply side challenges. After briefly
dropping to 5.7% during November 2022, it surged again to 6.4% in February 2023, primarily
due to the increase in food inflation. As part of the efforts to restrain inflation, the
RBI, like other central banks, increased the policy repo rate by 250 basis points from 4%
to 6.5% between May 2022 and February 2023, and drained out excess liquidity.
Additionally, the Government introduced a slew of measures like cutting excise and customs
duties, and restricting exports in select commodities & products, in order to control
the inflationary trend.
Fiscal deficit, which reached 9.2% of GDP during the pandemic year
FY2021, moderated to 6.7% of GDP in FY2022 and has been budgeted to reach 6.4% of GDP in
FY2023, thanks to prudent fiscal management by the Government and supported by appreciable
increase in revenue collection over the last two years.
Impacted by the global shocks, the Indian Rupee touched an all-time low
of 83.2 per US$ during October 2022. It recovered during November 2022, riding on a
depreciating US dollar and net inflows through foreign portfolio investments. These
factors, coupled with a sharp increase in India's net services exports, helped
stabilise the Rupee, which was at 82.2 per US$ at the close of FY2023. As on March 31,
2023, the country's foreign exchange reserves stood at USD 578.4 billion, equivalent
to 9.8 months of projected merchandise imports in FY2023 or 94.4 per cent of outstanding
external debt at end-December 2022.
Automotive Sector
The automotive sector is a key driver of India's economic growth
and contributes about 7% to the country's overall GDP. After witnessing various forms
of challenges like economic slowdown, widespread disruption caused by the pandemic,
semi-conductor chip shortages, supply chain dislocations and price escalation for
successive years, the automotive sector witnessed healthy growth across all segments
during FY2023. Overall, the automotive sector grew by 20% supported by strong replacement
demand (CVs), healthy urban demand (PVs), higher infrastructure spending and the scrappage
policy. In December 2022, India became the 3rd largest automobile market,
surpassing Japan and Germany in terms of sales.
The commercial vehicle segment grew by 34% in FY2023 over FY2022 driven
by robust freight movement pan-India, increases in infrastructure spending and pre-buying
given the expected price hikes due to transitioning to Phase 2 of BS6 on April 1, 2023.
M&HCV sales grew by 49% while retail commercial vehicles (including LCVs, ICVs and
SCVs) grew by 27%.
Sales of cars & utility vehicles grew by 27%, recording a new high
for the number of passenger vehicle sales in the country. The early part of the year
witnessed continued post-Covid pent up demand, and the latter part of the year witnessed
easing of the semi-conductor shortage issue as well as the launch of a slew of new models
by the OEMs. Utility vehicles and high-end variant demand continued to remain high, while
the higher inflation and consequent increased interest rates adversely impacted demand for
the entry level models.
The tractor segment witnessed a growth of 12% driven by robust
agriculture output procurement at healthy support prices, a normal monsoon, various
government schemes and subsidies for farm mechanisation, and a substantial easing in the
availability of finance.
On the export front, overall exports across segments witnessed a
decline of about 15% due to global macroeconomic uncertainty with the export of passenger
vehicles being the sole bright spot witnessing a growth of nearly 14%.
Operating & Financial Performance
After two years of disruption caused by the Covid-19 pandemic, FY2023
was the first uninterrupted year of operations for your Company. Your Directors are happy
to inform you that the Company's disbursements at an all-time high of Rs. 20,966 cr.
(PY Rs. 13,275 cr.) have registered a healthy growth of 58% during the year under review,
reflecting the robust market conditions in the automotive sector and focused efforts of
the Company. Disbursements across all asset classes have been consistent and registered
strong growth. Gross receivables managed by your Company as of March 31, 2023, stood at
Rs. 39,950 cr., as against Rs. 33,774 cr., recording a growth of 18% over the previous
year. During the year, overall margins have been under pressure due to the increase in
interest rates, but your Company's "AAA" credit rating and the treasury
team's ability to raise resources at competitive rates enabled it to maintain its
margins at a reasonably healthy level.
Your Company's superior credit standards, strong customer
relationships and systematic collection efforts have enabled it to navigate turbulent
times and ensured best-in-class performance on asset quality. Stage III assets, gross and
net of ECL provisions, stood at 1.66% (PY 2.19% & December 2022 2.43%) and 0.85% (PY
1.07% and December 2022 1.35%) respectively, as at 31st March, 2023.
Your Company has been maintaining comfortable liquidity in the form of
liquid investments and undrawn bank limits, to meet its maturing liabilities.
Your Company registered a net profit of Rs. 1,088 cr. compared to Rs.
903 cr. in the previous year, a growth of 20.5 %. Your Company's net worth stood at
Rs. 7,737 cr., as on 31st March 2023.
Capital adequacy (CRAR) at 22.77% was comfortably higher than the
statutory requirement of 15%.
There are no significant changes in key financial ratios of the Company
for FY2023 as compared to FY2022. Your Company's Return on Net Worth as on 31.03.2023
stood at 14.88% as compared to 13.82% as on 31.03.2022. The increase in return on net
worth was because of an overall improvement in the business disbursements, asset quality
and profitability.
RESOURCE MOBILISATION
a) Deposits
During the year, your Company mobilised fresh deposits aggregating to
Rs. 1,164.02 cr. Renewal of deposits during the year amounted to Rs. 1,737.97 cr.
representing 81% of the matured deposits of Rs. 2,113.36 cr. Deposits outstanding at the
year-end were at Rs. 4,709.17 cr. as against Rs. 4,103.19 cr. in the previous year. The
net accretion for the financial year was Rs. 605.98 cr. As at 31st March 2023,
4,384 TDRs amounting to Rs. 50.31 cr. had matured for payment and were due to be claimed
or renewed. After close follow-up, these figures are currently 3,002 and Rs. 29.45 cr.
respectively. Continuous efforts are being made to arrange for repayment or renewal of
these deposits. There has been no default in repayment of deposits or payment of interest
thereon during the year.
In our continued digital journey, through our online customer
portal/mobile app, our Depositors can place additional deposits, renew their TDRs,
initiate payment requests, furnish Form 15G/H, initiate change in address and bank
details.
b) Term Funding
During the year, your Company raised term funding from Banks, Mutual
funds, Insurance companies and others in the form of non-convertible debentures and term
loans to the tune of Rs. 8,000 cr., across varying tenors.
c) Bank Finance
As part of the overall funding plan, your Company's working
capital limits with consortium banks were retained at
Rs. 3,000 cr. During the year, your Company also issued several
tranches of commercial paper aggregating to Rs. 4,600 cr.
The maximum amount of outstanding commercial papers at any time was Rs.
3,450 cr. and the amount outstanding at the end of the year was Rs. 2,500 cr.
d) Assets Securitised / Assigned
During the year, your Company raised resources to the extent of Rs.
2,749 cr. through securitisation and assignment of receivables.
CREDIT RATINGS
Your Company's long term credit ratings have been retained at
"AAA" (Highest Degree of Safety) with a "Stable Outlook", by both ICRA
and CRISIL. The short-term borrowings (including commercial paper) are rated
"A1+" by both ICRA and CRISIL. Fixed Deposits are rated "AAA" (Highest
Credit Quality) by both ICRA and CRISIL.
OUTLOOK
The Indian economy is expected to be amongst the fastest growing major
economies in FY2024, backed by strong domestic drivers and strengthening macroeconomic
fundamentals. India's real GDP growth for FY2024 has been projected at 6.5% by the
RBI. Inflation has been showing signs of moderation, though it continues to remain above
tolerance levels. For FY2024, inflation has been projected at 5.2%. Interest rates are
expected to remain around the current levels for some time. The Monetary Policy Committee
of the Reserve Bank of India, at its meeting held in early April 2023, decided to keep the
policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%. The
Government of India has budgeted Rs. 10 lakh crore on infrastructure development for the
year, which will act as a driver of the growth of the overall economy.
Several global factors, viz., geopolitical hostilities, volatile
financial markets, supply chain dislocations, crude oil prices, inflation and climate
shocks like heat waves and unseasonal rains, are areas of key concern. Domestic responses
on the monetary and fiscal policy front to these global factors will influence
India's macroeconomic trajectory. The RBI Governor, in his statement on April 6,
2023, following the Monetary Policy Committee meeting, noted: "The protracted
geopolitical tensions and global financial market volatility pose downside risks to the
outlook."
The overall outlook for the automotive sector seems to be positive,
with growth across all segments expected to continue its trajectory witnessed in FY2023.
In line with the macroeconomy, the automotive sector outlook is also faced with downside
risks for FY2024. The steps being taken by the Government to address areas like production
linked incentives to OEMs, incentives for investment in the manufacture of
semi-conductors, blending of ethanol in petrol, installation of EV charging stations, EV
battery swapping policy, etc., are expected to support the medium-term growth outlook of
the automotive sector.
Commercial Vehicles (CV)
The year under review, FY2023, has been a good year for commercial
vehicles, recording a growth of 34% over FY2022. In particular, Medium & Heavy
Commercial Vehicles (MHCV) have shaken off the lows of the past three years to record a
growth of 49% over FY2022. The growth trends were visible in third quarter of the current
fiscal, with wholesale dispatches reporting a growth of 16 per cent on a year-on-year
basis, supported by replacement demand, improvement in the macroeconomic environment, and
healthy traction in the underlying industries such as steel, cement, mining, automobiles,
and e-commerce. The fortunes of the commercial vehicle segment are tied closely with the
macroeconomy and the outlook for commercial vehicles will mirror the risks that the
macroeconomic forecasts are qualified with. Dynamics will likely be different across the
different sub-segments of commercial vehicles.
The trend in MHCV of larger fleet operators consolidating their share
will continue in FY2024, especially as the supply of higher tonnage variants (and
therefore higher priced variants) increases. The transition to Phase II of BS 6 emission
norms effective April 1, 2023 has significantly increased the technology sophistication of
the MHCV segment, which also aids the consolidation of the larger fleet operator share.
Small road transporters will continue to migrate to used commercial vehicles or new
intermediate commercial vehicles.
Intermediate Commercial Vehicles (ICV) will benefit from a few
mega-trends dedicated freight corridor driven feeder route transportation, higher
quality and wider road networks, replacement of diesel variants with CNG/alternate fuel
variants, e-Commerce led inter-state good transport and related supply chain development,
rebound in bus demand and migration of small road transport operators (SRTO) to ICV.
The retail commercial vehicle segment (Light and Small Commercial
Vehicles) witnessed a robust 34% growth on a strong FY2022 base reiterating the continued
traction in growth of hub-and-spoke networks in logistics & supply chain solutions and
deepening of e-Commerce driven reach into the hinterland requiring last mile connectivity.
Several supply-side factors such as launch of newer variants by OEMs, greater
electrification & alternate fuel-based vehicle models and a wider, dedicated
distribution/dealer network are fuelling this growth. Operators tend to be first-time
buyers and first-time users, traditionally well-served by NBFCs.
Passenger Vehicles
The passenger cars & utility vehicles segment has scaled new highs
in FY2023 driven by the unleashing of pandemic-induced pent-up demand and the waning of
supply side challenges such as the semi-conductor shortage. Post-Covid, personal mobility
preferences continue to evolve towards higher-end variants of passenger cars and a
significant shift in consumer preference towards utility vehicles. The prevailing
inflation challenges over the past year and continued tepid rural recovery have had an
adverse effect on demand for entry-level variants of passenger cars since the transition
of consumers from two-wheelers to passenger cars has been stifled. Equally, the supply of
and the demand for electric passenger cars has increased and this trend will gain traction
in FY2024. While the share of electric vehicles in the passenger car volumes will remain
small, consumer awareness and supply of variants are improving. Well-established,
organised fleet operators are also resuming bulk purchases. The semi-conductor shortages
are expected to be sorted out in the latter half of the financial year. In sum, both
supply side investments and demand side robustness indicate a good year for passenger
cars. However, persistent inflation levels, the consequent higher interest rates and lags
in the sorting out of supply side challenges will likely stanch growth to single digit
levels in FY2024.
Tractors & Farm Equipment
The rural economy has remained muted for past several quarters despite
good monsoons, robust procurement and healthy yields in agriculture. Rabi foodgrains
production is estimated to increase by 6.2% in FY2023. Rural demand indicators such as
consumer non-durables have registered healthy growth. Looking ahead, the expectation of a
record rabi harvest will not only ease food price pressures but also likely buoy rural
sentiments. In addition, the Government of India is intensifying efforts to support the
agriculture ecosystem with its three-pronged thrust: i) making India a global agriculture
export hub, ii) driving "White Revolution 2.0" through turbocharging the dairy
ecosystem and iii) its "farm to food to fuel" programmes to increase
farmers' cash flows through allied agriculture activities. That said, while IMD has
forecasted a normal monsoon this year, there seem to be divergent views on the El Ni?o
effect for this year, which could play spoil sport to agriculture sentiments. Farm
mechanisation is likely to continue, and government subsidies and schemes remain
supportive of this trend. Tractor and farm equipment demand is likely to remain mildly
positive with the monsoon performance and the El Ni?o impact remaining key
monitorables.
Material Handling & Construction Equipment
The Government's commitment to the nation's infrastructure
development received a strong endorsement through an unprecedented Rs. 10 lakh crore
budgeted spend for FY2024 announced in the annual budget presentation by the Finance
Minister. This represents 3.3% of GDP and is the highest in India's economic history.
The implementation of the Gati Shakti National Master Plan (announced in October 2021)
continues satisfactorily. The Bharatmala Pariyojana is providing impetus to the road
infrastructure by emphasizing corridor-based road development to enable efficient movement
of freight and passengers, thereby stimulating economic and social development.
Modernization as well as development of airports, ports, urban transportation and inland
waterways are progressing well. These initiatives provide a major boost for the Material
Handling and Construction Equipment (MHCE) segment.
In sum, there are several positives that underpin India's
macroeconomic outlook, yet given global uncertainties, it is likely that downside risks
will outweigh upside drivers for FY2024. Consequently, FY2024 is going to be a challenging
year for your Company and its time-tested mantra of Growth with Quality and Profitability.
Continuing to remain focused on delivering near-term performance and simultaneously
building robust health of the organisation are central to continuing the Company's
tradition of being a long-term oriented, customer-obsessed, values-driven and
employee-friendly organisation.
INTERNAL FINANCIAL CONTROLS
The Company has a well-established internal financial control and risk
management framework to ensure the highest standards of integrity and transparency in its
operations and a strong corporate governance structure. Appropriate controls are in place
to ensure:
a) the orderly and efficient conduct of business, including adherence
to policies;
b) safeguarding of assets;
c) prevention and detection of frauds/errors;
d) accuracy and completeness of accounting records; and
e) timely preparation of reliable financial information.
Additionally, as part of RBI's Risk Based Internal Audit (RBIA)
requirement, your Company has adopted appropriate policy and operating guidelines. Along
with the Risk Management team and Internal Audit department, the functional and
operational risk control matrices have been designed to ensure that adequate controls as
may be required are in place and operating effectively and efficiently.
RISK MANAGEMENT
Your Company has built a robust risk governance and risk management
framework over the years. The Audit Committee, Risk Management Committee, Asset Liability
Management Committee and IT Strategy Committee review and monitor the risks on a regular
basis.
Apart from the above Board level sub-committees, your Company has
constituted two teams to review risk on an ongoing basis:
i) Functional Working Group on operational risks comprised of operating
executives across the Company and
ii) a Core Working Group on risk management comprised of functional
heads of various departments of the Company.
During the year in review, your Company has, adopted the ERM Framework,
which is based on 3 lines of defence:
a. Function-heads who are the risk owners and responsible and
accountable for assessing, controlling and mitigating risks;
b. Chief Risk Officer and his team who assists through facilitating
risk awareness, risk reviews, providing analysis and reports including creating a
proactive forward looking approach;
c. Internal Auditors and Statutory Auditors who provide assurance to
the senior management on risk governance through the effectiveness of internal controls
and the monitoring mechanisms.
The risk management process fulfils the requirement under Section 134
of the Companies Act, 2013 and also the guidelines under Regulation 21 of Listing
guidelines (Schedule II of Securities and Exchange Board of India (Listing Obligations and
Disclosure Requirements) Regulations, 2015.
The internal audit team reviews the processes and controls to ensure
the design effectiveness and to assure adequacy of controls to mitigate risk. Your Company
has well-documented standard operating procedures and risk control matrices for all
processes to ensure superior control over transaction processing and regulatory
compliance. Periodical review of the same ensures that the risks including technology
risks are under control.
Above all, your Company's values and culture that are enshrined in
the Sundaram Way of doing business and the obligations and commitment to our customers,
employees, deposit holders and the community are the foundation on which its risk
framework rests.
A few principal financial risks of your Company have been furnished in
the Notes to the Accounts under Note 37, for your information.
INTERNAL AUDIT
Your Company's internal audit department independently evaluates
the adequacy of control measures on a periodic basis and recommends improvements, wherever
appropriate, to suit the changes in business and control environment. The effectiveness
and efficiency of the controls are regularly measured through process reviews and risk
assessment. The internal audit department is staffed by qualified and experienced
personnel and reports directly to the Audit Committee of the Board. The Audit Committee
regularly reviews the audit findings as well as the adequacy and effectiveness of the
internal control measures.
Additionally, an Information Security Assurance Service is also
provided by independent external professionals. Based on their recommendations, the
Company has implemented a number of control measures both in operational and IT-related
areas, apart from information security related measures.
Your Company has rolled out the Risk Based Internal Audit (RBIA) Policy
with effect from 1st April 2022 as required by the RBI. The primary focus of
RBIA is to provide reasonable assurance to the Board and the Senior Management about the
adequacy and effectiveness of the risk management and control framework of the Company.
The internal audit function assesses and contributes to the overall improvement of the
organization's governance, risk management, and control processes using a systematic
and disciplined approach. Audits are conducted encompassing all the functional areas of
the branch network and Head Office in order to serve as important tools of internal
control.
INFORMATION TECHNOLOGY
Your Company recognizes Information Technology as a critical pillar to
run and grow its business. Significant investments continue to be made in IT
infrastructure and applications to expand the breadth and depth of technology availability
to your Company's staff and customers in order to enhance the unique Sundaram
Experience' to all stakeholders. Ensuring the reliability, security and integrity of
your Company's systems and data is the highest priority.
Your Company has a state-of-the-art Data Centre catering not only to
its own needs but also to those of its subsidiaries and associates, with a capacity of
over 300 servers, managed by professionals providing 24/7 support, with over 99.99%
uptime. The Data Centre is accredited for ISO/IEC 27001:2013 by TUV Rheinland for
Information Security Management System. The Disaster Recovery Site for all critical
applications is hosted at a separate facility located in a different seismic zone, with
near real-time data replication. Your Company has built a secure and scalable IT
infrastructure for remote working (work from home) to ensure smooth business operations
and customer services in adversities like pandemic, lockdown, etc. Your Company has 24x7
Security Operations Centre (SOC) for real-time threat monitoring and alerting. Your
Company has begun the journey for leveraging Cloud technology and is in the process of
drawing up a forward-looking Cloud strategy and roadmap. Your Company has engaged in
regular discussions with external consultants and industry experts to validate its
approaches to transformation and to reinforce Information & Cyber Security
methodologies. Periodic vulnerability assessment and penetration testing are carried out
on the infrastructure to ascertain the effectiveness of the practices laid down by your
Company.
Your Company's in-house IT team has adopted contemporary
Micro-services architecture and the Agile methodology to strengthen its digital
capabilities. Solutions for a wide range of complex business needs continue to be
delivered by the experienced in-house team. By working closely with the business
functions, they have implemented solutions that address key performance requirements like
improved turnaround time, straight through processing, timely availability of information
while enhancing risk management controls to enable better decisions and deliver superior
customer experience.
With the advantage of having created a strong digital foundation, your
Company is poised to take its technology base to the next level. Employing digital and
intelligent solutions to enable customer service and acquisition, faster introduction of
new products, reducing cost-to-serve, deepening usage of analytics and creating superior
customer experience are key priorities.
Your Company is in a relationship-centric business and has a
time-tested and differentiated strength the Sundaram experience that relies
on physical interactions with customers and other stakeholders. The digital strategy has
consciously been adapted to create the right blend of high touch and high tech to deepen
these customer and stakeholder relationships.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements, drawn up in accordance with the
applicable Accounting Standards, form part of the Annual Report as required by the
provisions of Section 129(3) of the Companies Act, 2013. A separate statement containing
the salient features of the financial statements of Subsidiaries and Associates in Form
AOC-1 forms part of the Annual Report.
The Consolidated profit after tax is Rs. 1,499.56 cr. as against Rs.
1,296.24 cr. of the previous year. The total comprehensive income for the year was Rs.
1,772.89 cr. as against Rs. 1,579.74 cr. The consolidated net worth for the year
stood at Rs. 9,909.85 cr., as against Rs. 8,794.83 cr. in the previous year.
The annual accounts of all the Subsidiary Companies have been posted on
your Company's website www.sundaramfinance.in. Detailed information,
including the annual accounts of the Subsidiary Companies will be available for inspection
by the members, through a digital platform which would be provided by your Company. The
same will also be made available in physical form to the members upon request.
SUBSIDIARIES
Sundaram Finance Holdings Limited
Sundaram Finance Holdings Limited reported a gross income of Rs. 130.61
cr. as against Rs. 80.08 cr. in the previous year. Profit after tax was Rs. 94.75 cr. as
compared to Rs. 46.91 cr. in the previous year.
The Board of Directors has recommended a final dividend of Rs.
1.50/-per share (30% on the face value of Rs. 5/-) for the financial year ended 31st
March 2023. This, together with the interim dividend of Rs. 1.50 per share (30% on the
face value of Rs. 5/-) paid during February 2023, would aggregate to a total dividend of
Rs. 3.00/- per share (60% on the face value of Rs. 5/-) for the financial year ended 31st
March 2023. In addition, the Board of Directors has recommended a Special Dividend of Rs.
1.00/- per share (20% on the face value of Rs. 5/-) for the financial year ended 31st
March 2023.
Sundaram Home Finance Limited
Sundaram Home Finance Limited, during the year approved loans
aggregating to Rs. 4,310 cr. (PY Rs. 2,476 cr.).
Disbursements during the year were higher by 69% at Rs. 3,901 cr. (PY
Rs. 2,311 cr.). The Company earned a gross income of Rs. 1,140 cr. (PY Rs. 957 cr.) and
reported a profit after tax at Rs. 215.41 cr. (PY Rs. 167.70 cr.). The loan portfolio
under management as at 31st March 2023 stood at Rs. 11,181 cr. as against Rs.
9,495 cr. in the previous year. Gross Stage 3 assets stood at 2.26% (PY 3.00%) and net of
ECL provisions stood at 1.13% (PY 1.57%), as at 31st March, 2023. The Net Stage
3 assets, excluding restructured assets, stood at 0.85% as at 31st March 2023.
The Board of Directors have recommended a final dividend of Rs. 10/-
per share (100%) for the year ended 31st March 2023. This together with interim
dividend of Rs. Nil per share, would aggregate to a total dividend of Rs. 10/- per share
(100%).
Sundaram Asset Management Company Limited (On consolidated basis)
The Demerger petition to demerge the fund accounting business of
Sundaram Fund Services Limited into Sundaram Asset Management Company Limited (wholly
owned subsidiaries) pursuant to Scheme of Arrangement under Sections 230 to 232 of the
Companies Act, 2013 has been submitted to National Company Law Tribunal, Chennai and await
orders. The merger petition to merge SAMC Services Private Limited with Sundaram Alternate
Assets Limited (SAAL) (wholly owned subsidiaries of Sundaram Asset Management Company
Limited) is submitted to National Company Law Tribunal, Chennai and await orders. SAMC
Support Services Private Limited and SAMC Trustee Private Limited, wholly owned
subsidiaries of Sundaram Asset Management Company Limited are under liquidation and await
orders.
Sundaram Trustee Company Limited
Sundaram Trustee Company Limited earned a gross income of Rs. 2.3 cr.,
as against Rs. 1.9 cr., in the previous year and reported a profit after tax of Rs. 1.26
cr. for the year, as against Rs. 0.97 cr. in the previous year. The Company recommended a
dividend of Rs. 252/- per share (2500%) for the year ended 31st March 2023.
LGF Services Limited
During the year, the Company reported a gross income of Rs. 8.14 cr. as
against Rs. 20.10 cr. in the previous year. The profit after tax for the year was Rs. 3.43
cr. as against
Rs. 11.71 cr. in the previous year. The Company recommended a dividend
of Rs. 3/- (30%) per share for the year.
Sundaram Fund Services Limited
Sundaram Fund Services Limited (formerly Sundaram BNP Paribas Fund
Services Limited) earned an income of Rs. 4.6 cr. during the year as against and Rs. 4.84
cr. in the previous year. The Company reported a profit after tax at Rs. 2.26 cr. as
against a profit of Rs. 2.27 cr. in the previous year.
JOINT VENTURE
Royal Sundaram General Insurance Co. Ltd (Royal Sundaram)
Royal Sundaram reported a Gross Written Premium (GWP) of Rs. 3,517 cr.
as compared to Rs. 2,966 cr. in the previous year, representing a growth of 19%. The
Company reported a profit after tax (as per IND AS) of Rs. 44 cr. for the current year as
against Rs. 172 cr. in the previous year. The current year's profit (as per IND AS)
was lower than previous year mainly due to "mark to market loss" of Rs. 78 cr.
(net of tax) on equity investments compared to "mark to market gain" of Rs. 33
cr. (net of tax) and impairment reversal on certain bonds amounting to Rs. 37 cr. (net of
tax) in the previous year. The Company recommended a dividend of Rs. 0.70/- (7%) per share
for the year ended 31st March 2023 (PY: 6% dividend). The Company's
solvency ratio as at March 31, 2023 was at 2.27 times, as against the mandated threshold
of 1.50 times.
BOARD & AUDIT COMMITTEE
The details regarding number of Board meetings held during the
financial year and composition of Audit Committee are furnished in the Corporate
Governance Report. The details of all other Committees are also furnished in the Corporate
Governance Report.
DIRECTORS
Mr. Harsha Viji and Mr. Rajiv C. Lochan, Directors, retire by rotation
and being eligible, offer themselves for re-election.
Mrs. Bhavani Balasubramanian was appointed as an Independent Director
of the Company, to hold office for a term of five (5) consecutive years with effect from
6th February 2023.
KEY MANAGERIAL PERSONNEL
Mr. P.N. Srikant was appointed as Secretary and Compliance Officer of
the Company with effect from 1st June 2022, in the place of Mr. P. Viswanathan,
who retired from the services of the Company on 31st May 2022.
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each Independent
Director of the Company under Section 149 (7) of the Companies Act, 2013 that they meet
with the criteria of their independence laid down in Section 149 (6).
ANNUAL EVALUATION BY THE BOARD
The Board has made a formal evaluation of its own performance and that
of its Committees and individual Directors as required under Section 134(3)(p) of the
Companies Act, 2013.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors confirm that:
1. In the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to material
departures;
2. The Company has selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the end of the
financial year and of the profit of the Company for that period;
3. Proper and sufficient care has been exercised for the maintenance of
adequate accounting records in accordance with the provisions of the Companies Act, 2013
for safeguarding the assets of the Company and for preventing and detecting fraud and
other irregularities;
4. The annual accounts have been prepared on a going concern basis;
5. Adequate internal financial controls have been put in place and they
are operating effectively; and
6. Proper systems have been devised to ensure compliance with the
provisions of all applicable laws and that such systems are adequate and operating
effectively.
AUDITORS
M/s B.K. Khare & Co., Chartered Accountants, Mumbai (Regn. No.
105102W) and M/s N.C. Rajagopal & Co., Chartered Accountants, Chennai (Regn. No.
003398S) have been appointed as Joint Statutory Auditors of your Company, to hold office
for a term of three (3) consecutive years from the conclusion of the 68th
Annual General Meeting to the conclusion of the 71st Annual General Meeting, in
accordance with the Guidelines for Appointment of Statutory Central Auditors
(SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs
(including HFCs) issued by the Reserve Bank of India vide their notification dated 27th
April 2021, at such remuneration as may be mutually agreed to between the Board of
Directors of the Company and the Joint Statutory Auditors.
ACKNOWLEDGEMENT
Your Directors gratefully acknowledge the support and co-operation
extended to your Company by all its customers, depositors, shareholders, and bankers, as
also the various mutual funds, insurance companies, automotive manufacturers and dealers,
oil marketing companies and other stakeholders.
Your Directors also place on record their special appreciation of Team
Sundaram for its dedication and commitment in delivering the highest quality of service to
every one of our valued customers.
|
For and on behalf of the Board |
Chennai 600 002 |
S. VIJI |
26.05.2023 |
Chairman |