 CV Finance - Although disbursements declined 10% YoY, the performance looks stable in the light of volume slowdown in two of its major segment i.e. HCV & cars. Margins improved on increased yields and asset quality continues to be stable.

 Housing finance - Disbursements declined 8% YoY as overall market along with TN remains weak. However, asset quality has been on an improving trajectory since it turned cautious in FY16. GNPA improved by 30bps on sequential basis at 3.1% in Sep19 despite the tough environment.

 Other Subsidiaries - General insurance biz saw better top line growth but negative earnings on provision towards impairment to DHFL bonds of INR 483mn. Sundaram AMC saw decline in AUM on weak macro environment as its equity segment sees net outflows while its debt portion remains stable.

 One off adjustment - Earnings include one-time income of INR 530mn and benefit of lower corporate tax, adjusted earnings growth would be 25% YoY.

Valuation & view

Sundaram Finance's conservative approach to build only healthy and profitable vehicle finance book has resulted in consistent performance despite the ups and downs in CV cycle. Subsidiaries have also been reporting decent numbers, thus aiding overall profitability. They contribute approximately 30% to the total value. Valuations at 2.6x FY21 standalone book still provide room for upside.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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