It is not just a company. It is an institution. So, what it does and how it does is a subject matter of public interest. T.T. Srinivasaraghavan , MD, Sundaram Finance Ltd., speaks on a variety of issues. Excerpts:
What do you make of the sudden surge in auto sales?
November has historically been a sleepy month in terms of commercial vehicle (CV) sales, coming as it does after the festive season. This time, however, November was surprisingly buoyant. And, December witnessed record numbers, both in the car and the CV segments. Our own disbursements in December set a new record.
While car sales were driven by year-end discounts, the mandatory requirement of AC/blower from January 1 led to pre-buying in the trucking segment. What took us by surprise was the unprecedented scale of the pre-buying.
The overall buying sentiment is definitely better compared to 12 months ago. We are seeing an uptick in terms of commercial vehicle financing, driven by a strong push in infrastructure investment. On the ground, there is visible action across the country, with the thrust on road projects. Oil companies, too, have been awarding contracts and that too is driving sales. Growth in sales of cars and two-wheelers has meant that the trucks carrying these vehicles have seen good growth.
With the trucks getting bigger, how relevant is the unit sales comparison?
A dramatic shift has taken place in the CV segment. Trucks have become progressively bigger. Multi-axle and tractor-trailer trucks are very much the flavour of the times, resulting in a huge increase in carrying capacity per truck. The heavy commercial vehicle segment is today dominated by 31 to 40 tonners, going up to 49 tonners. The day of 60-tonners is probably not too far off.
Hence, today’s one truck is equivalent to yesteryear’s three trucks. While we are seeing an overall growth in medium and heavy commercial vehicle sales, it is unrealistic to expect 20% growth year-on-year, in unit terms.
The dismantling of check posts and the vastly improved quality of our highways has led to higher productivity of trucks. Even a high single-digit growth in CV sales will lead to significant growth in terms of carrying capacity. The recent euphoria over the surge in CV sales should be tempered with the realisation that some of the buying is still being driven by discounting, which could very quickly lead to overcapacity in the trucking sector.
How does one create shareholder value?
Shareholder value is a result of various things you do and don’t do starting from how you run your business to how you manage the diversity. It finally comes down to how much you live your beliefs. Many a time in the life cycle of a business, you come across ‘attractive’ business opportunities, but with a string attached.
That requires you to step outside your clearly drawn lines. Accepting such opportunities could help your bottom line but cause significant dilution of the brand and go completely against the values you held dear. ‘At any cost’ is an abhorrent idea. It is only during crises that your character is tested.
And, it is in those times ‘walking the talk’ becomes critical. It is something that is built for the long-term. When the business environment was really bad, we had, on more than one occasion, consciously taken a decision to shrink our business.
The decision to not chase growth in those difficult times was a shareholder-friendly decision intended to protect the long-term shareholder value. It is from this that we derive our core business philosophy of GQP — growth, quality, profitability.
How do you handle disruptions?
The evolving thinking everywhere seems to be that there will be no predictability any more. One has to accept that as the new reality and learn to adapt. Disruption is seen as the new norm with some even welcoming it as a business driver. In my view however, one has to find a balance in any discourse. Responsible businesses should strive to find a balance between disruption and stability especially since we cater to a diverse, multi-layered base of customers, shareholders, depositors and the like.
With a push towards bank consolidation, what role do you see for non-banking finance companies (NBFCs)?
For long, NBFCs have been seen to be competing with banks. We believe both banks and NBFCs have a distinct and important role to play in achieving financial inclusion. Banks’ greatest strength is their ability to raise resources.
While NBFCs cannot match them on the liabilities side, they have shown great strength and resilience on the assets side. We have an intimate understanding of our customers and the risks associated with our business. One has to be on the ground to understand the market realities. Without ‘smelling the sand’, one cannot get a feel of the trenches.
In a perfect world, banks should be playing the role of a wholesaler and the NBFCs, the retailer. Banks have the resources and NBFCs have the reach and local customer knowledge and they know how to collect. There should be a structured mechanism by which they can work in tandem. The ends of financial inclusion would be well served by this.
