Your directors have pleasure in presenting the 58th Annual Report with audited accountsfor the year ended 31st March 2011. The summarised financial results of the Company aregiven hereunder:
| || ||(Rs. in Cr.) |
|Particulars ||Year ended March 31, 2011 ||Year ended March 31, 2010 |
|Income from Operations ||1370.78 ||1204.15 |
|Profit on Sale of Shares || ||25.39 |
|Other Income ||79.63 ||41.42 |
|Total Income ||1450.41 ||1270.96 |
|Less: Total Expenditure ||1020.04 ||947.49 |
|Profit before Tax ||430.37 ||323.47 |
|Profit after Tax ||295.23 ||226.75 |
|Surplus brought forward ||61.02 ||41.96 |
|Transfer from Special Reserve || ||76.00 |
|Amount available for appropriation ||356.25 ||344.71 |
|Appropriations have been made as under: || || |
|Transfers to: || || |
| Statutory Reserve ||59.10 ||45.40 |
| General Reserve ||154.79 ||175.00 |
|Dividend Interim ||38.89 ||33.33 |
|Final (Proposed) ||38.89 ||22.22 |
|Dividend Tax ||4.45 ||7.74 |
|Surplus carried to balance sheet ||60.13 ||61.02 |
| ||356.25 ||344.71 |
* Profit on sale of shares.
** Special Dividend received from a Subsidiary Company.
Your Company paid a tax-free interim dividend of Rs. 7/- per share (70% on the facevalue of Rs. 10/-). Your directors are now pleased to recommend a final dividend of Rs.7/- per share (70% on the face value of Rs. 10/-). This, together with the interimdividend, aggregates to a total dividend of Rs. 14/- per share (140% on the face value ofRs. 10/-) for the financial year ended 31st March 2011, on the paid-up capital of Rs.55.55 cr.
A detailed report on corporate governance together with a certificate from theStatutory Auditors, in compliance with Clause 49 of the Listing Agreement, is attached aspart of this report.
Compliance reports in respect of all laws applicable to the Company have beenreviewed by the Board of Directors.
MANAGEMENT DISCUSSION AND ANALYSIS
The global economy grew at 3.7% in 2010-11, belying earlier expectations of highergrowth. While the Asian economies, with the exception of Japan, grew in excess of 7%, thedeveloped economies such as the US, UK and Europe reported lower growth in the range of 3to 4%. The Asian economies, it may be recalled, were less affected by the recession duringthe last two years thereby enabling a faster return to normalcy. Further, these economieswere supported by strong domestic demand and rapid growth in service exports. The Japaneseeconomy, which was slowly progressing towards recovery, was badly affected by the recentearthquake, tsunami and nuclear accidents. These tragedies are likely to affect the globaleconomy as well, especially the automobile sector. All the emerging economies wereimpacted by rising oil, food and commodity prices forcing several Central Banks to take aseries of anti inflationary measures.
Indias GDP growth in 2010-11 has been estimated at 8.6% with the agriculture,industry and services sectors registering growth rates of 5.4%, 7.8% and 9.5%respectively. GDP growth is estimated to average 8.2% over the 11th Plan as against 7.7%during the previous Plan. Though the performance fell short of the 9% target at thebeginning of the Plan, it is to be viewed in light of the unprecedented crisis whichderailed the global economy. GDP growth during the 12th Plan period has been indicated inthe range of 9 to 9.5%, reflective of the growth imperatives of an emerging economy.
Thanks to the higher than anticipated non-tax revenue from 3G spectrum auctions, thefiscal deficit was lower at 5.1% of GDP for the year 2010-11 and is budgeted to drop to4.6% of the GDP for the year 2011-12. The estimated revenue deficit for the year 2010-11was also lower at 3.4% of GDP. Exports grew by nearly 28.7% during April- March, whileimports have grown at a lower level of 20.3%, indicative of a strong revival in externaltrade. This is expected to continue in the wake of the continuing global recovery anddomestic demand. The current account deficit during the first nine months of the fiscalyear was sharply higher but has since narrowed. With capital inflows projected to behealthy, Indias balance of payments position is likely to remain comfortable.
Inflation, based on Wholesale Price Index (WPI), showed signs of easing from August2010, after remaining in double digits in April - July 2010. With food and commodityinflation remaining high, inflation based on WPI, which came down to 8.3% in February2011, has risen again to 8.55% during May 2011. With global crude oil and commodity pricesremaining volatile, RBI has indicated that inflation is expected to be close to 9% in thefirst half of 2011-12, moderating to 6% by the end of the year. While the bumper crop oflast year and the promise of a normal monsoon this year should address the issue ofadequacy of food grain stocks, storage, distribution and affordability will continue to bechallenges and will have a significant bearing on inflation.
While the Reserve Bank of India has continued the process of exiting from theexpansionary monetary policy, it has focussed its attention on controlling inflation.Between April 2010 and May 2011, RBI revised its policy rates seven times, raising Reporates from 5.25% to 7.25% and Reverse Repo rates from 3.75% to 6.25%.
The stance of the monetary policy announced by RBI in May 2011 is clearly aimed atinflation targeting. The key priorities as set out by the policy are:
1. To maintain an interest rate environment that moderates inflation and anchorsinflation expectations.
2. To foster an environment of price stability that is conducive to sustaining growthin the medium-term, coupled with financial stability.
3. To manage liquidity in order to ensure that it remains broadly in balance, withneither a large surplus diluting monetary transmission nor a large deficit choking offfund flows.
Sales of medium and heavy commercial vehicles (M/HCV) registered an increase of 32%during 2010-11, aided in large measure by the new emission norms that took effect fromOctober 2010, as against 33% during 2009-10. Sales of light commercial vehicles (LCV)witnessed a lower growth rate of 23% as against 43% during 2009-10. Sales of Cars andmulti-utility vehicles (PCs) recorded 29% growth in 2010-11 as against 25% in 2009-10.
OPERATING & FINANCIAL PERFORMANCE
Your Companys hire purchase and loan disbursements at Rs. 7478 cr. for the year,registered a growth of 28%, over the previous years figure of Rs. 5834 cr. withM/HCVs and PCs being the key drivers of growth. Your Company has also increased itspresence in the rapidly growing Construction Equipment (CE) and Tractor segments. Thecompanys unwavering focus on asset quality backed by finely honed credit appraisaland collection skills has ensured that the portfolio continues to be one of the best inthe industry. Gross NPAs as at 31st March, 2011 stood at 0.77% as against 1.26% in theprevious year and Net NPAs at 0.20% as against 0.45% in the previous year.
The gross receivables managed by the Company, including assets sold or securitisedstood at Rs. 12354 cr. as at 31st March 2011, as against Rs. 10219 cr. in the previousyear.
The net profit from operations was Rs. 257.50 cr. as against Rs. 201.36 cr. in theprevious year (excluding special items), registering a growth of 28%. The companysNet-Worth crossed the Rs. 1500 cr. mark and stood at Rs. 1529.34 cr. as on 31.3.2011.
Capital Adequacy (CRAR) at 16.24% was comfortably higher than the statutory requirementof 12%. Last year, your Company started making a voluntary general provision at 0.4% ofStandard Assets. During the year, RBI has mandated a contingent provision against StandardAssets at 0.25%. Your Directors have decided, as a measure of prudence, to continue withthe provision at the higher level of 0.4% and transferred an amount of Rs. 6.46 cr.towards contingent provision on Standard Assets.
During the year, your Company mobilised fresh deposits aggregating to Rs. 260.24 cr.Renewal of deposits during the year amounted to Rs. 384.80 cr. representing 75% of thematured deposits of Rs. 512 cr. Deposits outstanding at the year-end were at Rs. 1192.03cr. as against Rs. 1094.91 cr. in the previous year.
As at 31st March 2011, 3512 deposits amounting to Rs. 12.63 cr., had matured forpayment and were due to be claimed or renewed. After close follow-up, the figures arecurrently down to 2147 and Rs. 6.83 cr. respectively. Steps are continuously being takento arrange for repayment or renewal of these deposits. Investor Relation Services Deposits has been re-certified by Bureau Veritas Certification (India) Private Limitedunder the upgraded ISO 9001:2008 Standard.
b) Term Funding
During the year, your Company raised term funding from mutual funds and insurancecompanies in the form of non-convertible debentures and term loans from banks to the tuneof Rs. 3155.95 cr., across various tenors.
c) Bank Finance
Your Companys bankers continue to extend their support, providing funding atcompetitive rates. Your Company issued several tranches of Commercial Paper aggregating toRs. 2670 cr., during the year. The maximum amount outstanding at any time was Rs. 1290cr., and the amount outstanding at the end of the year was Rs. 580 cr. As part of itsoverall funding plan, your Company reduced its working capital credit limits with banksfrom Rs. 1650 cr. to Rs. 1500 cr.
d) Sell-down of Receivables
During the year, your Company sold hire purchase and hypothecation loan receivables tothe extent of Rs. 750.94 cr.
All the borrowings of the Company are rated. The short term borrowings (includingcommercial papers) are rated "A1+/ P1+/ F1+" (highest safety). Fixed Depositsare rated "AAA" (highest safety). The long term borrowings are rated"AA+" (high safety). The long term ratings have a "Stable outlook"from ICRA, CRISIL and FITCH.
During the year, RBI announced several changes in the regulatory guidelines applicableto NBFCs. Notable among these are:
Increase in CRAR from 12 to 15% for all NBFCs by 31st March 2012.
Contingent Provision of 0.25% on Standard Assets.
Removal of Priority sector status for Bank lending to NBFCs other than MFIs.
RBI has set up a Working Group on NBFCs under the Chairmanship of Smt. Usha Thorat,former Deputy Governor, RBI, to examine a range of emerging issues pertaining toregulation of the NBFC (non-banking financial companies) sector. The broad terms ofreference of the Working Group are:
to focus on the definition and classification of NBFCs.
to address regulatory gaps and regulatory arbitrage.
to maintain standards of governance in the NBFC Sector and appropriate approachto NBFC supervision.
Over a period spanning nearly 70 years, Asset financing NBFCs have played a stellarrole in delivering affordable credit to large sections of the unbanked population,especially in semi urban and rural areas and were perhaps the earliest practitioners ofwhat is today fashionably called Financial Inclusion. It is to be hoped thatthe Working Group will take into account the heterogeneity of the sector, the vitalcontribution of the asset financing NBFCs in fostering financial inclusion and address thevarious issues that have been raised by them over the years, in order that they maycontinue to play their important role in Indias growth story.
The Index of Industrial Production has been on a declining trend for several months andworryingly, the capital goods index, an indicator of new investment, actually fell by18.4% in February 2011. The relentless increase in interest rates over the past year hasalready started exerting pressure on corporate and retail borrowers alike. The rise infunding costs comes at a time when manufacturing segments of industry are already understrain with rising costs of oil, commodities and other inputs. Similarly, as inflationstretches the wallets of families grappling with higher prices of food and otheressentials on the one hand and their commitments on vehicle and home loans climbing, thestrains are very visible. As always, global events, oil and commodity price movements, geopolitical factors and inevitably, the behaviour of the monsoon, will all come to bear onthe trajectory of Indias economic growth in 2011-12.
The automotive industry, coming off two successive years of high growth, is exhibitingclear signs of slowing down. With fleet replacements having been largely completed tocomply with emission norm changes and demand for consumer goods beginning to moderate,sales of M/HCVs are projected to grow at between 5 and 8% in 2011-12. With prices ofM/HCVs having increased by nearly 10% over the past year, the imminent increase in dieselprices and higher interest costs, sentiment in the M/HCV segment is muted. Sales ofpassenger cars and utility vehicles are also projected to seek a lower trajectory, as perthe industrys own estimates. The LCV / mini LCV, construction equipment and tractorsegments are however expected to continue growing at a healthy pace.
Your companys fortunes are closely linked to those of the automotive industry.Consequently, the growth prospects for 2011-12 are likely to be broadly reflective ofthose trends. In the projected scenario of low to moderate growth, continuing inflationand higher interest costs, your Company will continue to strive for meaningful growth,focussing as always on, delivering outstanding customer service, superior credit quality,a balanced portfolio mix and efficient cost management, in order to sustain profitability.
As part of the effort to evaluate the effectiveness of the internal control systems,your Companys internal audit department reviews all the control measures on aperiodic basis and recommends improvements, wherever appropriate. The internal auditdepartment is manned by highly qualified and experienced personnel and reports directly tothe Audit Committee of the Board. The Audit Committee regularly reviews the audit findingsas well as the adequacy and effectiveness of the internal control measures. Additionally,an Information Security Assurance Service is also provided by independent externalprofessionals. Based on their recommendations, the Company has implemented a number ofcontrol measures both in operational and accounting related areas, apart from securityrelated measures.
Your Company, being in the business of financing of commercial vehicles, cars, othervehicles and equipment in the retail segment, has to manage various risks. These risksinclude credit risk, liquidity risk, interest rate risk and operational risk. The RiskManagement Committee and the Asset Liability Management Committee review and monitor theserisks at periodic intervals.
The Company manages credit risk through stringent credit norms established throughseveral years of experience in this line of business and continues to follow the timetested practice of personally assessing every borrower, before committing to a creditexposure. This process ensures that the expertise in lending operations acquired by theCompany over decades is put to best use and acts to mitigate credit risks. Liquidity riskand interest rate risk arising out of maturity mismatch of assets and liabilities aremanaged through regular monitoring of the maturity profiles. The Company monitors ALMperiodically to mitigate the liquidity risk. The Company also measures the interest raterisk by the duration gap method.
Operational risks arising from inadequate or failed internal processes, people andsystems or from external events are adequately addressed by the internal control systemsand are continuously reviewed and monitored by a dedicated team of people. Processimprovements and quality control are on-going activities and are built into theemployees training module, as well.
The technology platform supporting the business is being redesigned and upgraded instages to meet the long term future needs. The new system and the Business Continuity Planof the Company are on continuous review by the independent systems auditors.
Your Company believes that its greatest assets are its people and training is aninvestment in long term people development, for organisational excellence. During the yearunder review, your Company has taken several new initiatives to ensure that the knowledgeand wisdom gained over decades is handed down to the next generation of employees. A wellbalanced mix of domain knowledge and behavioural training was taken up towards talenttransformation. These initiatives have paid good dividends in the form of a strong groupof in-house facilitators of domain knowledge and an inspired team of employees geared toserving the needs of your companys valued customers.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements, drawn up in accordance with the applicableAccounting Standards, form part of the Annual Report.
In accordance with the general exemption granted by the Central Government underSection 212(8) of the Companies Act, 1956 in February 2011, the Balance Sheet, Profit andLoss Account, Report of the Board of Directors and Report of the Auditors of theSubsidiary Companies, are not attached to the Balance Sheet of your Company. The financialinformation relating to all the Subsidiary Companies, in the aggregate, has been disclosedin the consolidated financial statements, as required. Further,
The annual accounts of all the Subsidiary Companies have been posted by yourCompany on its website www.sundaramfinance.in.
Annual accounts of the Subsidiary Companies and related detailed informationwill be available for inspection by the members, at the head offices of the Company andthe Subsidiary Companies concerned and will also be made available to the members uponrequest.
Sundaram BNP Paribas Home Finance Limited
The company, approved loans aggregating to Rs. 1496 cr. as against Rs. 915 cr. in thePrevious Year (PY), while disbursements at Rs. 1211 cr. (PY Rs. 743 cr.), grewsignificantly by 63%. The company earned a gross income of Rs. 308 cr. (PY Rs. 236 cr.)and reported an impressive 72% growth in profit after tax at Rs. 47.68 cr. (PY Rs. 27.72cr.). The loan portfolio as at 31st March 2011 stood at Rs. 2653 cr. as against Rs. 1981cr. in the previous year. The gross and net NPA stood at 0.29% and 0.09% respectively asof 31.03.11, clearly one of the best in the industry. The company proposed a higherdividend of 15% for the year as against 10% during the previous year.
Sundaram Asset Management Company Limited
Sundaram BNP Paribas Asset Management Company Limited and Sundaram BNP Paribas TrusteeCompany Limited became wholly owned subsidiaries of your company from October 2010,consequent to the acquisition of 49.90% equity shares held by the joint venture partner,BNP Paribas Asset Management, France in these companies. The names of the companies werethereafter changed to Sundaram Asset Management Company Limited and Sundaram TrusteeCompany Limited respectively.
The Average Assets under Management (AUM) of Sundaram Asset Management Company Ltd.were Rs. 13946 cr. for the year 2010-11 as compared to Rs. 13878 cr. in the previous year.The investor base of Sundaram Asset Management Company Limited stands at 2.22 million.
Sundaram Asset Management Company Limited earned a gross income of Rs. 122.40 cr. asagainst Rs. 111.83 cr. in the previous year. Reflecting the volatility in the stock marketand several regulatory changes, the company reported a profit after tax of Rs. 13.36 cr.as against Rs. 20.84 cr. in the previous year. The company recommended a dividend of 25%for the year as against 40% during the previous year.
Sundaram Trustee Company Limited
Sundaram Trustee Company Limited earned a gross income of Rs. 129.18 lakhs as againstRs. 124.10 lakhs in the previous year and reported a profit after tax of Rs. 40.90 lakhsfor the year, as against Rs. 42.15 lakhs in the previous year. The company recommended ahigher dividend of 800% for the year as against 600% during the previous year.
Sundaram Finance Distribution Limited (SFDL)
SFDLs income from operations at Rs. 7.79 cr. (PY Rs. 5.61 cr) grew by 39% overthe previous year. During the year, SFDL divested its holdings in Credit Analysis andResearch Limited (CARE), resulting in a profit of Rs. 50.15 cr. (net of tax outgo).Consequently, the profit after tax for the year was higher at Rs. 54.33 cr as against Rs.1.97 cr. in the previous year.
During February 2011, SFDL paid a Special Interim Dividend of 7770% which was treatedas final dividend for the year as against 225% paid during the previous year.
LGF Services Limited
During the year, LGF Services Limited earned an income from operations of Rs. 4.95 cr.as against Rs. 5.59 cr. in the previous year. The profit after tax for the year was higherat Rs. 1.92 cr. as against Rs. 1.83 cr. in the previous year. The company recommended adividend of 500% for the year, in line with the previous year.
Sundaram Infotech Solutions Limited
The company earned a gross income of Rs. 21.22 cr., as against Rs. 18.82 cr. in theprevious year. The profit after tax for the year was at Rs. 0.83 cr. as against Rs. 1.31cr. in the previous year.
Sundaram Business Services Limited (SBSL)
During the year, SBSL earned a gross income of Rs. 22.82 cr., as against Rs. 19.91 cr.in the previous year. The company reported a loss of Rs. 1.51 cr. as against Rs. 3.11 cr.in the previous year. The company remains focused on the Banking, Financial Services andInsurance segments and the Accounting and Payroll horizontals. The company has embarked onfurther business development efforts in Australia and expects to make further progressduring 2011-12.
Professional Management Consultants Limited (PMC)
During the year, PMC earned a gross income of Rs. 4.83 cr. as against Rs. 4.87 cr. inthe previous year. The company enforced strict cost control which resulted in profit ofRs. 2.38 lakhs as against loss of Rs. 68.98 lakhs in the previous year. The company hasstepped up its business development efforts and expects to make further progress duringthe year 2011-12.
Sundaram BNP Paribas Fund Services Limited
Sundaram BNP Paribas Fund Services Limited successfully completed the process ofmigration in relation to a few schemes of Sundaram Asset Management Company Limited fromits existing service provider and the operations in respect of those schemes went livewith effect from 6th December 2010. The company handled 24 New Fund Offers aggregating toRs. 1755.21 cr. from 32,436 investors. The company earned an income of Rs. 3.66 cr. duringthe year as against Rs. 1.13 cr. for the period ended October 2009 to March 2010. Thecompany is servicing 92 schemes amounting to Rs. 3393 cr. in assets. The company reporteda loss of Rs. 17.02 cr. during the year as against Rs. 2.22 cr. for the period endedOctober 2009 to March 2010.
Infreight Logistics Solutions Limited (Infreight)
During the year, Infreight earned a gross income of Rs. 19.16 cr. as against Rs. 17.26cr. in the previous year. The company continued its efforts to streamline its businessoperations to further increase the productivity and reduce operating loss.
The efforts yielded satisfactory results. Loss for the year was at Rs. 1.27 cr. asagainst Rs. 2.07 cr. in the previous year.
The company has since transitioned contracts relating to select transportation clientsfor a consideration of Rs. 4.75 cr., which was used for settling a major portion of theirborrowings which would reduce the interest burden and strengthen the financials of thecompany.
Sundaram Parekh Warehousing Services Limited
Sundaram Parekh Warehousing Services Limited was incorporated in August 2010 byInfreight Logistics Solutions Limited as its subsidiary with 51% shareholding and ParekhIntegrated Services Pvt. Ltd., holding the balance with the objective of providing fullfledged high-end warehousing services across the country. Parekh Integrated Services Pvt.Ltd. is one of the largest distribution and logistics company catering to specialisedindustry like pharmaceuticals, which will make available its expertise in operatingwarehousing facilities across the country. The company proposes to take on leasewarehousing facilities at different locations and is expected to become operational duringthe financial year 2011-12.
Sundaram Insurance Broking Services Limited
Sundaram Insurance Broking Services Limited was incorporated as a subsidiary of yourCompany on 15th November 2010 to provide insurance broking services. The company is yet tocommence its operations.
Royal Sundaram Alliance Insurance Company Ltd (Royal Sundaram)
Royal Sundaram posted a top-line growth of 25 percent with a Gross Written Premium(GWP) of Rs. 1143.99 cr., during the year, as compared to the GWP of Rs. 913.11 cr., inthe previous year. The Company has also recorded a healthy Profit before Tax (before motorpool loss) of Rs. 60.93 cr., registering a growth of 18 percent over the last year.
However, in March 2011 IRDA announced a steep increase in loss ratios for the thirdparty motor pool, requiring the company to make a higher provision of Rs. 75.81 cr. forthe year, as against Rs. 17.67 cr., in the previous year. Hence, after making provisionfor tax and motor pool losses, the company reported a loss of Rs. 20.14 cr. for the yearas against profit of Rs. 30.97 cr. in the previous year.
Your Company has been receiving enquiries regarding its continuance in the generalinsurance business and its investment in Royal Sundaram Insurance Company. Your Companywishes to clarify that while preliminary discussions had taken place in connection with apotential divestment, no further progress has been made, in view of the lack of clarity onthe regulatory front, regarding mergers and acquisitions.
BNP Paribas Sundaram Global Securities
Operations Private Limited
BNP Paribas Sundaram Global Securities Operations Private Limited earned gross incomeof Rs. 54.38 cr. during the year as against Rs. 24.75 cr. for the six months ended March2010.
The company reported a profit after tax of Rs. 6.42 cr. during the year as against Rs.4.31 cr. for the six months ended March 2010. The company recommended a dividend of 67%for the year ended 31st March 2011 as against 44% for the six months ended 31st March2010.
Sri S Narayanan, a Director of your Company, retired from the Board on 24th September2010. Your directors place on record the sterling contribution made by him to the growthand development of your Company through his wealth of knowledge and experience during hislong tenure of over 24 years as a Director of your Company.
Sri N Venkataramani and Sri P N Venkatachalam were co-opted as independent directorsduring the year. Sri Harsha Viji was co-opted as additional director and appointed asDirector (Strategy & Planning) with effect from 24th September 2010.
Sri Srinivas Acharya and Sri S Ravindran retire by rotation and, being eligible, offerthemselves for re-election. Sri T R Seshadri, Director, who retires by rotation has notoffered himself for re-election. Your directors place on record the immense contributionmade by him to the growth and development of your Company through his rich experience andexpertise in financial sector during his tenure of 16 years as a Director of your Company.The Board recommends that the vacancy caused by his retirement not be filled.
Sri N Venkataramani, Sri P N Venkatachalam and Sri Harsha Viji hold office asAdditional Directors up to the date of the ensuing Annual General Meeting. The Company hasreceived due notices from some members, proposing their appointment as directors of theCompany.
M/s Brahmayya & Co., Chartered Accountants, Chennai, retire and are eligible forre-appointment. A certificate under Section 224(1B) of the Companies Act, 1956 has beenreceived from them.
INFORMATION AS PER SECTION 217(1) (e) OF THE COMPANIES ACT, 1956
Your Company has no activity relating to conservation of energy or technologyabsorption. During 2010-11, expenditure in foreign currencies amounted to Rs. 16.94 lakhson account of other charges. Foreign Currency earnings amounted to Rs. 68.41 lakhs.
In accordance with the provisions of Section 219 (1) (b) (iv) of the Companies Act,1956, the Directors Report is being sent to all the shareholders of the Companyexcluding the annexure prescribed under Section 217(2A) of the Companies Act. The saidannexure, is available for inspection by the Members at the Registered Office of theCompany during office hours till the date of the Annual General Meeting.
SUNDARAM FINANCE EMPLOYEE STOCK OPTION SCHEME
Your Board of Directors, based on the recommendations of the Compensation Committee,granted 16,500 stock options to its eligible employees, on 30.05.2011. The disclosurerequired under SEBI Guidelines, in this regard, is furnished in the Annexure.
DIRECTORS RESPONSIBILITY STATEMENT
Your directors confirm that:
1. in the preparation of the annual accounts, the applicable accounting standards havebeen followed;
2. they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent, so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit of the Company for that period;
3. they have taken proper and sufficient care for the maintenance of adequateaccounting records, in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and
4. they have prepared the annual accounts on a going-concern basis.
CORPORATE SOCIAL RESPONSIBILITY
The Sundaram Finance Group is involved in a number of community focused activities thatexemplify its strong commitment to society at large. Some of the major initiatives thatthe Group is involved in, are in the areas of health, education and promotion of thecountrys rich culture and heritage.
Your Company has been deeply involved with the Sundaram Medical Foundation, anon-profit Trust that runs the Dr. Rangarajan Memorial Hospital, since its inception. Thehospital occupies an eminent position in the healthcare sector of India as a model ofcost-conscious, affordable, healthcare delivery and corporate involvement in socialprojects. For the past 14 years, the Group has also been associated with the Hindu MissionHospital in Tambaram, Chennai that caters to the medical needs of under served ruralcommunities. Cancer, schizophrenia, kidney and ophthalmic care are some of the otherhealth care causes that the Group supports through organisations such as the CancerInstitute, Cancer Relief Society, Schizophrenia Research Foundation, Tanker Foundation andSankara Nethralaya.
Foremost among the many causes that the Group is involved with, in the field ofeducation, is Laxmi Charities, established 37 years ago. A charitable educationalinstitution, it assists meritorious students from the lower income groups to pursue highereducation. Over the nearly four decades of its existence, this institution has assistedover 34000 deserving and needy scholars in pursuing their careers. The Group has also beenactively supporting several schools, colleges, Universities and NGOs involved in primaryeducation.
Environment, Heritage, Culture and Sports
The Group is also involved in a wide spectrum of activities ranging from the upkeep andmaintenance of a public park in the heart of Chennai, ecology awareness campaigns, to ahost of activities aimed at encouraging childrens participation in art and craft,music and personality development, through year round programmes. The Group is alsoclosely involved with a popular annual festival that showcases folk art, music and dance,again with emphasis on children and an All-India Veterans Tennis tournament.
Your directors gratefully acknowledge the support and co-operation extended to yourCompany by all the customers, depositors, shareholders, bankers, mutual funds, automotivemanufacturers and vehicle dealers.
For nearly six decades, your Company has grown on the strong foundation of a set ofvalues that we call the Sundaram Way. It is these values that have been ouranchor in difficult times and our beacon when we have forged ahead on the path to growth.This would not have been possible without the complete dedication and unswervingcommitment displayed by the employees of the Company, thus enabling it to report a strongperformance during the year.
| ||For and on behalf of the Board |
|Chennai 600 002 ||S VIJI |
|30th May 2011 ||Chairman |
Disclosure under Clause 12 of the Securities and Exchange Board of India (EmployeeStock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
|S. No ||Particulars ||Sundaram Finance Employee Stock Option Scheme - 2008 |
|(a) ||Options Granted ||44,250 |
|(b) ||The pricing formula ||Rs. 10/- per share (at par) |
|(c) ||Options vested ||10,500 |
|(d) ||Options exercised ||10,500 |
|(e) ||The total number of shares arising as a result of exercise of Option ||10,500 |
|(f) ||Options lapsed ||Nil |
|(g) ||Variation of terms of Options ||Not Applicable |
|(h) ||Money realized by exercise of Option ||Rs. 1,05,000/- |
|(i) ||Total number of Options in force ||33,750 |
|(j) ||Employee-wise details of Options granted on 28th May 2010 (Grant 2) & 30th May 2011 (Grant 3) || |
| ||(i) Senior Managerial Personnel: || |
| ||1 Sri. S Venkatesan ||2,750 |
| ||2 Sri. P S Raghavan ||1,500 |
| ||3 Sri. A N Raju ||4,500 |
| ||4 Sri. Paramesh Krishnaier ||3,500 |
| ||5 Sri. K Swaminathan ||2,000 |
| ||6 Sri. M Ramaswamy ||4,000 |
| ||7 Sri. S Ravindran ||750 |
| ||8 Sri. P Viswanathan ||2,750 |
| ||9 Sri. S Srinivasan ||1,750 |
| ||10 Sri. S Sivakumar ||750 |
| ||11 Sri. Shridhar Iyer ||1,000 |
| ||12 Sri. M J Kulkarni ||1,500 |
| ||(ii) Any other employee who receives a grant in any one year of Option amounting to 5% or more of Option granted during that year: || |
| ||1. Sri T P Raman, Managing Director, Sundaram Asset Management Company Limited ||2,500 |
| || || |
| ||2. Sri Srinivas Acharya, Managing Director, Sundaram BNP Paribas Home Finance Limited ||4,500 |
| ||(iii) Identified employees who were granted Option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant ||Not Applicable |
|(k) ||Diluted earnings per share (EPS) pursuant to issue of shares on exercise of Option calculated in accordance with Accounting Standard (AS) 20 Earnings Per Share ||Not Applicable |
|(l) ||Where the Company has calculated the employee compensation cost using the intrinsic value of the stock Options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the Options, shall be disclosed. ||Rs. 0.08 lakh |
| ||The impact of this difference on profits and on EPS of the Company shall also be disclosed. ||Impact on Profit - would be less by Rs. 0.08 lakh. |
| || ||Impact on EPS - Nil. |
|(m) ||Weighted average exercise prices and weightage average fair values of Options shall be disclosed separately for Options whose exercise price either equals or exceeds or is less than the market price of the stock. ||Grant 1 ||Grant 2 |
| || ||Rs. 10/- per share (at par) and Fair Value is Rs. 266.51 ||Rs. 10/- per share (at par) and Fair Value is Rs. 385.50 |
|(n) ||A description of the method and significant assumptions used during the year to estimate fair values of Options, including following weighted average information: ||Black Scholes Model ||Black Scholes Model |
| ||(i) risk free interest rate, ||4.13% ||5.07% |
| ||(ii) expected life, ||368 days ||369 days |
| ||(iii) expected volatility, ||55.92% ||38.27% |
| ||(iv) expected dividends, and ||No dividend rights during the vesting period. ||No dividend rights during the vesting period. |
| ||(v) the price of the underlying share in market at the time of Option grant. ||Rs. 276.10 ||Rs. 395.00 |
(Rs. in Cr.)
|Year ||Paid-up Capital ||Reserves ||Deposits ||Total Receivables ||PBDT ||PAT ||Dividend ||Dividend |
| || || || || || || ||% ||Amount |
|1954 ||0.02 || ||0.10 ||0.10 || || || || |
|1972 ||1.00 ||0.58 ||8.35 ||9.86 ||0.73 ||0.30 ||16.00 ||0.16 |
|1976 ||1.50 ||0.99 ||13.57 ||19.87 ||1.78 ||0.67 ||16.00 ||0.24 |
|1978 ||2.00 ||1.37 ||14.65 ||27.18 ||2.01 ||0.77 ||18.00 ||0.36 |
|1982 ||3.00 ||3.00 ||45.20 ||76.60 ||4.28 ||1.58 ||20.00 ||0.60 |
|1986 ||6.00 ||6.59 ||104.10 ||184.66 ||10.35 ||2.67 ||16.00 ||0.96 |
|1990-91 ||12.00 ||30.24 ||201.02 ||483.21 ||34.69 ||12.01 ||25.00 ||3.00 |
|1995-96 ||24.00 ||204.31 ||550.44 ||1637.05 ||127.50 ||64.92 ||35.00 ||8.40 |
|2004-05 ||27.78 ||655.22 ||740.25 ||4488.30 ||144.55 ||75.99 ||75.00 ||21.87 |
|2005-06 ||27.78 ||783.06 ||627.98 ||5452.18 ||227.21 ||170.59@ ||135.00# ||37.50 |
|2006-07 ||27.78 ||850.10 ||658.47 ||7327.02 ||165.01 ||100.47 ||105.00 ||29.17 |
|2007-08 ||27.78 ||1015.15 ||756.62 ||8925.05 ||333.02 ||212.54@ ||150.00 ||41.67 |
|2008-09 ||55.55 ||1097.12 ||940.06 ||9203.53 ||257.47 ||150.73 ||65.00 ||36.11 |
|2009-10 ||55.55 ||1260.57 ||1094.91 ||10218.80 ||368.29 ||226.75@ ||100.00 ||55.55 |
|2010-11 ||55.55 ||1473.79 ||1192.03 ||12354.38 ||485.06 ||295.23$ ||140.00 ||77.77 |
# includes 50% Special Dividend
@ includes profit on sale of shares - Rs. 88.13 cr., Rs. 76.82 cr., and Rs. 25.39 cr.,respectively.
$ includes Special Dividend received from a Subsidiary Company - Rs. 38.85 cr.