Impact of the second wave
He said that the momentum built up in the third and fourth quarters of FY21 was dealt a blow by the ferocious second wave of the pandemic in April/May 2021, which inflicted significant economic and emotional damage in a short period of 6-8 weeks.
The second wave was met with a series of staggered lockdowns that led to a sharp drop in activity. Again, various monetary, regulatory and fiscal policy measures helped contain the solvency risk of financial entities.
Near Term Prospects Bright
On the outlook, Viji said that the tapering of the second wave coupled with an aggressive vaccination drive has brightened the near-term prospects for the economy, with the adverse economic impact expected to be limited to the first quarter of FY22. “The agricultural sector has turned buoyant with a near-normal monsoon, robust procurement by the government and improved Kharif sowing.”
The re-establishment of GST collections to ₹1 lakh+ crore levels, increases in fertilizer sales, improved e-way bill activity, increases in power & fuel consumption, and growth in eight core industries all point to a sequential improvement in economic activity from the disruptions induced by the second wave.
The upcoming festive season for the automotive sector
The automotive sector is facing challenges on the supply side due to the global shortage of semiconductors, which is adversely impacting the production schedules of most of the large manufacturers and creating disruptions to the supply chain. “Recent pandemic-driven lockdowns in East Asia are compounding the challenge. This, coupled with relatively high input prices on fuel and commodities, presents the risk of a dampener to the upcoming festival season”, Viji said.
Sundaram Finance’s focus
Given this level of uncertainty and volatility, he said that Sundaram Finance’s focus will continue to remain on striking a judicious balance between Growth, Quality and Profitability (GQP), the time-tested trinity that has served the Company well.
“Key priorities will be to support loyal customers tide over the aftermath of the Covid crisis by deploying all measures made available by the regulator and the government, drive collections and recovery efforts to maintain the traditional asset quality levels and preserve capital, and prudently pursuing growth opportunities that emerge as economic activity resumes post-Wave 2 across the well-understood and diversified asset class base that Sundaram Finance has established,” said Viji.
Expect the CV segment to come back strongly
In response to a query from a shareholder, Rajiv Lochan, MD, Sundaram Finance said, “In the CV space, in addition to growth in the M & HCV space, we believe that the SCV and ICV segments will continue to offer growth opportunities. As the economic activity revives, we expect the CV segment to come back strongly. In the Passenger Vehicle segment, we see a long run way as the consumer market matures and grows in India.”
Growth Opportunities in Construction Equipment and Tractor Segment
Rajiv Lochan said that the infrastructure and the rural and agricultural sectors are seeing a substantial and unprecedented level of investment on the back of Government push and policy reform.“We expect this to open up growth opportunities in the construction equipment and tractor segments in the coming years. We have sown the seeds and built a strong foundation in both these segments in the last 15 years. As we come out of the Pandemic, we feel we are well-positioned to take advantage of the significant growth opportunities in these segments arising out of the infra push and far-reaching agri reforms of the Government.”
Established in 1954, Sundaram Finance has today grown into one of the most trusted and diversified financial services groups in India providing financing for commercial vehicles, cars& utility vehicles, tractors and farm equipment, construction equipment, SME finance and a range of working capital products for financing diesel, tyres, insurance as well as working capital for SMEs. Through its subsidiaries and group companies, the company offers home finance, loans against property, mutual funds and investment management solutions and the full range of general insurance products and services. It has a nationwide presence of nearly 600branches, over two lakh depositors and over four lakh customers.