Sundaram Finance Limited 61st Annual Report 2013-14 Sundaram Finance Limited No.21, Patullos Road, Chennai - 600 002, India. www.sundaramfinance.in Sundaram Finance Limited No.21, Patullos Road, Chennai - 600 002, India. www.sundaramfinance.in Board of Directors S Viji Chairman S Ram N Venkataramani P N Venkatachalam S Mahalingam S Prasad S Ravindran Aroon Raman Shobhana Ramachandhran T T Srinivasaraghavan Managing Director Harsha Viji Director (Strategy & Planning) A N Raju Director (Operations) Audit Committee S Prasad Chairman S Ravindran Shobhana Ramachandhran Stakeholders Relationship Committee S Prasad Chairman T T Srinivasaraghavan Nomination, Compensation & P N Venkatachalam Chairman Remuneration Committee S Prasad S Ravindran Aroon Raman Corporate Social Responsibility Committee Aroon Raman Chairman S Ravindran Shobhana Ramachandhran T T Srinivasaraghavan Risk Management Committee T T Srinivasaraghavan Chairman Srinivas Acharya Harsha Viji A N Raju M Ramaswamy Asset Liability Management Committee T T Srinivasaraghavan Chairman Srinivas Acharya Harsha Viji A N Raju M Ramaswamy Chief Financial Officer M Ramaswamy Secretary & Compliance Officer P Viswanathan Registered Office 21, Patullos Road, Chennai - 600 002 • Tel: 044 2852 1181 • Fax: 044 2858 6641 Email: [email protected] • Website: www.sundaramfinance.in CIN L65191TN1954PLC002429 Auditors M/s. Brahmayya & Co., Chartered Accountants, 48, Masilamani Road, Balaji Nagar, Royapettah, Chennai 600 014 Information Security Assurance Services M/s. Tejas Brainware Systems (P) Ltd., ‘Lakshmi Bagh’, New No.28, Old No.19, Second Main Road, C.I.T. Colony, Mylapore, Chennai 600 004 Annual Report 1 2013-14 Management Team Paramesh Krishnaier Executive Director K Swaminathan Advisor – Technology V K Raman Senior Vice President & Head – Group Internal Audit S Ravindran Senior Vice President & Head – Credit Control and Processing Dept. S Srinivasan Senior Vice President & Head – Corporate Finance S Sivakumar Vice President & Head – Administration & Corporate Communications Shridhar Iyer Vice President M J Kulkarni Vice President & Head – Western Region K Sankarakumar Vice President & Head – Distribution D Ravindran Vice President (Sundaram Infotech Solutions) V Ananthanarayanan Chief Information Officer Rajesh Venkat Senior General Manager & Head – Sundaram Business Services H Venkatesan Senior General Manager – Internal Audit N Veeraraghavan Senior General Manager – Information Systems N Ramachandran Senior General Manager & Head – Central Region S Sridhar Senior General Manager – Treasury Subsidiaries Sundaram BNP Paribas Home Finance Limited LGF Services Limited Sundaram Asset Management Company Limited Sundaram Infotech Solutions Limited Sundaram Asset Management Singapore Pte. Ltd. Sundaram Business Services Limited Sundaram Trustee Company Limited Sundaram BPO India Limited Sundaram Finance Distribution Limited Sundaram BNP Paribas Fund Services Limited Infreight Logistics Solutions Limited Sundaram Insurance Broking Services Limited Sundaram Parekh Warehousing Services Limited Bankers State Bank of India IDBI Bank Ltd. State Bank of Travancore Axis Bank Ltd. State Bank of Patiala HDFC Bank Ltd. Bank of India ICICI Bank Ltd. Indian Overseas Bank The Hongkong and Shanghai Banking Corporation Ltd. Canara Bank Standard Chartered Bank United Bank of India Citibank N.A Indian Bank The Royal Bank of Scotland N.V Bank of America Debenture Trustee IDBI Trusteeship Services Limited Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai – 400001 CURRENCY EQUIVALENTS ` One Million = ` 10 Lakhs US$ 1 = Indian ` 60.10* ` One Billion = ` 100 Crores or *RBI Reference Rate as on 31.03.2014 ` 10,000 Lakhs SUNDARAM FINANCE LIMITED 2 Contents Directors’ Report 4 Corporate Governance Report 14 Financial Highlights 34 Independent Auditors’ Report 35 Balance Sheet 38 Statement of Profit and Loss 39 Notes to the Accounts 40 Cash Flow Statement 74 Consolidated Financial Statements Balance Sheet 80 Statement of Profit and Loss 81 Notes to the Accounts 82 Cash Flow Statement 104 Independent Auditors’ Report 106 Annual Report 3 2013-14 Directors’ Report Your directors have pleasure in presenting the 61st Annual Report with audited accounts for the year ended 31st March 2014. The summarised financial results of the Company are given hereunder: FINANCIAL Results: (` in cr.) Particulars Year ended Year ended March 31, 2014 March 31, 2013 Revenue from Operations 2215.48 2063.02 Other Income 98.43 68.76 Total Revenue 2313.91 2131.78 Less: Total Expenses 1667.28 1539.17 Profit before Tax 646.63 592.61 Profit after Tax 442.51 410.11 Surplus brought forward 107.95 67.56 Amount available for appropriation 550.46 477.67 Appropriations have been made as under: Transfers to: – Statutory Reserve 88.50 82.02 – General Reserve 199.00 174.88 Dividend – Interim – 50.00 Final (Proposed) 111.10 50.00 Dividend Tax 14.16 12.82 Surplus carried to balance sheet 137.70 107.95 550.46 477.67 SUNDARAM FINANCE LIMITED 4 CORPORATE GOVERNANCE PAT (` in cr.) • A detailed report on corporate governance, together with 500 – a certificate from the Statutory Auditors, in compliance 443 410 with Clause 49 of the Listing Agreement, is attached as 400 – 355 part of this report. 300 – 257 • Compliance reports in respect of all laws applicable to the Company have been reviewed by the Board of 200 – Directors. 100 – MANAGEMENT DISCUSSION AND ANALYSIS 0 – 2010-11 2011-12 2012-13 2013-14 GLOBAL ECONOMY PAT from continuing operations considered. The early part of the Financial Year 2013-14 witnessed some volatility in the emerging markets in response to the Federal DIVIDEND Reserve’s tapering, but the global economic scenario has since remained stable. While the recovery in advanced economies Your directors are pleased to recommend a dividend of `10/- notably the US, has gathered steam, economic activity in most per share (100% on the face value of `10/-) for the financial emerging market economies has remained below par. Chinese year 2013-14 on the paid-up capital of `111.10 cr. economic growth, a key driver of the global economy for the past few years, moderated, as tighter credit conditions and slowing exports posed significant challenges. The impact of Dividend (` in cr.) tapering of the US quantitative easing program was felt even more sharply in the emerging market economies of South 120 – 111.10 Africa, Brazil, Indonesia and Turkey. Global economic growth 99.99 is projected to improve from 3% in 2013 to 3.6% in 2014, 100 – 100%* 86.11 led predominantly by the advanced economies. 77.77 80 – 90%* INDIAN ECONOMY 60 – 155% For the first time in 25 years, the Indian economy witnessed 140% 40 – its second successive year of below 5% growth, driven predominantly by a decline in financial savings, low business 20 – confidence and sluggish investment demand over successive quarters, resulting in a sharp deceleration in industrial 0 – 2010-11 2011-12 2012-13 2013-14 growth. Rarely has India seen a slowdown of such length and * Dividend is on the enhanced share capital. depth, and the recovery is likely to be a slow and long process. The Index of Industrial Production (IIP) showed a decline Annual Report 5 2013-14 of 0.1% during April 2013 – February 2014, compared with retail inflation, as measured by the CPI, dropping from 9.1% 0.9% growth in the corresponding period of the previous in December 2013 to 6.7% in February 2014, RBI held the year. Growth of core industries, which provide key inputs to policy rates steady in April 2014. Though both the fiscal deficit the industrial sector, remained sluggish at 2.6% during April and CAD have narrowed, many believe that the reduction in the 2013 – February 2014 compared to a growth of 6.4% in the fiscal deficit is merely an accounting adjustment, which will corresponding period a year ago. catch up in the current financial year. The Balance of Payments situation however, appears to be comfortable. India’s exports, buoyed by a weakened rupee, witnessed a revival of sorts in the early part of the year but began to lose AUTOMOTIVE SECTOR momentum and started decelerating from November 2013 and turned negative in February 2014. The Farm sector has During the Financial Year 2013-14, the automotive industry been the one bright spot in an otherwise gloomy picture. in India continued to face weak consumer sentiment which Agricultural GDP grew by 4.9% during April - December impacted the sale of passenger cars and commercial vehicles 2013 and with good winter rainfall and healthy reservoir alike. The Medium and heavy commercial vehicles segment storage, food grain production is estimated to be a record (M & HCV) bore the brunt of the slowdown, registering its 263.2 million tonnes in 2013-14. Unseasonal rainfall in worst performance since 2008-09, with sales plummeting 25% March is said to have caused some damage to crops in parts to 200627 units. This was on top of an already steep decline of Central and South India but the overall impact is unlikely of 23% registered in 2012-13. With freight availability being to be significant. low for most part of the year and freight rates not keeping High interest rates, stubborn retail inflation and lack of policy direction, combined with uncomfortably high fiscal Disbursement and Receivables ` and current account deficits (CAD), left the Government with Under Management ( in cr.) very few options. Faced with compulsions to rein in the fiscal 21000 – deficit, government put the brakes on Plan expenditure, as a 18158 17645 result of which investment and consumption growth declined 18000 – to their lowest levels in 11 years. 15540 15000 – Following the US Federal Reserve’s first hints about tapering its bond buying programme, the Rupee fell to a low of `68.85 12354 12000 – to the Dollar, before RBI's intervention helped it recover to 9991 9719 `61-62. RBI's decision to open a Dollar window for the oil 9433 9000 – companies and introduce a swap arrangement to encourage 7592 overseas deposits, as well as the Finance Ministry’s steps to 6000 – curb gold imports, helped reduce the CAD and raise foreign exchange reserves.