Sundaram Finance to hive off non-finance business into separate arm

18 Feb 2017

Sundaram Finance Limited (SFL) has decided to hive off its investments in non-financial services into a wholly owned-subsidiary, Sundaram Finance Investments Limited (SFIL).

The board of SFL has given its nod for the de-merger exercise. The demerger of non-financial services investments will help safeguard the regulated financial services assets of the group.

''Sundaram Finance's balance sheet and capital adequacy will remain robust post de-merger and we will continue to seek growth opportunities in the financial services landscape,'' said TT Srinivasaraghavan, managing director of SFL.

SFIL is likely to list on the stock exchanges after the demerger, subject to necessary approvals from regulators and shareholders.

Sundaram Finance Group, which has subsidiaries in auto and home financing, mutual funds, general insurance and financial services distribution, reported a net profit of Rs583 crore on revenues of Rs5,035 crore for the financial year ended 31 March 2016.

Total assets of the company stood at Rs28,027 crore and the company has an estimated net-worth of Rs4,195 crore.

In the last six decades, SFL has invested in various non-financial services businesses, including several investments in automotive and manufacturing businesses as a co-promoter along with TVS group companies.

"Significant investments include listed companies such as Sundaram Clayton, Wheels India, IMPAL and private entities like Brakes India, Turbo Energy. The cumulative investment in these companies (in book value terms) has grown to over Rs150 crore in FY16 from Rs23 crore in FY06 and has yielded a cumulative dividend of Rs199 crore in just the last 5 years," said the company in a press release.

As per the proposal, all shareholders of SFL would receive one share of SFIL free of cost for every share held in SFL as on the record date. The appointed date for the scheme is 1 April 2016.

As a promoter, SFL would hold 26.47 per cent stake in SFIL and the balance 73.53 per cent will be issued to all shareholders of SFL.

"Over the years, our investments in the manufacturing and automotive sectors have not only yielded significant returns, but also demonstrated a strong track record of value creation. We will continue to explore non-financial services investments out of SFIL, both in manufacturing companies and elsewhere. Most importantly, Sundaram Finance's balance sheet and capital adequacy will remain robust post-demerger and we will continue to seek growth opportunities in the financial services landscape," said TT Srinivasaraghavan, managing director, SFL.