With a broad portfolio that includes vehicle financing, home loans, insurance, asset management, and more, Sundaram Finance has become a trusted name for millions of individuals and businesses across India. Sundaram Finance Limited was started as a subsidiary of Madras Motor Insurance Company Limited (renamed as Madras Motor and General Insurance Company Limited-MMGI) on August 11, 1954, under the Indian Companies Act, 1913. It ceased to be a subsidiary of MMGI in 1960.
The company was founded by T.S. Santhanam, son of industrialist T.V. Sundram Iyengar, along with his brothers and close family members and associates. Initially, the company focused on hire purchase financing, marking the beginning of its journey in the financial services sector. The first office of the company was located at 180, Mount Road, Chennai-600002. While the name of the company has remained the same, the status changed from public limited to private limited during 1955 and once again to public limited during 1961.
Initial capital
Sundaram Finance was founded with an initial capital of ₹2,00,000 and it increased to ₹1,00,00,000 by way of rights and bonus shares at the time of listing on the Madras Stock Exchange in 1972. The listing was pursuant to an offer for sale by one of the shareholders of the Company, viz., T.V. Sundram Iyengar & Sons (P) Limited, during 1972. And nearly 95.88% of the present day paid-up share capital of ₹11,10,38,600 was allotted to the shareholders by way of capitalisation of reserves, i.e. bonus shares, according to the first annual report of the company. Interestingly, this company has not raised capital since and has grown over the decades only through internal accruals to the capital.
During the initial years, trucks and bus sales were the primary focus for the company, and it financed only those vehicles for which TVS companies held the franchise. According to details shared by the company, car financing was done only for a select clientele: largely personal friends and the acquaintances of the Managing Director and other members of the Board.
Those days the financing of trucks and buses was chiefly in the hands of traditional moneylenders who invariably charged usurious rates of interest and used strong-arm tactics to enforce collection. The transport operators who were not sufficiently aware of the rules of finance would inevitably spend surplus they made on personal requirements. On August 19, 1954, the first loans were given to SMK Nataraja Nadar, proprietor of Meenambigai Motor Service, Virudhunagar, who borrowed ₹60,000 at 6%, and P. Appavau Pillai of Ratna Motor Service, Dharmapuri, who availed himself of ₹50,000 at 7.5%.
Flexible repayment
In its early years, the company offered flexible repayment plans tailored to the ability of clients. These personalised schemes were crafted after in-depth, one-on-one discussions with the borrowers. In the event of delay in repayment, the company engaged in “heart-to-heart” conversations with borrowers, leading to restructuring of the payment schedule. This personal approach significantly minimised defaults, as borrowers felt supported and understood.
Sundaram Finance was also instrumental in propagating the concept of Equated Monthly Instalment (EMI). According to the details given by the company, while this existed before the company was formed, given that financing of most transport operators was by moneylenders, it was hardly ever put to use. It is learnt that T.S. Santhanam and his team embarked on an exercise to sensitise the borrowers to the benefits of the EMI.
In 1954, when the journey of Sundaram Finance began, raising funds was possible only through sourcing deposits, and banks were not allowed to extend credit to hire purchase companies. At that time, T.S. Santhanam made repeated representations to the Finance Ministry to change the regulation. The SBI Act was amended by Parliament to facilitate lending to NBFCs. And Sundaram Finance was the first finance company to receive bank funding in India from the SBI and remained the only hire purchase company which enjoyed this facility for several years.
Initially, the company operated in Tamil Nadu and Bangalore. Later, the operations spread to Kerala and Andhra Pradesh. In 1985, the company opened its first office in Delhi. Today, it has its presence across India, with over 700 branches, over 1.1 lakh depositors, and over 4.75 lakh lending customers. Over the years, the company established several subsidiaries — Sundaram Asset Management Company Limited (SAMCL) in 1996-97; Sundaram Home Finance Limited in 1999-2000; Sundaram Trustee Company Limited in 2003-04; Sundaram Asset Management Singapore Pte. Limited in 2016-17; and Sundaram Alternate Assets Limited in 2017-18.
The company’s key product lines are deposits, lending and retail distribution of investment, and insurance. The company says, “We are investing in keeping ourselves educated about the various options for alternative fuels and have done a few transactions observing the space with interest and trying to develop greater awareness.”
Access to finance
The Managing Director of Sundaram Finance, Rajiv C. Lochan, says, “Over the next few years, as India makes headway in her journey to a middle-income economy, Sundaram Finance will continue to focus on providing access to finance to small Indian entrepreneurs at fair prices and transparent payment terms.” He adds: “To our customers and employees, our endeavour is to deliver the Sundaram experience in keeping with our ethos. We will remain marathon runners, focused on pursuing growth with quality and profitability for the long term. We will be guided by our enduring values while embracing new age thinking and strive to be the most respected NBFC in India.” With its focus on integrity and sound financial management and commitment to its customers, Sundaram Finance has navigated economic fluctuations, evolving to meet the needs of its customers.
Published - November 17, 2024 10:47 pm IST
