Shift to smaller CVs is an opportunity, says Rajiv Lochan

Sundaram Finance MD sees preference for 1-4 tonne segment as hedge against cyclicality in heavy CVs

Sundaram Finance saw a change of guard at the top just as the second wave of the pandemic gripped the nation last year. Rajiv Lochan took over as MD of Sundaram Finance on April 1, 2021 from T.T. Srinivasaraghavan who retired after spending 38 years with the company. Coming close to finishing a year in office, Mr. Lochan highlighted opportunities he saw for the company – small fleet operators going down the size ladder and opting for smaller CVs; and financing of stable asset classes such as passenger vehicles (PVs), both of which would help lessen the impact of the cyclicality of the heavy commercial vehicles business. Further, geographic expansion beyond its traditional core is also on the cards. Excerpts: 

When I took over on April 1 last year, my agenda was one of continuity. Covid had slowed down a number of things. The expectation was to take stock of the opportunities during such a challenging phase and craft the way forward. We are going ahead with the time-tested trinity of Growth, Quality and Profitability, striking a balance among the three and I believe that this will serve us well. My focus is to see if we can take each of these three areas one notch up, given the market opportunities that are available and the capabilities we have built in the customer segments, geographies and asset classes. In the last 15-20 years, we have grown 12-15% compounded annually. We think there is a chance to take this up to 15-18%. We want to build consistency in doing this. We see the next 5-10 years as being an interesting period. Later this decade, Sundaram Finance will turn 75. We are also working towards what should characterise us then. 

One of the strategies is to try and decouple from the commercial vehicle (CV) cycles that we have been subjected to in the past. Just under two decades ago, we began the diversification journey and have come a long way since. In the past, Medium and Heavy CVs (M&HCVs) used to constitute 50-55% of our business. Now it is down to about 40% and we would like to bring that down to one third of our portfolio. The dynamics in the CV space have been changing dramatically with the corporatisation in the M & H CV segment arising out of the introduction of GST and the axle load norms. 

Given where this high-end segment has gone, including in terms of increased tonnage and the high cost of a large truck, many of the small road transport operators, who were previously in the M & H CV segment, are moving into the lower end of the spectrum, into Intermediate CVs and Light CV segments within the CV space. Some of them are also purchasing used vehicles.  That is throwing up new opportunities for us.  

The Small CV (SCV) segment is very interesting with the whole spectrum from the 1-tonne to 4-tonne segment really opening up. We see lots of growth opportunities there. It syncs up very well with our line of purpose of serving the under-banked customer whom we understand. We have been registering a growth of 10-15% in the SCV space. The ticket size has also been moving up. It is a segment that is growing well and becoming meaningful for us.  

Passenger Vehicles contribute to one fourth of our portfolio. It is a stabilising asset class as there is no cyclicality in this segment. The medium-term trajectory looks good for the cars segment as it is a large retail asset class that will only grow given the evolution of the Indian middle class and their aspirations.  

There is a lot of runway in the newer segments such as Construction Equipment, Tractor and Farm Equipment. Each of these is reasonably large in size.