Tag: Sundaram Finance Holdings

Sundaram Finance Holdings seeks to consolidate foundry business

Banking & Finance

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Sundaram Finance Holdings Ltd (SF Holdings) said it has taken steps to consolidate investments in the foundry business.

Increased shareholding

The company has increased its shareholding in Flometallic India. Flometallic has, in turn, filed a scheme of arrangement with the NCLT to merge its operations with those of Brakes India. Along with Dunes Oman (a subsidiary of Brakes India), the merger will create a combined foundry capacity of 1,75,000 tonnes operating at four locations — Sholingur, Naidupeta, Jagadia and the Sultanate of Oman.

“This will create one of the largest ferrous casting businesses in the country and will increase the competitiveness of the foundry business as a whole,” according to a statement.

Portfolio investment

SF Holdings will also make an additional investment of up to €2 million in its portfolio company, Italy-based Mind S.r.l, which focuses on carbon fiber components for the automotive industry in Europe. A year-ago, SF Holdings had invested about ₹24 crore in the company for a 40.6 per cent stake.

The additional investment is to augment working capital needs and invest in further growth, it added.

Profits rise

SF Holdings reported a standalone net profit of ₹11.09 crore for the quarter ended September 30 compared to ₹3.78 crore for the corresponding period of the previous year.

SF Holdings is engaged in the business of making investments — primarily companies in the automotive space — many of them co-promoted with the TVS group. It holds significant investments in companies such as Sundaram Clayton, Wheels India and IMPAL (all listed), and Brakes India and Turbo Energy (both unlisted).

Also see: Sundaram Finance Holdings: Why you should accumulate this oft-ignored small-cap stock

As a result, dividends from portfolio companies form a substantial part of the financial results, according to a statement.

For the half year ended September 30, consolidated net profit was ₹50.86 crore compared to ₹9.41 crore in the year-ago period.

Automotive holdings

Supported by a strong recovery in the automobile sector, the dividend received from portfolio companies was at ₹29.13 crore for the half-year period, already exceeding the full year’s dividend received for FY21 (₹14.13 crore).

“We continue to use the automotive industry down-turn to consolidate our portfolio, investing further into our companies and undertaking business restructuring to unlock synergies in our foundry business,” said Harsha Viji, Director, SF Holdings.

The company’s performance is also an extension of its long-term strategy of consolidating its automotive holdings.

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Sundaram Finance Holdings invests ₹480 cr in buying out stakes in portfolio companies

Banking & Finance

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Sundaram Finance Holdings Ltd (SF Holdings) said it invested about ₹480 crore in consolidating holdings in a few portfolio companies in the past one year or so.

SF Holdings primarily operates as a holding company owning a portfolio of businesses engaged in various aspects of automotive manufacturing. Significant investments include Sundaram Clayton, Wheels India, IMPAL (all listed) and Brakes India and Turbo Energy (both unlisted).

While the performance of portfolio companies is improving, it is still below their results in FY20 due to the downturn in the automotive industry driven by cyclical factors as well as the impact of the pandemic, according to a statement.

“We remain optimistic on the recovery and growth of the automotive sector in the medium term and consequently we expect a recovery in the future results of the company,” said Harsha Viji, Director, SF Holdings.

Consolidating holdings

In the past one year, the holding company utilised the opportunity to further consolidate its long-term holdings in its portfolio. “We have bought out foreign partners in Wheels India and Brakes India with an investment of ₹450 crore,” said TT Srinivasaraghavan, Chairman, Sundaram Finance Holdings Ltd.

The company increased its stake in Wheels India from 13.58 per cent to 23.28 per cent, through an acquisition of an additional 9.70 er cent stake from the foreign partner (Titan Europe) for a total consideration of ₹100 crore. The combined holding of the Indian promoters in Wheels India now stands at 57.53 per cent.

In Q1 this year, SF Holdings completed the acquisition of an additional 7.71 per cent stake in Brakes India Pvt Ltd for a total consideration of ₹350 crore from the foreign partner ZF International, taking its stake from 6.67 per cent to 14.38 per cent. The Indian promoters now own 100 per cent of the company.

The company also consolidated its shareholding in its foundry portfolio by acquiring a 6.84 per cent stake in Flometallic India Pvt Ltd and consequently the stake in Flometallic has increased from 40 per cent to 46.84 per cent.

Carbon fiber biz

SF Holdings made an investment of ₹23.71 crore in the carbon fiber business of Mind S.r.l., Italy for a 40.6 per cent stake.

“The carbon fibre market, though nascent in India now, has solid potential to grow in the long term, and the technology and expertise from Mind S.r.l will help position SF Holdings well in the market. In the long term, the carbon fiber operations could get partially shifted to India, which is expected to decrease manpower cost and expand margins,” said Srivats Ram, Director, SF Holdings.

SF Holdings reported net profit of ₹5.13 crore for the quarter ended June 30, compared to ₹2.85 crore in the year-ago quarter. Revenue stood at ₹10.50 crore (₹9.30 crore). Consolidated profit, including share of associate’s profit, was ₹31.58 crore against a loss of ₹9.89 crore a year ago.

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