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Informist, Friday, Aug. 1, 2025

By Janwee Prajapati

MUMBAI – Sundaram Finance Ltd. is expected to report a higher net interest income for the June quarter, according to brokerages tracking the company. The company's net interest margin is expected to remain flat or at best rise only slightly, despite an increase in the net interest income. While a low cost of funds and a fixed lending rate are expected to help improve the company's net interest margin, sluggish demand in the automotive sector will likely be a drag.

Sundaram Finance is expected to post a standalone net profit of INR 4.51 billion for the June quarter, down more than 17% sequentially but up nearly 47% on year, according to the average of estimates from four brokerages. The highest estimate for the company's net profit is INR 4.89 billion from Nirmal Bang Equities Pvt. Ltd. while the lowest estimate is INR 4.05 billion from IDBI Capital Market Services Ltd.

The company's net interest income for Apr-Jun is expected to rise 3% on quarter and 30% on year to INR 6.89 billion. The highest estimate for net interest income is INR 6.95 billion from Centrum Broking Ltd. The lowest estimate is INR 6.84 billion from IDBI Capital. "Increased rural activity and recent pick up in infrastructure spending by the government are expected to sustain healthy performance in two wheelers, tractors, and construction equipment segments," Centrum Broking said.

However, Sundaram Finance's performance is also likely to be adversely impacted by low demand in the automotive sector with a slowdown across segments. "Tepid volumes in commercial and passenger vehicles and disruption in economic activity are likely to result in a slowdown in growth for auto financiers," Prabhudas Lilladher said. The company's asset quality is also expected to deteriorate.

"The company is expected to see a marginal expansion in its net interest margin backed by (a) decline in cost of funds, with a fixed rate finance book," Nirmal Bang said. The non-banking finance company's net interest margin will likely rise to 5.4%, up 61 basis points on year and down marginally on quarter, according to the brokerage.

The company's pre-provisioning operating profit is expected to grow to INR 6.69 billion, up 41% on year, according to the average of estimates from four brokerages. The company's assets under management are expected to grow 15% on year and 17% on quarter, according to IDBI Capital. The non-bank finance company's total assets under management were INR 514.76 billion as on Mar. 31.

Prabhudas Lilladher expects Sundaram Finance's credit cost to rise 61 bps on quarter but drop 6 bps on year to 0.6%. While the cost-to-income ratio of the auto financier is seen rising 360 bps sequentially, it is expected to fall 340 bps on year to 30.5%, according to Centrum Broking.

Sundaram Finance's borrowings are seen at INR 472.72 billion, up 12% from the year-ago quarter but down 10 bps sequentially, according to Nirmal Bang. The company's loans and advances as of June-end are estimated at INR 529.54 billion, up 16% on year and up 2.9% on quarter, the brokerage said.

Sustainability of growth of assets under management, net interest margin, and asset quality will be the key things to monitor in the non-bank financier's earnings, according to IDBI Capital. Sundaram Finance is scheduled to detail its earnings Monday. On Friday, shares of the company ended at INR 4,568.50 on the National Stock Exchange, down over 2.3% from the previous close. The shares have fallen 14.6% since the company announced its March quarter earnings on May 26. The shares are trading 17.4% below their all-time high of INR 5,535.85.

Of the six brokerage reports on the stock available with Informist, four have a 'hold' recommendation with an average target price of INR 5,076 and two brokerages have a 'sell' recommendation.

Following are the Apr-Jun earnings estimates for Sundaram Finance based on reports from four brokerages in the descending order of the net profit:

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Edited by Nishant Maher

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