Sundaram BNP Paribas Home Finance Posts Highest Numbers in Industry

Possessing the dream home

Sundaram BNP Paribas Home Finance Posts Highest Growth in Industry
Sundaram BNP Paribas Home Finance Posts Highest Growth in Industry | Source

Housing loan finance companies


Three-Fold Increase in Profit

Sundaram BNP Paribas Home Finance has reported a three-fold increase in its net profit for the quarter ended 31.12.11 compared to the corresponding period of the previous year. Net profit increased to Rs.24.66 crore from Rs.8.02 crore in the corresponding period of the previous year. Disbursement of home loan increased by 63% to Rs.493 crore from Rs.301 crore. As part of its fund raising exercise, the company may raise Rs.300 crore shortly. The company feels that there is a lot of scope in the home loan market in the tier-2 and tier-3 cities of South India. Srinivas Acharya is the Managing Director of Sundaram BNP Paribas Home Finance.

High Book Value

The company’s Registered Office is located at 21 Pattullos Road, Chennai 600 002. Its telephone number is 28521181. Its Corporate Office is located at 46 Whites Road, Chennai 600 014. Its telephone number is 28515267. The company’s paid-up capital stands at Rs.80.15 crore. Its free reserves amount to Rs.175.34 crore. Its debt equity ratio stood at 10.84 as on 30.09.11.

High Growth in Disbursements

Sundaram BNP Paribas Home Finance is confident of retaining its over 60% growth in home loan disbursements. It is unfazed by competition from banks and financial institutions. Compared to the other regions of India, the South Indian realty market has shown tremendous stability. Most of the projects in South India are small in size. Banks enjoy access to cheaper finance whereas standalone housing finance companies like Sundaram BNP Paribas Home Finance will have to depend on market borrowings for growth. Therefore margins of such companies are lesser than that of banks. But profitability is much more for companies like Sundaram BNP Paribas Home Finance compared to banks. This is because the banks advance to many sectors and many of these loans can become NPA. But housing finance companies like Sundaram BNP Paribas Home Finance monitor their loan portfolio meticulously and prevent any loan from falling into an NPA. Therefore profits of such companies are also more than banks.

Corruption in Public Sector Banks

Moreover, there is a lot of corruption in availing a home loan with a nationalised bank as compared to availing it from Sundaram BNP Paribas Home Finance. Therefore Sundaram BNP Paribas Home Finance is able to increase its disbursements due to higher demand. In the last financial year, the company’s disbursements increased to Rs.1211 crore from Rs.742 crore in the previous fiscal year. This was a growth of 63%. This growth rate is very high compared to the industry average of 25%. The company has fixed a disbursement target of Rs.1800 crore for the current fiscal year and is well on its track to achieve the same. The company has the backing of its parent Sundaram Finance. Because of this connection, Sundaram BNP Paribas Home Finance is able to get a customer base among transport customers who are self-employed.

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Strong association with BNP Paribas


Self-Employed People Are Also Granted Home Loans by the Company

Ordinarily, banks refuse to advance home loans to self-employed people. But Sundaram BNP Paribas Home Finance is able to do it readily. It is a case of fools rushing in where angels fear to tread? Not exactly. Sundaram BNP Paribas Home Finance can easily gather information about the creditworthiness of these people applying for home loans as these people would already have been customers of its parent company Sundaram Finance. 40% of the customers of Sundaram BNP Paribas Home Finance belong to the self-employed category. Raising funds has never been a torrid task for Sundaram BNP Paribas Home Finance because of its brand image. It enjoys twin advantage of brand image in the market namely the image of its parent Sundaram Finance, which belongs to the popular TVS group of companies and the image of BNP Paribas. Sundaram BNP Paribas Home Finance also processes the applications fast compared to the banks. Sundaram BNP Paribas Home Finance had 51 branches at the end of last fiscal. It plans to increase this to 75 at the end of the current fiscal year. It has already opened 13 branches during the first half of the current financial year. Sundaram BNP Paribas Home Finance has most of the branches in South India and especially in Tamil Nadu, its home turf.

High Interest Regime May Change

The construction industry in South India is not facing any cash flow problem compared to the builders in other regions in India. This is because of the small size of the projects in South India. Sundaram BNP Paribas Home Finance is not lending money to the real estate developers. It is also avoiding lending to second homes except in rare cases. The high interest rate regime is showing signs of crumbling down. RBI had been raising interest rate in the past in the name of attacking inflation. But that strategy has suppressed growth. Now the RBI has changed its policy and may resort to cutting interest rates to facilitate growth. If this happens, then Sundaram BNP Paribas Home Finance will see increased disbursements.

BNP Paribas Extends Backing to the Company

BNP Paribas exited from the mutual funds joint venture Sundaram BNP MF because of the regulatory reasons. BNP Paribas views its association with Sundaram Finance in the home loan business as one of its best joint ventures globally. BNP Paribas holds 49% stake in Sundaram BNP Paribas Home Finance. The remaining 51% stake is held by Sundaram Finance. BNP Paribas has also associated itself with Sundaram Finance for security services and back end work after exiting the mutual fund venture. As Sundaram BNP Paribas Home Finance is able to raise its funds required for the activities easily and effortlessly and also enjoys the backing of both its partners, there is no likelihood of the company going public in the near future.

Public Can Invest In The Company’s Fixed Deposits Without Fear

Sundaram BNP Paribas Home Finance has a fixed deposit scheme to attract funds. General public can fearlessly deposit their money in such schemes as their money is hundred per cent safe. 20-25 per cent of the deposits of the company come from Trusts. The company has a deposit base of Rs.500 crore. Total loan book of the company is Rs.3000 crore as on last year. Sundaram BNP Paribas Home Finance has 30000 customers. The company’s asset quality is very high. Last year it reported a net NPA of only 0.1%. The company has securitised about 10% of its portfolio. Loans disbursed under the teaser rates constitute around Rs.200 crore for the company. Now the teaser rate has been abolished by the RBI. Sundaram BNP Paribas Home Finance is also seriously thinking financing builders for their projects.

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