Sundaram Finance Holdings Acquires Majority Stake in Axles India: Impact on Group Growth & Valuation
Business and Industry Overview:
Sundaram Finance Limited is a large finance company in India. It started in 1954 in Chennai. The founder was T.S. Santhanam. It is part of the TVS Group. The company is registered with the Reserve Bank of India (RBI). It is a Systemically Important Deposit Accepting NBFC. That means it can take deposits and is very important for the financial system. The company gives many types of financial services. It gives loans for vehicles like cars, trucks, and tractors. It gives loans to small and medium businesses (SMEs). It also gives home loans, leasing services, and fixed deposits. Sundaram Finance also gives services like wealth management, investment banking, private equity, credit cards, infrastructure finance, and treasury advice. The company has many other businesses too. These are called subsidiaries. Some of them are Sundaram Home Finance (for home loans), Sundaram Asset Management (for mutual funds), Sundaram Finance Holdings (for other investments), and Royal Sundaram General Insurance (for insurance). Sundaram Finance has more than 640 branches in India. It is known for being safe, trusted, and careful in its work. In December 2017, the company’s market value was ₹26,000 crore. By April 2025, the market value became ₹51,616 crore. It is one of the trusted and respected finance companies in India.
Latest Stock News:
Sundaram Finance Holdings Limited (SFHL), part of Sundaram Finance Group, will buy 24.16% stake in Axles India for ₹182.68 crore. After this deal, SFHL’s total share in Axles India will go up to 62.98%, making Axles India its subsidiary. The deal is expected to finish by April 30, 2025. SFHL will buy 61,58,208 shares at ₹296.65 each from Dana Global Products Inc., a foreign promoter. This deal does not include stamp duty or taxes. Also, it is not a related party transaction. Sundaram Finance Limited, the promoter of SFHL, does not directly own shares in Axles India. Axles India makes axle housings for medium and heavy commercial vehicles. The company was started in 1982 and was earlier part of a joint venture with Eaton. Later, Dana Holding Corporation took over Eaton’s axle business. This move fits SFHL’s strategy to grow in the automotive components sector, especially for commercial vehicles. It will help SFHL improve its position and create business benefits (synergies) in this field. SFHL is the investment arm of Sundaram Finance and mainly invests in auto component manufacturing. The group believes in steady growth, financial safety, and high asset quality, not quick expansion.
Potentials:
Sundaram Finance Ltd. has big plans to grow and do well in the future. It wants to stay strong and make steady profits. The company is planning to expand its services and help more people. One of the main plans is to grow its Sundaram Home Finance branch network. The company will open 40 new branches in India. These branches will give out home loans, small business loans, and loans for affordable housing. Sundaram Home Finance will also open 10 branches just for affordable housing and hire 75 new employees to help with this growth. The company is also making a big move in the automotive parts industry. Sundaram Finance Holdings (SFHL) is buying more shares in Axles India. It will buy a 24.16% share for ₹182.68 crore. After this, SFHL will own 62.98% of Axles India, making it a part of SFHL. This is important because Axles India makes parts for heavy trucks. SFHL wants to grow with Axles India, which has been doing well. Sundaram Finance is raising ₹13,000 crore by selling non-convertible debentures (NCDs). This money will help the company lend more and expand its business. The company is also focusing on digital technology. It is making it easier for customers to apply for loans, manage money, and get help online. This will save time and make things simpler for customers. In short, Sundaram Finance wants to grow in many ways. It will open more branches, invest more in Axles India, raise money, and use technology to help customers. These steps will help the company do well in the future.
Analyst Insights:
- Market capitalisation: ₹ 51,616 Cr.
- Current Price: ₹ 4,646
- 52-Week High/Low: ₹ 5,536 / 3,733
- Stock P/E: 31.6
- Dividend Yield: 0.65 %
- Return on Capital Employed (ROCE): 9.21 %
- Return on Equity: 14.2 %
Sundaram Finance Ltd (SFL) shows steady performance, but it may be overpriced at its current price. The P/E ratio of 31.6 is much higher than the industry average. This means the stock is expensive based on its earnings. A high P/E ratio often suggests that investors are paying too much for the stock. This makes the stock riskier for those looking for value. The Return on Capital Employed (ROCE) is 9.21%, lower than the industry average. This means the company is not using its capital efficiently. The company is not generating strong returns from its investments. This could limit its ability to grow in the future. The interest coverage ratio is 2.3x, which is also lower than the industry average. This shows that the company may struggle to pay interest on its debt. If the economy weakens or interest rates rise, it could become harder for the company to meet its debt obligations. The P/B ratio of 4.13 indicates the stock is trading more than four times its book value. This suggests the stock is overvalued based on its assets. Investors may be paying too much for the company’s physical assets. Sundaram Finance’s dividend yield is only 0.65%. This is a low yield compared to other companies. Income investors may not find this attractive. The company does not pay out much in dividends. The company’s debt/equity ratio is 1.2x. This is rising, meaning the company is taking on more debt. If borrowing costs increase, or if the economy slows, the company could face more risk. The stock has underperformed its sector in recent months. The stock price has been falling. This indicates that investors are not very optimistic about the company’s future.
In conclusion, Sundaram Finance Ltd has a good history. But its high valuation, low ROCE, rising debt, and poor performance suggest it may not be a good buy right now. Investors may want to look for stocks with better value and stronger fundamentals.
