Saranya Sairajan Finance

7/31/2019 Saranya Sairajan Finance

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A STUDY ON HIRE PURCHASE AND LEASING BUSINESS OF SUNDARAM

FINANCE LIMITED

By

SARANYA SAIRAJAN.C

Registration Number: 30410631052

Of

EASWARI ENGINE ERING COLLEGE, CHENNAI

A Project Report Submitted

to the

FACULTY OF MANAGEMENT STUDIES

In partial fulfillment of the requirements

for the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

ANNA UNIVERSITY: CHENNAI 600 025

JULY 2012


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BONAFIDE CERTIFICATE

Certified that this Project titled A STUDY ON HIRE PURCHASE AND LEASING BUSINESS OF

SUNDARAM FINANCE LIMITED is the Bonafide work of Ms.SARANYA SAIRAJAN, Who carried out the

research work under my supervision .Certified further, that the best of my knowledge the work herein

does not form part of any other project report or dissertation on the basis of which a degree or award

was conferred on an earlier occasion on this or any other candidate.

Mrs.V.GAYATHRI Mr.K.MUKUNDAN

PROJECT SUPERVISOR HEAD OF THE DEPARTMENTDepartment of Management Studies, Department of Management Studies,

Easwari Engineering College Easwari Engineering College

Submitted for project viva voce examination on _______________

INTERNAL EXAMINER EXTERNAL EXAMINER


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ABSTRACT

SUNDARAM FINANCE LIMITED is one of the leading financial institutions in India comes

under the category of non-banking financial companies (NBFCs). Sundaram Finance Limited is

a largest financial company belongs to TVS group. Sundaram Finance Limited is a financial

institution which provides vehicle finance, leasing and accepts deposits from its customer.

Sundaram Finance Limited has uncompromising commitment to customer service and employee

welfare.. Sundaram Finance Limited has more than 500 branches allover India.

The study is entrusted to do a study on the working of hire purchase and lease finance.

The study is also entrusted to view the development of Hire Purchase business of Sundaram

Finance Limited, its concepts, agreement, features, terms and stages involved in Hire Purchase

business.

A sample of hire purchase customers is taken for analysis purpose. With respect to data

collection both primary data and secondary data have been collected. Primary data are being

collected by personal interviews and discussions with the various officials of Sundaram Finance

Limited.

Secondary data are collected from the annual reports and the companys website.

Based on the findings, suggestions are given as to which mode of finance would be beneficial for

the assets financed.


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ACKNOWLEDGEMENT

I am indebted to our Chairman Thiru.T.R.PACHAMUTHU for providing an excellent environment and

infrastructure at Easwari Engineering College, Ramapuram, for successfully completing the program on

Masters in Business Administration.

It is my duty to thank our principal, Dr .K.ABDHUL GHANI for his kind hearted help throughout the

period of my project.

My sincere thanks to our beloved Head of the Department Mr. K.MUKUNDAN for permitting me to do

this project

I would like to Mr. J. Ravi (Manager- Operations) and Mr. Harinath (HR Department), Sundaram

Finance Ltd for their guidance and support without which helped me to complete my project.

I thank my internal guide Mrs.V.GAYATHRI for her kind contribution to this project and providing me

with valuable points in completing this project.

I also thank the other faculty members, friends and relatives for providing me their kind co-operation

and helping me in successful completion of the project work.


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DECLARATION

I, SARANYA SAIRAJAN.C, Reg No: 30410631052, Second year, MBA Student of Department of

Management Studies, Easwari Engineering College, Chennai do hereby declare that the project entitled

A STUDY ON HIRE PURCHASE AND LEASING BUSINESS OF SUNDARAM FINANCE LIMITED Submitted

in partial fulfillment of the requirement for the award of the Degree of Master of Business

Administration of the Anna University, is my original and independent work.

Place: Chennai

Date: (SARANYA SAIRAJAN.C)


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CHAPTER S.NO PARTICULARS PAGE.NO

CHAPTER 1 INTRODUCTION

1.1INTRODUTION

1.2 OBJECTIVES OF THE STUDY

1.3 NEED AND IMPORTANCE OF THE

STUDY

1.4 SCOPE OF THE STUDY

1.5 COMPANY PROFILE

1.6 INDUSTRY PROFILE

1.7 PRODUCT PROFILE

CHAPTER 2 REVIEW OF LITERATURE

2.1 LITERATURE OF SURVEY

CHAPTER 3 RESEARCH METHODOLOGY

3.1 RESEARCH DESIGN

3.2 SOURCES OF DATA

3.3 LIMITATION OF STUDY

CHAPTER 4 DATA ANALYSIS AND

INTERPRETATION

4.1 DATA ANALYSIS


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4.2 FINDINGS

4.3 SUGGESTIONS

4.4

4.5

CONCLUSION

BIBLIOGRAPHY


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1.1 INTRODUCTION

Hire Purchase is a type of installment credited under which the hire purchaser,

called the hirer agrees to take the goods on hire at a stated rental which is inclusive of the

repayment of principal as well as interest, with an option to purchase. A contract of hire is a

contract act. The system of acquire an asset to an intending purchaser who is unable to pay the

full price of the asset at one time in lump sum.

At the time, there was great deal of hire purchase particularly in respect of

customer durables. The sellers of consumer installment credit were looked upon as disguised

money lender who tempted their customers into debt which they could not afford to pay, whereas

the hirers were accused of lending improvident lives. But social attitudes towards HP have today

undergone a remarkable change and not only the old prejudice against it has practically

disappeared, but HP is also fast receiving due recognition as a mode of industry finance, one step

further to non consumer finance.

All early HP transactions were financed by the manufactures or dealers

themselves who sold the goods on HP terms. Subsequently independent financial houses come

into existence who offered finance on HP terms for the purchase of a wide variety of consumer

articles, automobiles and later industrial machinery also.

At one time, the dealer was expected to pay for the privilege of this financing facility

by selling the goods to the finance company to a discount but competition among the finance

houses led to a general increase in the dealer bargaining power, and eventually the finance

company was forced to pay the dealer a commission on certain classes of transactions - e.g.,

agreements relating to motor vehicle - if it wished to obtain business.

The growth of and development of the system of HP finance can be traced to the

advent of industrial development in the UK, it is said that one Mr. Henry Moore a bishop gate

piano maker introduced the system of HP first time in 1846. Thereafter this new methodobtaining goods on credit rapidly gained favor with the advent of sewing machine produced by

singer manufacturing company which let out machines to its customer under hiring agreement

containing on options, the sums paid by the way of hire rent being allowed against the purchase

price in the event of the option being exercised.


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1.1.1CONCEPT OF HIRE PURCHASE

Any product from pin to plane is financed. The purchaser or the user identifies the

product. He contact the HP company and after finalizing the quantum of finance, period, finance

charges, or rate he enter with the finance company called the hire purchase agreement. The

finance company is called the owner and the user is called the hirer. Guarantor can be accepted

as per requirement. He then makes the initial payment called INITIAL HIRE. Document charges

as required in the particular state where the transaction is put through and incidental charges if

applicable. One rupee is collected as option money in HP agreement. The reason is hire purchase

is a deemed sale at the end of the contract. The product is sold to the user and the end of the

contract and this is the sale price from the finance company to the user.

SFL is basically a hire purchase company. This company was established on 1954 with a

basic aim to support commercial vehicles operators. Now the company has taken a major shift to

cars for the sake of volume in the last 6 years and is doing a very good volume.

1.2 NEED AND IMPORTANCE OF THE STUDY


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HP financing has gained much momentum. Many NBFCs have adopted this mode of

finance and the income from HP financing affect profitability of the concern with the

combination of risk. Hence the need for studying Hire Purchasing and its profitability to the

customers.is important.

There is also another mode of finance which is leasing that Sundaram Finance Ltd offers.

This comparative study helps in identifying the best mode of finance.

1.3 OBJECTIVES OF THE STUDY

The following are the objectives of the present study

To study the working of hire purchase Sundaram Finance Ltd To compare hire purchase with leasing and bring out light on the best mode of

finance with respect to parameters such as classification of assets and the period

of tenure for which the asset is lent.

1.4 SCOPE OF THE STUDY

The scope of the study is limited to analysis of one year data i.e. 1st April 2010 to31st March 2011 for evaluating the procedure of HP in SFL.

The study was based on segment D cars only. The study covers the existing customers. The study was restricted to the particular branch of SFL.

1.5 INDUSTRY PROFILE


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1.5.1 NON-BANKING FINANCIAL COMPANIES (NBFCS)

Non-bank financial companies (NBFCs) are financial institutions that provide

banking services without meeting the legal definition of a bank, i.e. one that does not hold a

banking license. Operations are, regardless of this, still exercised under bank regulation.

According to Reserve Bank Amendment of Act 1997, A Non-Banding Financial Company

(NBFCs) means,

A financial institution which is a company A non-banking institution which is a company which has its principal business receiving

of deposits under any scheme of arrangement or in any other manner or lending in any

manner

The non-banking financial sector in India has tremendous growth in recent years. NBFCs

attracted a large number of small investors since the rate of return on deposits with them was

relatively high. NBFCs are quite flexible sectors like equipment leasing, hire-purchase, housing

finance, consumer finance and so on, where gaps between the demand and supply of funds have

been high. The growth in number of NBFCs was facilitated by the case of entry, limited fixed

assets and absence of any need to hold inventories.

1.5.2 CURRENT SCENARIO OF NBFCS

The base of todays feebleness of Non-Banking Finance Companies can perhaps be

traced back to early nineties. The buoyant capital market, in the first flush liberalization

welcomed every issue with huge premiums and massive over subscription. This was the signal

for several unscrupulous promoters to set up high profile finance companies and raise money

from both the capital markets and through public deposits.

The Reserve Bank of India for its past, progressively relaxed its regulatory hold over

the industry and made it possible for the companies with little financial strength and even fewer

scrupulous to raise large amounts of money from an unsuspecting public. Hardly anyone knew

or questioned how these moneys were deployed. Soon afterward, the stock market scam broke

claiming its first victim from the non-banking finance companies sector. With the capital market


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in disarray, it was no longer possible for continue of fund flow, from investors who had burnt

their fingers in the stock markets. It was thus convenient fresh deposits. In July1996, the RBI,

perhaps the most sweeping changes in the non-banking finance companies regulation, virtually

pulled out all the stock, enabling companies to raise deposits with minimum number and more

significantly, removed the ceiling on interest rate.

At the point, when the government was faced with grim situation and responding to the

plea of the industry, the government set up a special task force headed by Mr. C.M. Vasudev to

recommend the steps for the orderly growth of finance companies while keeping investor

protection as its key priority. The committee in its final report recognized the important role

played by these companies and warned against the tendencies to tar all the companies with the

same brush. The silent recommendations of the Vasudev committee were

Review of minimum capital requirement of Rs. 25lakhs for registration purposes Higher capital adequacy ratio for non-banking finance companies seeking public deposits

without credit rating

Preview of prudential norms with ceiling for exposure to real estate and capital markets Differential ceiling on public deposit acceptance for companies with and without credit

ratings

A separate instrument to regulate and supervise non-banking finance companies.1.5.3 ADVANTAGES OF NBFCs

Lower transaction costs Higher rate of interest on deposits compared to banks Quick financial decision caking

Customer orientation

Prompt provision of services

1.5.4 RBI GUIDELINES FOR NBFCs


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The nineties witnessed a dramatic increase in the number of NBFCs and it was thought

necessary to have a regulatory framework for NBFCs. RBI came out with set of guidelines for

NBFCs specifically aimed at protecting the depositors.

To encourage the NBFCs that is running on sound business principals, on July 24th

1996, NBFCs were divided into two classes,

Equipment leasing and hire purchase (finance company) Loan and investment companies

1.5.5 CATEGORIES OF NBFCs

Loan Companies Investment Companies Hire Purchase Companies Equipment Leasing Companies Mutual Benefits Finance Companies Housing Finance Companies

Equipment leasing company Any company, which is a financial institution, carrying on its

principal business. The activities of leasing of equipment of the financing of such activity.

Hire purchase finance company A company, which is a financial institution, carryingon its principal business, hire purchase transaction.

Investment CompanyA company, which deals with acquisition of securities. Loan CompanyA company, which is a financial institution and carries on its principal

business of providing finance by any activities other than its own.

Mutual benefit finance company A company, which is a financial institution. This isnotified by the central government under section 620 (a) of The Companies Act 1956.


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1.5.6 FUTURE HOLDS FOR NBFCs

Reduce number of players Cross barrier competition Segmentation and positioning End of tax based leasing Emergency of vendor leasing Asset based funding Price based competition

1.5.7 REASONS FOR RAPID GROWTH OF NBFCs

Lower transaction costs Quick financial decision-making Customer orientation Prompt provision of services Flexibility in month installment structure Lower degree of regulation vis--vis banks No entry barriers


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1.6 COMPANY PROFILE

Sundaram Finance Limited was incorporated in 1954 and has grown into one of the

most trusted financial services group in India and a part of TV Sundaram Iyengar and Sons group

of companies, one of Indias largest industrial conglomerates and diversified industrial

conglomerate with principal base in Chennai and Madurai. Almost all the companies in the

group are privately held. The company was started with a paid-up capital of Rs.2Lakhs and

later went public in 1972.

1.6.1 FOUNDER OF THE COMPANY

The Company was founded by Sri. T. S. Santhanam. He has a rich experience in the

automobile and road transport sector for nearly six decades. He was the founder, Director and

First managing director of Sundaram Finance Limited and has served on various committees

constituted by the Central Government and Reserve Bank of India on various aspects relating to

growth and development of the Road Transport and Non-Banking Financial Companies.

The company has been rated as MAA by the ICRA signifying the highest num ber of

deposits. The Company mobilizes its funds from driver sources at competitive rates thus

achieving a reduction in overall cost of funds. The company gets its funds from the main sources

namely,

Deposits Bank/Industrial Finance Debentures Commercial Papers

The position for the last four decades:

In 1972 capital of Rs.1 crore was invested at that time. The company shares of Rs. 100each were such divided into 10 shares of the nominal value of Rs. 10 each.

The company has the record interrupted divided declaration ever since its incorporationand has been maintaining and improving the quantum of dividends.


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The other members of the board are eminent persons who hold responsible positions inthe government banking institutions and Engineering industry. The company is also a

member of International Finance and Leasing Associations (IFCA).

The company other than HP is also engaged in hypothecation of loans, leasing of plantand machinery to corporate bodies.

As supplementary and allied activities to HP and leasing, car financing, tyre financing,bills discounted and mortgaged loans on section of properties are extended selectively.

1.6.2 MAIN ACTIVITIES OF SUNDARAM FINANCE LIMITED

Deposits Hire Purchasing Leasing

1.6.3 FIVE PILLARS OF SUNDARAM FINANCE LIMITED

Faith Depositors confidence Institutional trust Investor safety Employee loyalty

1.6.4 CORPORATE PHILOSOPHY OF THE COMPANY

Truth and fairness guide the management of finance Customer satisfaction through excellent service and reliability Prudence and conservation in finance operations Truth, honesty and efficiency in all dealings Professional management with high standards of integrity Full compliance with law and regulations.


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1.6.5 EXPANSION OF SUNDARAM FINANCE LIMITED

S = Services, Safety & Security.

U = Understanding the client needs.

N = No problem approach.D = Development of human resources.

A = Attitude always positive.

R = Resourceful.

A = Anticipate customers need.

M = Marketing edges/Managerial edges.

F = financial soundness.

I = Integrity

N = Never have a negative approach.

A = Authenticity.

N = numerous among finance companies.

C = Commitment, Courtesy & Customer.

E = Efficiency and effectiveness.

L = Love for the organization.

T = Technical experience.

D = Depositors concern paramount

1.6.6 OBJECTIVES OF THE COMPANY

Sundaram Finance was initiated with the sole objective of financing commercial

vehicles and passenger cars. Within a span of 55 years they have spread their wings to every

exposable area in the Non-banking finance sector. Sundaram Finance Where Truth, Fairness

and Transparency guide the management of finance.


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1.6.7 STRENGTHS

Support of the group companies. Involvement of the directors on major policy matters. High employee morale. Good initial system for operation and control. Efficiency and sophisticated software system for decision support system. Investors trust and faith in the company. Easy financing schemes for all carsnew and second hand cars. Simple documentation, quick processing and speedy approval. Customized schemes, personalized service. Direct dealing between customer and company. No hidden costs. Tailormade products to suit individual requirements.

1.6.8 SUBSIDARIES /GROUPS

Sundaram Finance Sundaram BNP Paribas Asset Management Sundaram BNP Paribas Home Finance Limited Royal Sundaram Alliance Insurance Sundaram InfoTech Solutions Sundaram Business Services Sundaram Finance Distribution Limited

Infrieght Logistics Solutions Limited


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1.6.9AWARDS RECEIVED

Certificate of Commendation award by the Government of India under the scheme ofGood Tax Payers.

Second Best Tax Payer in the category of Private Sector Company for AssessmentYear 1994-95 in Tamil Nadu Region, from the Income Tax Department, Tamil Nadu.

Rolling Trophy by Rotary Club of Madras South West for Best Employer-EmployeeRelationship for the year 1995-96.

Best Tax Payer in the category of Private Sector Company for Assessment Year 1995 -96 in Tamil Nadu Region, from the Income Tax Department, Tamil Nadu.

Automan Award to Shri T S Santhanam, Chairman, from Motor India in 1998.

Pioneering Service Award to Shri T S Santhanam Chairman, from Chennai GoodTransport Association.

Sarige Ratna Award to Shri T S Santhanam, Chairman, from the Bangalore City LorryTransporting Agents Association (Regd).

Most Valued Customer Award to Shri T S Santhanam Chairman, from the State Bankof India.

The Best Financier of the New Millennium 2000 to Shri. G K Raman, ManagingDirector, from the All India Motor Transport Congress.
http://www.sundaramfinance.in/companyinfo/awards.htmlhttp://www.sundaramfinance.in/companyinfo/awards.htmlhttp://www.sundaramfinance.in/companyinfo/awards.html


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1.6.10 MAJOR MILESTONES

1954 Birth of Sundaram Finance

1972 First finance company to be listed on the Madras Stock Exchange

1981 Started Leasing operations. Formation of Lakshmi General Finance

1994 Receivables crossed Rs. 1000 crore (Rs. 10 billion)

1995 Deposits crossed Rs. 500 crore (Rs. 5 billion)

1996 Formed Sundaram Newton Asset Management Company Ltd. in collaboration withNewton Management Ltd., UK.

1996 Received Best Tax Payer Award

1997 Received Best Tax Payer Award

1997 Receivables crossed Rs. 2000 crore (RS. 20 billion)

1998 Promoted Fiat Sundaram Auto Finance Limited, a joint venture with Fidis S.p.A., Italy

1999 Promoted Sundaram Home Finance Limited with equity participation fromInternational Finance Corporation (IFC), Washington, and FMO Netherlands

2000 Promoted Royal Sundaram Alliance Insurance Company Limited, a joint venture with

Royal & Sun Alliance Plc, for Non-Life Insurance

2000 Promoted Sundaram InfoTech Solutions - InfoTech division of Sundaram Finance

2001 Promoted Sundaram Business Services - BPO arm of Sundaram Finance

2005 Merger with LGF making SF Billion dollar Balance sheet NBFC

2006 BBNP Paribas Asset Management Group, France acquires 49.90 % stake in

Sundaram Asset Management Company Ltd from SFL.

2008 Union de Credit pour le Batiment SA (UCB), a wholly owned subsidiary of BNPParibas SA, France, acquires 49.90% stake in Sundaram Home Finance Ltd from SFL.


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1.6.11 BOARD OF DIRECTORS

CHAIRMAN

Sri S Viji

DIRECTORS

Sri S Ram

Sri S Narayanan

Sri A Rangaswami

Sri S Padmanabhan

Sri T R Seshadri

MANAGING DIRECTOR

Sri T T Srinivasaraghavan

DEPUTY MANAGING DIRECTOR

Sri Srinivas Acharya

1.7 PRODUCT PROFILE

1.7.1 PRODUCTS / SERVICES OFFERED

Hire Purchase Leasing Deposits Car Finance Commercial Vehicle Finance Equipment Finance Fleet Card Tyre finance


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1.7.2 HIRE PURCHASE

In hire purchase the vehicle is sold to the finance company, which in turn hires it to the user.

After the end of the contract the product is sold to the user after collecting option money.

A Hire Purchase has two elements which are governed by the Indian Contract Act 1872,

and Sale of Goods Act 1930. Bailment is one aspect, which comes under the Indian Contract

Act. A sale is the sale of goods act. The hirer who becomes the purchaser is a bailee until he pays

the full price of goods. The contract of sale is completed only on the payment of the last

installment.

1.7.3 LEASING

It is only in financial lease, the ownership will get transferred while in operating lease,the ownership is not transferred.

It is only a bipartite agreement involving lessor and lessee. Depreciation is claimed by the lessor in the lease agreement. In operation lease, through the lessor can be one person, there can be a number of lessees. Period of lease will be shorter, and duration as technological changes will affect the

lessee.

The relationship in a lease agreement is that of lessor and lessee. Ownership will pass on when the lesser has collected sufficient money from the lessee,

which is equivalent to the value of the goods or equipment.

Lease agreement is entered more among business concerns. Sales tax depends on the actual value at the time of sale. On the termination of lease agreement, if it is an operating lease, the lessor takes the

equipment back. In the case of financial lease, the equipment can be sold for a particular

value to the lessee.

Interest does not form a major part of lease agreement, but the lease charges will includeinterest also as part of it.


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1.7.4 CAR FINANCE

Sundaram finance is one of the largest and a leading player in the area of car finance. It

extends finance on all models of cars. It has a vast network of over 150 branches and

experienced field force help its customers choose the vehicle and the finance package to suit

their budget.

The approval is fat and with minimum documentation. In fact customers can drive away

with their dream car in 48 hours flat. SFLs car finance schemes are easy to understand and

without any hidden costs. It deals with those employees who care of high integrity and extremely

customer friendly.

Realizing the high growth potential of the car market, SF launched Sundaram car finance

exclusively to finance cars and utility vehicles. Supported by a large country wide network,strong dealer relationship and its customized service, SF has attained a portion of strength in its

area, servicing a large customer base.


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1.7.5 WORKING OF HIRE PURCHASE

The financier purchases the asset and lets it on hire to the user. The user exercises an option to

purchase the asset at the end of the contract after paying all the dues. HP is a transaction in which

the purchaser of goods pays an initial deposit and takes possession. Subsequent installments are

made over a specified time after which ownership passes to the purchaser. The parties to the

contract are Owner (financier) and Hirer (purchaser / user). The installments are called Hire

Money.

Usually every hire-purchase agreement shall contain the following terms:

The cash price of the goods, cash price means the price at which goods may bepurchased.

The hire-purchase price, hire purchase price means the total amount which is payable bythe hirer under the agreement.

The date on which the hire-purchase agreement will commence. The description of the goods that will be delivered to the hirer at the commencement of

the agreement.

The number of installments to be paid by the hirer along with the amount of eachinstallment and the date of payment of each installment.

The down payment if any, the down payment means the amount which is required to bepaid by hirer to the hire vendor at the time of commencement of hire-purchase

agreement.

The rate interest charged by the hire vendor (optional).

Characteristics of a Hire Purchase agreement:

The goods are delivered in the possession of the purchaser at the time of commencementof the agreement.

Hire vendor continues to be the owner of the goods till the payment of last installment. The hirer has a right to use the goods as a bailer.

The hirer has a right to terminate the agreement at any time in the capacity of a hirer.


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The hirer becomes the owner of the goods after the payment of all installments as per theagreement.

If there is a default in the payment of any installment, the hire vendor will take away thegoods from the possession of the purchaser without refunding him any amount.

Why do people avail finance?

When individuals source of income or flow of money is low When there is a need for working capital and maintain liquidity by business class. To enjoy tax benefits and income tax exemptions.

Whom to finance:

Any individual who is above 18 yrs of age

Any individual who is mentally fit Any individual who has the capacity to borrow

Qualifications to finance:

Ability to repay Willingness to repay

Ability to repay :

Financial ability to repay is judged by the income of a person or an entity.

Generally the net income should be taken for assessing his financial capacity.

Net income = [gross monthly incomedeductions] x 12

For business entities,

Net income or cash profit = Net Profit after tax + Depreciation

Net annual income should be equal to or greater than twice the annual commitment of the

contract. This is called cash flow cover.

Amount Commitment = Equal Monthly Installment [EMI] x 12


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Willingness to repay:

Though the methods adopted to check willingness to repay for any individual is not completely

reliable, still techniques like field enquiry is carried out to enquire about the individual in his /

her locality and to know about the general behavior of the individuals.

Operation and process involved in a Hire Purchase agreement:

The field officers of the company are in constant touch with their clients, whenever theyspot a proposal; they approach the prospective customer and explain the terms of hire

purchase finance provided by the company.

Once the customer makes up his mind, the company makes through a quick creditevaluation of the customer. This is done at the branch level and is then sent to the head

office for approval.

A schedule giving a break up of finance is prepared and given to the customer. This contains details about the invoice amount, finance charges, finance amount

(normally 75% of the invoice amount) with the EMI is shown along with the details

regarding insurance amount.

Once the official and the customer are satisfied they prepare the HP document andcustomer will sign this document along with a guarantor and a witness.

After all formalities are fulfilled the vehicle is purchased in the name of SundaramFinance Limited and registered in the name of the hirer with an endorsement in the RC

book that the vehicle is under HP agreement with the company.

Installments that are due are payable on the respective due dates, by the hirer at any oneof the branches or the field staff may collect the same from hirers place.

If the hirer defaults, he is given enough time, before which the last remedy i.e.,repossession is sought.

A record of the installment received from hirer and the installments due is alsomaintained in most efficient manner.


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After collecting the entire amount that is due, termination papers are issued to cancel thelien in the RC Book. The contract comes to a close.

Calculation of EMI (Equated Monthly Installment)

EMI = (Finance amount + Finance charges) / No. of Installments

Finance Charges = Finance amount x flat rate of interest x No. of years.

Flat rate of interest:

This is generally used for computing the EMI manually, easily and easy understanding ofa monthly commitment.

The EMI is initially fixed and the hirer has to pay this fixed amount for all theinstallments

The amount contributed towards the interest and principle varies with installments.Simple rate of interest:

In this technique, the Interest amount is calculated for every month with respect to theprinciple remaining.

Hence the EMI charges payable by the consumers vary for every installment and hence itis confusing.

Sundaram Finance Limited extends finance through hire purchase for

Cars Commercial vehicles

The documents that are collected for the finance of cars and commercial vehicles are the same.

(E.g., Identity proof, address proof, income proof, and asset proof).

Cars:

Segment A : Cars costing up to Rs. 3 lakhs Segment B : Cars costing from Rs. 3 to Rs. 7 lakhs Segment C : Cars costing from Rs. 7 to Rs. 13 lakhs Segment D : Cars costing above Rs. 13 lakhs


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Segment A and B, SFL funds up to 90% of the cost of the cars and funds up to Segment C and

D, SFL funds up to 75% of the cost of the cars only, because of the fact that the vehicles in

segment C &D depreciate faster.

The repayment period is up to 5 years for salaried class and 4 years for business class.

1.7.6 LEASING

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must

pay a series of contractual, periodic, tax deductible payments.

The lessee is the receiver of the services or the assets under the lease contract and the lessor is

the owner of the assets. The relationship between the tenant and the landlord is called a tenancy,

and can be for a fixed or an indefinite period of time (called the term of the lease). The

consideration for the lease is called rent. A gross lease is when the tenant pays a flat rental

amount and the landlord pays for all property charges regularly incurred by the ownership from

lawnmowers and washing machines to handbags and jewellery.

Under normal circumstances, a freehold owner of property is at liberty to do what they want with

their property, including destroy it or hand over possession of the property to a tenant. However,

if the owner has surrendered possession to another (the tenant) then any interference with the

quiet enjoyment of the property by the tenant in lawful possession is unlawful.

Similar principles apply to real property as well as to personal property, though the terminology

would be different. Similar principles apply to sub-leasing, that is the leasing by a tenant in

possession to a sub-tenant. The right to sub-lease can be expressly prohibited by the main lease.

The term of the lease may be fixed, periodic or of indefinite duration.

If it is for a 'tenancy for years', the term ends automatically when the period expires, and no

notice needs to be given, in the absence of legal requirements.

The term's duration may be conditional, in which case it lasts until some specified event occurs,

such as the death of a specified individual.

A periodic tenancy is one which is renewed automatically, usually on a monthly or weekly basis.


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A tenancy at will lasts only as long as the parties wish it to, and may be terminated without

penalty by either party.

It is common for a lease to be extended on a "holding over" basis, which normally converts the

tenancy to a periodic tenancy on a month by month basis.

1.7.6.1COMPARISON OF BUYING AND LEASING

There are many distinct differences between buying and leasing, regardless if such a transaction

or agreement applies to property, machinery, equipment or other assets.

The difference lies in that a lease is conceptually very similar to the principle of borrowing.

The ownership of the leased property (be it land, equipment, merchandise, or etc.) is not

transferred under the terms of the lease agreement. The lease gives the lessee the right to use the

assets covered under the agreement for the duration of the contracted term, however, upon the

completion of said term the lessee is required to return the assets in question to the lessor,

thereby completing the terms of the agreement. In a general example having to do with an

automobile lease, the vehicle is due back to the dealership at the conclusion of the lease term.

Once the vehicle is returned, the automobile lease agreement is completed and the parties (lessor

and lessee) separate with no further obligations to each other (assuming there is no damage on

the vehicle entitling the dealer to some further compensation). The lessee has no further claim or

right to use the vehicle and the lessor, or car dealer no longer collects any payment from the

former lesseethe previous driver.

Many lease agreements contain clauses and addendums that outline additional rights, or options

for the lessee, to be exercised at will upon the conclusion of the lease (there are numerous

equipment lease types with individual features). In automobile leases as a general example, a

lessee may have an option to purchase the vehicle, thereby restructuring the agreement and

ultimately obtain the ownership of the asset previously leased. In the example of a propertylease, the renter (or lessee) may have the option to extend the lease, under pre-determined terms.

Such scenarios are numerous and are typically pre-set during the initial creation and negotiation

of the agreement between the parties.


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Purchasing, on the other hand, involves an agreement that outlines the terms under which the

purchaser acquires ownership of the desired item, property or asset. The purchase agreement

delineates the purchase price and the terms under which it is to be paid for by the buyer. The

overall purchase price can be amortized over a period of time as in the case of financing, or it can

be paid in full, resulting in the instant transfer of ownership to the purchaser. In the event that the

purchase is financed over a period of time, the ultimate price paid for the item or asset can be

greater than the original price due to interest. For an individual deciding between buying or

leasing, it is crucial to understand the pros and cons of each.

RESPONSIBILITY: In a scenario involving business entities that typically rely on functional

equipment for ongoing operations and to stay ahead of competitors, responsibility is a key factor.

In a purchase, the responsibility for the equipment falls solely on the shoulders of the business

owner. While there are various insurance plans and warranties available to protect the owners, in

case of damage or faulty manufacturing, the ultimate responsibility for the life of the equipment,

after a purchase is complete, falls on the buyer. In a lease scenario, a lessee is only responsible

for the equipment for the duration of the lease and while he or she remains in possession.

RESALE VALUE: In case of a purchase, the full value of the asset is transferred to the

purchaser, as the new owner. This means that in case of resale at a subsequent time, the full price

for which the asset is resold can be collected by the new owner. In case of an automobile

purchase, for example, an individual can, at a later date freely resell the vehicle and collect its

value, albeit a depreciated amount from the original purchase price. In a lease, the lessor has no

claim to the asset upon the conclusion of a lease, thereby the monies that were paid in the course

of the lease cannot be, in part or in whole be recouped through a resale of the asset.

DEPRECIATION: Depreciation is a major consideration for individuals deciding between

buying and leasing. For assets that suffer from significant depreciation, either as a result of

regular wear and tear or through becoming obsolete upon the release of newer versions of thesame materials (particularly applicable in the case of technology) leasing can prevent a

significant loss of value. In business, there exists a basic rule of thumb: If it appreciates, buy it.

If it depreciates, lease it. Leasing could permit the use of the equipment while it is new and

upon the completion of the lease, it can be simple to upgrade by virtue of a new lease. In case of


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a purchase, however, an individual may be stuck with an obsolete asset with no means of

recouping the cost of its acquisition.

MAINTENANCE: Because in the instance of a lease the ultimate ownership is retained by the

lessor, it is in the lessors best interest to maintain the asset in its best working order. Therefore,

lessees can often benefit from comprehensive maintenance programs offered by lessors while

still paying a discounted premium due to the fact that the asset is being leased, not purchased.

COST: In the event of a purchase, the full value of the asset must be paid to the seller. In the

event of a lease, however, only a portion of the full value is assessed, typically around 50%,

however the figure varies based on the duration and type of lease. As a consequence, a lessor can

gain the use of a much needed asset for a fraction of the full price of ownership. In many

instances, this can better serve the lessee that an outright purchase would. As a corollary, a lessor

could be granted the use of an asset that could otherwise be cost prohibitive.

1.7.6.2 ADVANTAGES

For businesses, leasing property may have significant financial benefits:

Leasing is less capital-intensive than purchasing, so if a business has constraints on itscapital, it can grow more rapidly by leasing property than by purchasing property.

Capital assets may fluctuate in value. Leasing shifts risks to the lessor, but if the propertymarket has shown steady growth over time, a business that depends on leased property is

sacrificing capital gains.

Depreciation of capital assets has different tax and financial reporting treatment fromordinary business expenses. Lease payments are considered expenses rather than assets,

which can be set off against revenue when calculating taxable profit at the end of the

relevant tax accounting period.

In some cases a lease may be the only practical option; for example, a small business maywish to open a location in a large office building within tight locational parameters.

Leasing may provide more flexibility to a business which expects to grow or move in therelatively short term, because a lessee is not usually obliged to renew a lease at the end of

its term.


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1.7.6.3 DISADVANTAGES

For businesses, leasing property may have significant drawbacks:

A net lease may shift some or all of the maintenance costs onto the tenant. If circumstances dictate that a business must change its operations significantly, it may be

expensive or otherwise difficult to terminate a lease before the end of the term. In some

cases, a business may be able to sublet property no longer required, but this may not

recoup the costs of the original lease, and, in any event, usually requires the consent of

the original lessor. Tactical legal considerations usually make it expedient for lessees to

default on their leases. The loss of book value is small and any litigation can usually be

settled on advantageous terms. This is an improvement on the position for those

companies owning their own property. Although it can be easier for a business to sell

property if it has the time, forced sales frequently realise lower prices and can seriously

affect book value.

If the business is successful, lessors may demand higher rental payments when leasescome up for renewal. If the value of the business is tied to the use of that particular

property, the lessor has a significant advantage over the lessee in negotiations.

1.7.6.4 TYPES OF LEASE AGREEMENTS

(a) Financial lease

(b) Operating lease.

(c) Sale and lease back

(d) Leveraged leasing and

(e) Direct leasing.

FINANCIAL LEASE

Long-term, non-cancellable lease contracts are known as financial leases. The

essential point of financial lease agreement is that it contains a condition whereby the

lessor agrees to transfer the title for the asset at the end of the lease period at a

nominal cost. At lease it must give an option to the lessee to purchase the asset he has


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used at the expiry of the lease. Under this lease the lessor recovers 90% of the fair

value of the asset as lease rentals and the lease period is 75% of the economic life of

the asset. The lease agreement is irrevocable. Practically all the risks incidental to the

asset ownership and all the benefits arising there from are transferred to the lessee

who bears the cost of maintenance, insurance and repairs. Only title deeds remain

with the lessor. Financial lease is also known as 'capital lease'. In India, financial

leases are very popular with high-cost and high technology equipment.

OPERATIONAL LEASE

An operating lease stands in contrast to the financial lease in almost all aspects. This

lease agreement gives to the lessee only a limited right to use the asset. The lessor is

responsible for the upkeep and maintenance of the asset. The lessee is not given any

uplift to purchase the asset at the end of the lease period. Normally the lease is for a

short period and even otherwise is revocable at a short notice. Mines, Computers

hardware, trucks and automobiles are found suitable for operating lease because the

rate of obsolescence is very high in this kind of assets.

SALE AND LEASE BACK

It is a sub-part of finance lease. Under this, the owner of an asset sells the asset to a

party (the buyer), who in turn leases back the same asset to the owner in consideration

of lease rentals. However, under this arrangement, the assets are not physically

exchanged but it all happens in records only. This is nothing but a paper transaction.

Sale and lease back transaction is suitable for those assets, which are not subjected

depreciation but appreciation, say land. The advantage of this method is that the

lessee can satisfy himself completely regarding the quality of the asset and after

possession of the asset convert the sale into a lease arrangement.

LEVERAGED LEASING

Under leveraged leasing arrangement, a third party is involved beside lessor and

lessee. The lessor borrows a part of the purchase cost (say 80%) of the asset from the

third party i.e., lender and the asset so purchased is held as security against the loan.


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The lender is paid off from the lease rentals directly by the lessee and the surplus after

meeting the claims of the lender goes to the lessor. The lessor, the owner of the asset

is entitled to depreciation allowance associated with the asset.

DIRECT LEASING

Under direct leasing, a firm acquires the right to use an asset from the manufacturer

directly. The ownership of the asset leased out remains with the manufacturer itself.

Other types of leases are listed below:

CAPITAL LEASE

Type of lease classified and accounted for by a lessee as a purchase and by the lessor as a sale or

financing, if it meets any one of the following criteria: (a) the lessor transfers ownership to the

lessee at the end of the lease term; (b) the lease contains an option to purchase the asset at a

bargain price; (c) the lease term is equal to 75 percent or more of the estimated economic life of

the property (exceptions for used property leased toward the end of its useful life); or (d) the

present value of minimum lease rental payments is equal to 90 percent or more of the fair market

value of the leased asset less related investment tax credits retained by the lessor.

.

FIRST AMENDMENT LEASE

The first amendment lease gives the lessee a purchase option at one or more defined points with

a requirement that the lessee renew or continue the lease if the purchase option is not exercised.

The option price is usually either a fixed price intended to approximate fair market value or is

defined as fair market value determined by lessee appraisal and subject to a floor to insure that

the lessor's residual position will be covered if the purchase option is exercised.

If the purchase option is not exercised, then the lease is automatically renewed for a fixed term

(typically 12 or 24 months) at a fixed rental intended to approximate fair rental value, which will

further reduce the lessor's end-of-term residual position. The lessee is not permitted to return the

equipment on the option exercise date. If the lease is automatically renewed, then at the


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expiration of that initial renewal term, the lessee typically has the right either to return the

equipment without penalty or to renew or purchase at fair market value.

FULL PAYOUT LEASE

A lease in which the lessor recovers, through the lease payments, all costs incurred in the lease

plus an acceptable rate of return, without any reliance upon the leased equipment's future

residual value.

GUIDELINE LEASE

A lease written under criteria established by the IRS to determine the availability of tax benefits

to the lessor.

LEVERAGED LEASE

In this type of lease, the lessor provides an equity portion (usually 20 to 40 percent) of the

equipment cost and lenders provide the balance on a nonrecourse debt basis. The lessor receives

the tax benefits of ownership.

NET LEASE

A lease wherein payments to the lessor do not include insurance and maintenance, which are

paid separately by the lessee.

OPEN-END LEASE

A conditional sale lease in which the lessee guarantees that the lessor will realize a minimum

value from the sale of the asset at the end of the lease.

SALES-TYPE LEASE

A lease by a lessor who is the manufacturer or dealer, in which the lease meets the definitional

criteria of a capital lease or direct financing lease.

SYNTHETIC LEASE

A synthetic lease is basically a financing structured to be treated as a lease for accounting

purposes, but as a loan for tax purposes. The structure is used by corporations that are seeking


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off-balance sheet reporting of their asset based financing, and that can efficiently use the tax

benefits of owning the financed asset.

TAX LEASE

A lease wherein the lessor recognizes the tax incentives provided by the tax laws for investmentand ownership of equipment. Generally, the lease rate factor on tax leases is reduced to reflect

the lessor's recognition of this tax incentive.

TRAC LEASE

A tax-oriented lease of motor vehicles or trailers that contains a terminal rental adjustment clause

and otherwise complies with the requirements of the tax laws.

TRUE LEASE

A type of transaction that qualifies as a lease under the Internal Revenue Code. It allows the

lessor to claim ownership and the lessee to claim rental payments as tax deductions.


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2. LITERATURE REVIEW

2.1 TITLE

Radiotherapy equipmentpurchase or lease?

BOOK

British Journal of Radiology (2001) 74, 735-744

2001 British Institute of RadiologyAUTHOR

1. A Nisbet, PhD, MIPEM and2. A Ward, BSc, CPFA

AUTHOR AFFILIATIONS

Department of Medical Physics and Bio-Engineering and 2Finance Department, Raigmore

Hospital, Highland Acute Hospital NHS Trust, Old Perth Road, Inverness IV2 3UJ, UK

ABSTRACT

Against a background of increasing demand for radiotherapy equipment, this study was

undertaken to investigate options for equipment procurement, in particular to compare purchase

with lease. The perceived advantages of lease are that equipment can be acquired within budget

and cash flow constraints, with relatively low amounts of cash leaving the NHS in the first year,

avoiding the necessity of capitalizing the equipment and providing protection against the risk of

obsolescence associated with high technology equipment. The perceived disadvantages of

leasing are that the Trust does not own the equipment, leasing can be more expensive in revenue

terms, the tender process is extended and there may be lease conditions to be met, which may be

costly and/or restrictive. There are also a number of technical considerations involved in the

leasing of radiotherapy equipment that influence the financial analysis and practical operation of

the radiotherapy service. The technical considerations include servicing and planned preventative


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maintenance, upgrades, spare parts, subsequent purchase of add ons, modification of

equipment, research and development work, commencement of the lease period, return of

equipment at the end of the lease period and negotiations at the end of the lease period. A study

from Raigmore Hospital, Inverness is described, which involves the procurement of new, state-

of-the-art radiotherapy equipment. This provides an overview of the procurement process,

including a summary of the advantages and disadvantages of leasing, with the figures from the

financial analysis presented and explained. In addition, a detailed description is given of the

technical considerations to be taken into account in the financial analysis and negotiation of any

lease contract.

2.2 TITLE

Leasing And Hiring Equipment-Feasible Alternatives To Purchase ?

AUTHOR

Nick Openshaw is a specialist business and commercial lawyer with a long-standing interest in

the veterinary field. He is based in Barnstaple, North Devon.

BOOK

In Practice 1996, volume 18 of practice management and business.

ABSTRACT

OUTRIGHT purchase of expensive equipment may not be a feasible option for many practices.

In this article, Nick Openshaw outlines various alternative ways of acquiring equipment and

highlights some of the pitfalls to watch out for.


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2.3 TITLE

The Lease Or Buy And Asset Acquisition Decisions

AUTHOR

Lawrence.D.Schall ,Gradute School Of Business Administration,Universtiy Of Washington

BOOK

Journal Of Finance, American Finance Association 1974

ABSTRACT

A significant portion of business finance theory is concerned with firms investment criteria

derived under the assumption that the firm objective is to maximize shareholder wealth. It is

therefore somewhat surprising that no lease or buy criterion is available which has been shown to

be consistent with this objective. A decision rule is derived which indicates whether an asset

should be acquired and whether acquisition if justified, should be by purchase or lease.


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3.RESEARCH METHODOLOGY

Research means a search of knowledge. Sometime it may refer to scientific and

systematic search pertinent information on specific topic in fact; research is an art scientific

investigation. Redman and Mory defines research as a systemized effort to gain new

knowledge.

Research can be defined as a Scientific and Systemic Search for pertinent

information on a specific topic. Therefore, research could be understood as an organized

activity with specific objectives on a problem or issues supported by compilation of related data

and facts, involving application of relevant tools of analysis and deriving logically on originality.

3.1RESEARCH DESIGN

This research deals with the analytical research. Analytical research is analyzing

and making critical evaluation based on the facts and information already available.

3.2 SOURCES OF DATA

3.2.1 Primary data

The data collected for the first time through field survey is known as

primary data. Here the primary data was collected from the employees by personnel interviews

and discussions with various officials of SFL.

3.2.2 Secondary data

The Secondary data are being collected from the customer database of the

company.

5 companies have been taken for analysis who are the present customers of Hire Purchase

Sundaram Finance Ltd


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The companies are

Sundram Fasteners Limited TVS Srichakra Jindal Steel and Power Limited (JSPL) Coromandel Engineering Company Limited Sical Logistics Ltd

3.3 LIMITATIONS OF THE STUDY

The project is concerned with the activities of SFL only and does not have anyreference with the subsidies of SFL.

The procedures involved and schemes of HP business and leasing business inNBFCs are varying in nature. Hence, being a case study, the findings and

suggestions cannot be applied to other NBFCs.

The study could collect only limited samples, as the data were kept confidential. The period of study taken for analysis was to one financial year i.e.2010-2011


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4. DATA ANALYSIS

1. Since both lease payments and hire purchase installment payments are deductible fromthe profits in computing the tax liability, both the payments are considered after tax for

the purpose of comparison.

2. For simplification, Present Value effect of money is being ignored and thereby presentvalue factors are not used in while computing the interest obligation

Sundaram Fasteners want to purchase a Chevrolet Captiva on hire from Sundaram Finance for a

period of 4 years. The EMI is calculated below

Table 4.1

Equated Monthly Installment Calculation

Price of the car = Rs.19, 71,547

Finance Amount is 75% of the total price of the car.

i.e., Finance Amount = 19, 71,547*75/100

= 14, 78,660.25

Interest @ 12% = 14, 78,660.25*12/100

= 1, 77,439.23 p.a

For 4 years = 1, 77,439.23*4

= 7, 09,757

Total Repayable amount =14, 78,660+7,09,757

= 21, 88,417

Equated Monthly Installments = 21, 88,417/48

= 45,592

EMI(after tax) = 45,592(1-0.30) = 31,914

BRAND PRICE INTEREST PERIOD

CAPTIVA 1971547 12% 48 months


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Coromandal Engineering Company wishes to purchase a Toyota Camry on hire from Sundaram

Finance for a period of 4 years. The EMI is calculated below


CAMRY 23,73,170 12% 48 months.

Table 4.2


Price of the car = Rs. 23, 73,170



= 17, 79,877.5

Interest @ 12% = 17, 79,877.5*12/100

2, 13,585.3 p.a

For 4 years = 2, 13,585.3 *4

= 854341.2

Total Repayable amount =17, 79,877.5+854341.2

= 2634218.7

Equated Monthly Installments =2634218.7 /48

= 54879.55

EMI(after tax) = 54879(1-0.30)

=38415.


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Jindhal Power and Steel Company want to purchase a Hyundai Santa Le on hire from Sundaram

Finance for a period of 4 years. The EMI is calculated below


SANTA LE 23,45,500 12% 48 months

Table 4.3





= 17, 59,125

Interest @ 12% = 17, 59,125*12/100

2, 11,095 p.a

For 4 years = 2,11,095 *4

= 8, 44,380

Total Repayable amount =17, 59,125+8, 44,380

= 26, 03,955

Equated Monthly Installments =26, 03,955/48

= 54259.06

EMI(after tax) = 54259(1-0.30)

=37981.


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TVS Shri Chakra intends to purchase a Ford Endeavour on hire from Sundaram Finance for a



ENDEAVOUR 19,50,800 12% 48 months

Table 4.4





= 14, 63,100

Interest @ 12% = 14, 63,100*12/100

=1, 75,572 p.a

For 4 years = 1, 75,572 *4

= 7, 02,288

Total Repayable amount =14,63,100+7,02,288

= 2165388

Equated Monthly Installments =2165388/48

= 45112.25

EMI(after tax) = 45,112(1-0.30)

=31578


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Sical Logistics intends to purchase a Toyota Fortuner on hire from Sundaram Finance for a



FORTUNER 20,14,800 12% 48

Table 4.5





= 1511100

Interest @ 12% = 1511100*12/100

1,81,332 p.a

For 4 years =181332 *4

= 725328

Total Repayable amount =1511100+725328

= 2236428

Equated Monthly Installments =2236428/48

= 46592.25

EMI(after tax) = 46592(1-0.30)

=32614


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Lease calculation for Chevrolet Captiva if taken on a lease from Sundaram Finance for a period

of 4 years. The payment is calculated below

BRAND LEASE AMOUNT RESIDUAL PERIOD INTEREST

CAPTIVA 1971547 490000 48months 12%

Table 4.6

Monthly lease payment

=43,914.81

Lease payment after tax = 43,914.81(1-0.30)

= 30,740


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Lease calculation for Toyota Camry if taken on a lease from Sundaram Finance for a period of 4

years. The payment is calculated below


CAMRY 2373170 590000 48 months 12%

Table 4.7


=52,857.71

Lease payment after tax= 52,857.71(1-0.30)

=37,000


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Lease calculation for Hyundai Santa Le if taken on a lease from Sundaram Finance for a period

of 4 years. The payment is calculated below


SANTE LE 2345500 580000 48 months 12%

Table 4.8


=52,292.39

Lease payment after tax= 52,292.39 (1-0.30)

=36,604.67


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Lease calculation for Ford Endeavour if taken on a lease from Sundaram Finance for a period of

4 years. The payment is calculated below


ENDEAVOUR 1950800 480000 48 months 12%

Table 4.9


=43,531.81

Lease payment after tax=43,531.81 (1-0.30)

=30472.26


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Lease calculation for Toyota Fortuner if taken on a lease from Sundaram Finance for a period of

4 years. The payment is calculated below


FORTUNER 2014800 500000 48 months 12%

Table 4.10


=44,890.49

Lease payment after tax=44,890.49 (1-0.30)

=31423


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5.CONCLUSION

5.1 FINDINGS

FIGURE 5.1

DATA

1. Monthly payment to be made if the car is purchased on hire by the Sundaram Fasteners is31,914 rupees

2. Monthly rental to be made if the car is purchased on lease by the Sundaram Fasteners is30,740 rupees


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FIGURE 5.2

DATA:

1. Monthly payment to be made if the car is purchased on hire by the CoromandalEngineering Company is 38,415 rupees

2. Monthly rental to be made if the car is purchased on lease by the CoromandalEngineering Company is 37,000 rupees


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FIGURE 5.3

DATA:

1. Monthly payment to be made if the car is purchased on hire by the TVS Shri Chakra is37,981 rupees

2. Monthly rental to be made if the car is purchased on lease by the TVS Shri Chakra is36,600 rupees


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FIGURE 5.4

DATA:

1. Monthly payment to be made if the car is purchased on hire by Jindhal Power and Steelis 31,578 rupees

2. Monthly rental to be made if the car is purchased on lease by Jindhal Power and Steel is30,470 rupees


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FIGURE 5.5

DATA:

1. Monthly payment to be made if the car is purchased on hire by Sical Logistics 32,614rupees

2. Monthly rental to be made if the car is purchased on lease by Sical Logistics 31,420rupees


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5.2 SUGGESTIONS

Considering the analysis and interpretation on the study, the following suggestions can be

recommended to Sundaram Finance Ltd,

1. The company should think of increasing its business by offering its services to highprofitable industries at a competitive price.

2. The company can price their offering in an attractive manner by lowering up the interest.

3. The company can provide service over the internet and phone, which would be lucrativeboth for the company and its customers.

4. The company can introduce different kinds of leasing assets like buildings.

5. The company can think of extending its offices to the northern and eastern side of thecountry. Extension of market strategy for capturing customers in these areas will provide

increased business.

6. Customers before making an investment decision should evaluate their options and arriveat a profitable decision whether to acquire the asset or lease the asset.

The above mentioned suggestions would keep Sundaram Finance Limited to be market

leader in leasing as leasing attributes to a very small portion of the entire business.


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5.3 CONCLUSION

1.

Since The After Tax Periodical Obligation of the customer is lower in case of lease, it isadvisable for these companies to take the car on lease, instead of taking it on hire.

2. Moreover, the customer has to finance the car on his own to the extent of the balance25% of the price of the car as only 75% of the price would be financed since the cars fall

under Segment D category.

3. Therefore,the customers of hire purchase can choose to purchase cars at lease as themonthly rental to be made is less when compared to that of hire purchase.

4. However, the decision as to whether to acquire a car under lease or hire purchase dependsupon the interest of the customers interest to have ownership rights or not.


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5.4 BIBLIOGRAPY

JOURNAL REVIEW

www.jstor.org/discover

http://scholar.google.co.in/

http://bjr.birjournals.org/content/74/884/735.short

WEBSITES

http://www.sundaramfinance.in/

http://www.wisegeek.com/finance

http://www.efunda.com/formulae/finance/lease_calculator.cfm

http://www.investopedia.com/terms/n/netadvantagetoleasing

BOOK REVIEW

Financial Management-Dr.S.N.Maheshwari

Financial Management-E.Gnanasekaran

Merchant Banking And Financial Services-Dr.S.Guruswamy(3rd Edition)
http://www.jstor.org/discoverhttp://www.jstor.org/discoverhttp://scholar.google.co.in/http://scholar.google.co.in/http://bjr.birjournals.org/content/74/884/735.shorthttp://bjr.birjournals.org/content/74/884/735.shorthttp://www.sundaramfinance.in/http://www.sundaramfinance.in/http://www.wisegeek.com/financehttp://www.wisegeek.com/financehttp://www.efunda.com/formulae/finance/lease_calculator.cfmhttp://www.efunda.com/formulae/finance/lease_calculator.cfmhttp://www.investopedia.com/terms/n/netadvantagetoleasinghttp://www.investopedia.com/terms/n/netadvantagetoleasinghttp://www.investopedia.com/terms/n/netadvantagetoleasinghttp://www.efunda.com/formulae/finance/lease_calculator.cfmhttp://www.wisegeek.com/financehttp://www.sundaramfinance.in/http://bjr.birjournals.org/content/74/884/735.shorthttp://scholar.google.co.in/http://www.jstor.org/discover

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