Sundaram Finance Holding Ltd (SFHL) is a very interesting company. I used to hold Wheels India and it popped up as promoter share holder. Digging deeper I realized that this was an entity which was demerged from Sundaram Finance. Now TVS family has split and Sundaram group has gone to TSF group. They have their holding in all the auto ancillary companies directly and through SFHL. It is similar to Tata investments. SFHL also has mandate to invest upto 10% in other opportunistic bets.
Looking further at its holdings led to to realization that it was holding 23.57% in a gem called Brakes India Pvt Ltd. This is a high growth high ROCE business. A close comparison would be Wabco India. As these companies make complete braking system including actuation and not a single component, they command a high PE ratio.
Another positive is that none of its companies face EV disruption except for Turbo Energy which is 10-15% of valuation. Turbo chargers are still in growth phase in India. Non of Maruti engines use turbo chargers yet. Turbo charges in commercial vehicles are not going away.
Below table lists holdings and I have tried to do a valuation exercise.
| Companies | % Holding | Mcap (in crore) | Profit (in crore) | Assumed PE | Implied value |
|---|---|---|---|---|---|
| Brakes India | 23.57% | 716.00 | 50 | 8438 | |
| Turbo Energy | 32.00% | 265.00 | 15 | 1272 | |
| Axles India Limited | 38.81% | 86.00 | 20 | 668 | |
| The Dunes Oman FZC (LLC) | 43.69% | 56.00 | 15 | 367 | |
| Sundaram Dynacast | 26.00% | 20.00 | 20 | 104 | |
| Transenergy | 42.41% | 9.00 | 15 | 57 | |
| SBSL | 100.00% | 17.00 | 15 | 255 | |
| IMPAL | 20.00% | 1650 | 330 | ||
| Wheels India Limited | 23.96% | 2000 | 479 | ||
| TVS Holding | 6.49% | 30000 | 1947 | ||
| Sundaram Clayton | 7.49% | 3540 | 265 | ||
| Sundaram Composite | 39.00% | Annual report | 15 | ||
| Lucas-TVS | 5.32% | Annual report | 65 | ||
| Delphi TVS Technologies | 3.19% | Annual report | 20 | ||
| Fettle Tone | 2.71% | Annual report | 87 | ||
| Cash and equivalent | Annual report | 720 | |||
| 15089 |
Fettle Tone is one of promoter of Max health insurance. It is part of opportunistic bet which I have mentioned earlier.
SBSL - Sundaram Biz Services Ltd is into IT/BPO
Current market cap even after a sharp run-up is 9000 crore.
Below link summarizes performance of SFHL and its major holdings.
Disc: Invested around Rs 200. Not a buyer at this level.
But I am very bullish on Brakes India. This can command much better valuations with getting into advanced braking solution. They are catching up with Wabco. Infact Brakes India was JV with ZF and when ZF acquired Wabco they had to divest their stake in Brakes India to meet Competition Commission requirements as both companies were in similar biz
Latest move from Brakes India is about getting into electronics and software side of braking - controls and systems. Required for advanced systems like ECS (Electronic Stablity Control). They have partnered with Japanese leader ADVICS (Advanced Intelligent Chassis Systems). They are Toyota subsidiary. This will immediately open up Toyota and High end Maruti market for them. As safety norms become stricter all cars will eventually need to have advanced braking.
They are also developing new products and setting up north america presences (required for tax efficient exports to US)