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

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 PROJECT SUPERVISOR Department of Management Studies, Easwari Engineering College

Mr.K.MUKUNDAN HEAD OF THE DEPARTMENT Department of Management Studies, Easwari Engineering College

Submitted for project viva voce examination on _______________

INTERNAL EXAMINER

EXTERNAL EXAMINER

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.

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.

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)

CHAPTER CHAPTER 1

S.NO

PARTICULARS

PAGE.NO

INTRODUCTION
1.1 1.2 1.3
INTRODUTION

OBJECTIVES OF THE STUDY NEED AND IMPORTANCE OF THE STUDY

1.4 1.5 1.6 1.7

SCOPE OF THE STUDY COMPANY PROFILE INDUSTRY PROFILE PRODUCT PROFILE

CHAPTER 2
2.1

REVIEW OF LITERATURE
LITERATURE OF SURVEY

CHAPTER 3

RESEARCH METHODOLOGY

3.1 3.2 3.3 CHAPTER 4

RESEARCH DESIGN SOURCES OF DATA LIMITATION OF STUDY

DATA ANALYSIS AND INTERPRETATION

4.1 DATA ANALYSIS

4.2 4.3 4.4

4.5

FINDINGS SUGGESTIONS CONCLUSION BIBLIOGRAPHY

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 method obtaining 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.

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

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 to 31st 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

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

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

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, carrying on its principal business, hire purchase transaction. Investment Company A company, which deals with acquisition of securities. Loan Company A 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 is notified by the central government under section 620 (a) of The Companies Act 1956.

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

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 number 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. 100 each 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 incorporation and has been maintaining and improving the quantum of dividends.

The other members of the board are eminent persons who hold responsible positions in the 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 plant and 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.

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.

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 cars new and second hand cars. Simple documentation, quick processing and speedy approval. Customized schemes, personalized service. Direct dealing between customer and company. No hidden costs. Tailor made 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

1.6.9 AWARDS RECEIVED Certificate of Commendation award by the Government of India under the scheme of Good Tax Payers.

Second Best Tax Payer in the category of Private Sector Company for Assessment Year 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-Employee Relationship for the year 1995-96.

Best Tax Payer in the category of Private Sector Company for Assessment Year 199596 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 Good Transport Association.

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

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

The Best Financier of the New Millennium 2000 to Shri. G K Raman, Managing Director, from the All India Motor Transport Congress.

1.6.10 MAJOR MILESTONES 1954 1972 1981 1994 1995 1996 1996 1997 1997 1998 1999 2000 2000 2001 2005 2006 2008 Birth of Sundaram Finance First finance company to be listed on the Madras Stock Exchange Started Leasing operations. Formation of Lakshmi General Finance Receivables crossed Rs. 1000 crore (Rs. 10 billion) Deposits crossed Rs. 500 crore (Rs. 5 billion) Formed Sundaram Newton Asset Management Company Ltd. in collaboration with Newton Management Ltd., UK. Received Best Tax Payer Award Received Best Tax Payer Award Receivables crossed Rs. 2000 crore (RS. 20 billion) Promoted Fiat Sundaram Auto Finance Limited, a joint venture with Fidis S.p.A., Italy Promoted Sundaram Home Finance Limited with equity participation from International Finance Corporation (IFC), Washington, and FMO Netherlands Promoted Royal Sundaram Alliance Insurance Company Limited, a joint venture with Royal & Sun Alliance Plc, for Non-Life Insurance Promoted Sundaram InfoTech Solutions - InfoTech division of Sundaram Finance Promoted Sundaram Business Services - BPO arm of Sundaram Finance Merger with LGF making SF Billion dollar Balance sheet NBFC BBNP Paribas Asset Management Group, France acquires 49.90 % stake in Sundaram Asset Management Company Ltd from SFL. Union de Credit pour le Batiment SA (UCB), a wholly owned subsidiary of BNP Paribas SA, France, acquires 49.90% stake in Sundaram Home Finance Ltd from SFL.

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

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 include interest also as part of it.

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.

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 be purchased. The hire-purchase price, hire purchase price means the total amount which is payable by the 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 each installment and the date of payment of each installment. The down payment if any, the down payment means the amount which is required to be paid 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 commencement of 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.

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

If there is a default in the payment of any installment, the hire vendor will take away the goods 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 income deductions] 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

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 they spot 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 credit evaluation 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 and customer will sign this document along with a guarantor and a witness. After all formalities are fulfilled the vehicle is purchased in the name of Sundaram Finance 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 one of 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 also maintained in most efficient manner.

After collecting the entire amount that is due, termination papers are issued to cancel the lien 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 of a monthly commitment. The EMI is initially fixed and the hirer has to pay this fixed amount for all the installments 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 the principle remaining. Hence the EMI charges payable by the consumers vary for every installment and hence it is 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

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.

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 lessee the 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 property lease, 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.

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 the same 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

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 its capital, 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 property market 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 from ordinary 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 may wish 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 the relatively short term, because a lessee is not usually obliged to renew a lease at the end of its term.

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 leases come 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

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.

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

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

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 investment and 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.

2. LITERATURE REVIEW 2.1 TITLE Radiotherapy equipmentpurchase or lease? BOOK British Journal of Radiology (2001) 74, 735-744

2001 British Institute of Radiology

AUTHOR 1. A Nisbet, PhD, MIPEM and 2. 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

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, stateof-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.

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.

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

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 any reference with the subsidies of SFL. The procedures involved and schemes of HP business and leasing business in NBFCs 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

4. DATA ANALYSIS 1. Since both lease payments and hire purchase installment payments are deductible from the 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 present value 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

BRAND CAPTIVA

PRICE 1971547

INTEREST 12% Table 4.1

PERIOD 48 months

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

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

BRAND CAMRY

PRICE 23,73,170

INTEREST 12% Table 4.2

PERIOD 48 months.

Equated Monthly Installment Calculation

Price of the car = Rs. 23, 73,170 Finance Amount is 75% of the total price of the car. i.e., Finance Amount = 23, 73,170*75/100 = 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.

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

BRAND SANTA LE

PRICE 23,45,500

INTEREST 12% Table 4.3

PERIOD 48 months

Equated Monthly Installment Calculation

Price of the car = Rs. 23, 45,500 Finance Amount is 75% of the total price of the car. i.e., Finance Amount = 23, 45,500*75/100 = 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.

TVS Shri Chakra intends to purchase a Ford Endeavour on hire from Sundaram Finance for a period of 4 years. The EMI is calculated below

BRAND ENDEAVOUR

PRICE 19,50,800 Table 4.4

INTEREST 12%

PERIOD 48 months

Equated Monthly Installment Calculation Price of the car = Rs. 19, 50,800 Finance Amount is 75% of the total price of the car. i.e., Finance Amount = 19, 50,800*75/100 = 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

Sical Logistics intends to purchase a Toyota Fortuner on hire from Sundaram Finance for a period of 4 years. The EMI is calculated below

BRAND FORTUNER

PRICE 20,14,800

INTEREST 12% Table 4.5

PERIOD 48

Equated Monthly Installment Calculation Price of the car = Rs. 20, 14,800 Finance Amount is 75% of the total price of the car. i.e., Finance Amount = 20, 14,800*75/100 = 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

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 Table 4.6

48months

12%

Monthly lease payment

=43,914.81 Lease payment after tax = 43,914.81(1-0.30) = 30,740

Lease calculation for Toyota Camry 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

CAMRY

2373170

590000

48 months

12%

Table 4.7 Monthly lease payment

=52,857.71

Lease payment after tax= 52,857.71(1-0.30) =37,000

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

BRAND SANTE LE

LEASE AMOUNT 2345500

RESIDUAL 580000

PERIOD 48 months

INTEREST 12%

Table 4.8

Monthly lease payment

=52,292.39

Lease payment after tax= 52,292.39 (1-0.30) =36,604.67

Lease calculation for Ford Endeavour if taken on a lease from Sundaram Finance for a period of 4 years. The payment is calculated below

BRAND ENDEAVOUR

LEASE AMOUNT 1950800

RESIDUAL 480000

PERIOD 48 months

INTEREST 12%

Table 4.9

Monthly lease payment

=43,531.81

Lease payment after tax=43,531.81 (1-0.30) =30472.26

Lease calculation for Toyota Fortuner if taken on a lease from Sundaram Finance for a period of 4 years. The payment is calculated below

BRAND FORTUNER

LEASE AMOUNT 2014800

RESIDUAL 500000 Table 4.10

PERIOD 48 months

INTEREST 12%

Monthly lease payment

=44,890.49

Lease payment after tax=44,890.49 (1-0.30) =31423

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 is 31,914 rupees 2. Monthly rental to be made if the car is purchased on lease by the Sundaram Fasteners is 30,740 rupees

FIGURE 5.2

DATA: 1. Monthly payment to be made if the car is purchased on hire by the Coromandal Engineering Company is 38,415 rupees 2. Monthly rental to be made if the car is purchased on lease by the Coromandal Engineering Company is 37,000 rupees

FIGURE 5.3

DATA: 1. Monthly payment to be made if the car is purchased on hire by the TVS Shri Chakra is 37,981 rupees 2. Monthly rental to be made if the car is purchased on lease by the TVS Shri Chakra is 36,600 rupees

FIGURE 5.4

DATA: 1. Monthly payment to be made if the car is purchased on hire by Jindhal Power and Steel is 31,578 rupees 2. Monthly rental to be made if the car is purchased on lease by Jindhal Power and Steel is 30,470 rupees

FIGURE 5.5

DATA: 1. Monthly payment to be made if the car is purchased on hire by Sical Logistics 32,614 rupees 2. Monthly rental to be made if the car is purchased on lease by Sical Logistics 31,420 rupees

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 high profitable 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 lucrative both 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 the country. 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 arrive at 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.

5.3 CONCLUSION

1. Since The After Tax Periodical Obligation of the customer is lower in case of lease, it is advisable 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 balance 25% 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 the monthly 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 depends upon the interest of the customers interest to have ownership rights or not.

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)