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G. Madhan

THE fixed deposit programme of Can Fin Homes is a good investment option. The interest rates are on a par with housing finance companies such as Sundaram Home and PNB Housing, but higher by 1-1.5 percentage points vis-a-vis banks. Deposits with housing finance companies are eligible for a tax break under Section 80L and Can Fin Homes falls in this category.

But considering the flat trends in revenues and profits and intensifying competition, an investment beyond three years can be avoided, as the incremental returns are not attractive enough.

Under the non-cumulative schemes, there are monthly, quarterly, half-yearly and yearly-income options. Under the monthly/quarterly income schemes, the interest rates are, 12-23 months at 7 per cent, 24-35 months at 7.25 per cent, 36-47 months at 7.5 per cent, 48-59 months at 7.75 per cent and 60-84 months at 8 per cent.

In the half-yearly scheme, the interest rates are higher by 25 basis points (0.25 per cent). The rates of the annual income scheme, barring the 12-23 month tenor, are higher by 50 basis points from that of quarterly income scheme.

Under the cumulative scheme, the interest rates for 12, 24, 36, and 48 months are 7 per cent, 7.25 per cent, 7.5 per cent and 7.75 per cent respectively. For 60-84 months, the interest rate is 8 per cent. Interest for this scheme is compounded monthly.

A cumulative deposit scheme `Abhivridhi', which increases the amount invested by 80 per cent in 84 months, offers 8.43 per cent (effective yield 8.75 per cent). The minimum deposit for all the schemes is Rs 5,000.

Further details can be got from the registered office at No 29/1, Sir M. N Krishna Rao Road, Basavangudi, Bangalore - 4.

Business prospects and financials: Given the increase in demand for housing, the company has good prospects for growth as far as loans go.

But this may not necessarily lead to a likely growth in earnings due to pressures on profitability from increasing competition.

The company's net profit margin for same period stands at 12.8 per cent down from the corresponding previous period's 13.1 per cent.

The capital adequacy for the year ending March 2002 was at 13.6 per cent against the minimum stipulated 12 per cent. The interest spread for the same period has also come down marginally from that of the corresponding previous period.

Shareholder's funds for the year ending March 2002 are Rs 113.05 crore, up from the previous period's Rs 100.07 crore. Fixed deposits, which represents 15.8 per cent of the total source of funds, is down (17.8 per cent).

This is in line with trends in companies such as HDFC as well. They appear to be taking advantage of finer rates available in the market.

But for investors in the FD programme, the declining proportion of FDs in the financial plan can be a source for some comfort.

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