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G. Madhan

THE fixed deposit programme of Ashok Leyland Finance (ALF) is a good option. The interest rates are higher than that offered by other auto-finance companies such as the Bajaj Auto Finance and Lakshmi General Finance. Considering the attractive interest rates, strong fundamentals and impressive growth registered by the auto sector, an investment across all the tenures can be considered.

Schemes and features: ALF offers cumulative and non-cumulative schemes (see table). Under the monthly income scheme, only the 36-month tenure is available and the interest rate for this option is 8 per cent. Under the quarterly income plan, the depositor can choose between two tenures — 24 or 36 months. Since the quarterly scheme is compounded at monthly intervals, the effective yields for the scheme are 7.55 per cent and 8 per cent respectively.

Since the cumulative deposit scheme is compounded at monthly intervals, the annual yields are 7.23 per cent for one year, 8.07 per cent for two years and 9.01 per cent for the three years. For further details can be had from the company's head office at Sudarsan Building, 86, Chamiers Road, Chennai - 600 018.

Business prospects: ALF is one of the better-managed non-banking finance companies. It offers financing for the purchase of commercial vehicles, cars, multi-utility vehicles, two-wheelers and white goods. As the demand for both commercial vehicles and two-wheelers has been showing a gradual uptrend, the company may witness steady growth in its disbursements, revenues and earnings.

Financials: The company registered strong growth in its operating income and post-tax profits during the year ended 2002-03. However, the disbursements grew marginally by 1 per cent to Rs 1,870 crore. The capital adequacy ratio stood at 19.1 per cent against the minimum stipulated 12 per cent. The non-performing assets totalled 0.88 per cent. For the quarter ending June 2003, the operating income dropped 9.5 per cent to Rs 74.2 crore from the corresponding previous period. The profit after tax, however, rose 11.8 per cent to Rs 10.3 crore. The net profit margin also rose to 13.9 per cent (11.3 per cent).

Suitability: Investors not looking for regular returns can go in for the cumulative option, which is available across all three tenures and also has a reasonable minimum deposit requirement. Those preferring monthly returns can consider the monthly income plan.

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