The Hindu Business Line : TVS Srichakra: On a smooth ride

TVS Srichakra accepts cumulative and non-cumulative deposits for two and three years. The cumulative scheme offers an annual yield of 10.40 per cent and 10.93 per cent for two and three years. The non-cumulative scheme offers monthly and quarterly interest payment options and the rates depend on the payment interval chosen; 9.50 per cent for two and three years for the monthly payment option and 9.56 per cent for the quarterly option for the same tenures. The minimum deposit amount is Rs 25,000.

Investors looking for the shortest possible tenure can invest in the two-year option. Otherwise, the three-year option appears attractive and servicing of deposits is unlikely to be a problem. Those willing to lock in for three years can choose the cumulative option as it earns a higher yield at 10.93 per cent.

Despite the stiff competition, a good presence in the original equipment market and the robust growth in two-wheeler production and sales would improve TVS Srichakra's profitability.

Though the near-to-medium-term outlook looks stable, the long-term prospects would depend entirely on the trend in two-wheeler sales.

The debt-equity ratio at 0.51:1 and the interest coverage of 2.81 times its profits before tax provides reasonable safety for payment of interest and principle.

Given the comfortable interest coverage and debt-equity ratios and a strong group support, TVS Srichakra is one of the safer options available.

As the interest rates offered are comparatively attractive, one can consider a two-year investment.

The company is a major producer of two-wheeler tyres. It has a significant presence in the original equipment (OEM) segment and supplies to Bajaj Auto, Hero Honda and TVS Suzuki.

The OEM market contributes over 60 per cent of its revenue, 30 per cent flows in from the replacement market and the rest from exports.

Aided by the robust offtake of two-wheelers and the relatively soft input prices, the company has scaled up its performance over the last three quarters.

For the quarter ended December 2001, the turnover rose 19 per cent to Rs 43.29 crore, while the post-tax earnings jumped 38 per cent to Rs 1.68 crore.

As the demand for two-wheelers in the near-to- medium term appears good, this would improve the future cash flows for TVS Srichakra.

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