The Hindu Business Line : Sundaram Home Finance: Home safe

THE fixed deposit programme of Sundaram Home Finance, a subsidiary of Sundaram Finance, could be a good option for investors with a low-to-medium risk profile. The interest rates are quite attractive, especially after the recent decline in interest rate level.

Sundaram Home Finance is in a business that is one of the safest avenues of financing today. The company's credit quality is on the high side. The fixed deposits are one of the safer fixed income investment options available, as suggested by the `M-double-A-minus' (MAA-) rating assigned by ICRA, indicating high safety.

The company's financial and operational risk profile is stable. The financials also indicate that the company is not likely to face any problems in servicing its fixed deposit base. An investment up to three years is safe and can be considered. The four-and-five-year tenures can be avoided, as the incremental returns are not high enough to warrant such a long exposure.

The company also offers loans against the fixed deposits. Interest on deposits of housing finance companies' gets a tax concession (under Section 80L). This may not be available what with the Kelkhar Task Force on tax reforms suggesting that all such concessions be discontinued. Therefore, there is an element of uncertainty about the tax concession.

Schemes and features

Under the fixed deposit programme, an investor has the choice of cumulative and non-cumulative (regular income) schemes. Under the regular income scheme, the company offers monthly, quarterly and yearly income plans.

Under the quarterly income plan, the investor can choose between four tenors — 12-23 months at 7.75 per cent; 24-35 months at 8 per cent; 36-59 months at 8.5 per cent; and 60 months at 8.50 per cent.

Under the yearly income scheme, for the same tenors, the interest rates on offer are 8 per cent, 8.25 per cent, 8.75 per cent and 8.75 per cent respectively. The minimum deposit for the above schemes is Rs 10,000. The monthly income plan offers 8.25 per cent for the duration of 36-59 months. The minimum deposit for this scheme is Rs 20,000.

Under the cumulative deposit scheme there are five tenors — 12, 24, 36, 48 and 60 months. For 12 and 24 months, the interest rates are 8 per cent, 8.25 per cent respectively, and for the rest 8.75 per cent. The minimum investment here is Rs 10,000.

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