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G. Madhan

CONSIDERING the current decline in the interest levels, the fixed deposit programme of Cholamandalam Investment and Finance Company is a good option for investors. Cholamandalam is among the better-managed NBFCs operating now and its credit quality is on the high side. The fixed deposit programme of the company, "Gold Nest", is one of the safe options available at present.

Business: The company offers fund-based financial services such as hire purchase, leasing, auto finance, trade finance and services in non-fund areas such as merchant banking. The company appears to have maintained its growth momentum in retail finance by expanding its product portfolio and increasing the geographical reach. New products such as two-wheeler and tractor finance accounted for 20 per cent of the disbursements in the half-year ending September 2002.

Financials: The company's financial and operational risk profile is stable. For the half-year ending September 2002, the net profits grew by 50.5 per cent to Rs 12.42 crore. For the same tenor, the interest component was 47 per cent of the total income from the operations. For the year ending March 2002, the company's non-performing assets, as a percentage of risk weighted assets, fell to 1 per cent from 1.3 per cent in the previous year.

Schemes and features: The company accepts fixed and cumulative deposits. Under the fixed deposit income scheme, the interest is paid at monthly, quarterly and annual rests. The interest rates differ according to the interest payment interval. The monthly payment option offers 7.95 per cent for one year, 8.44 per cent for two years and 8.93 per cent for three years.

In the quarterly payment option, for the same tenors, the rates offered are 8 per cent, 8.50 per cent and 9 per cent respectively. For the annual scheme, for the same tenor, the rates offered are 8.25 per cent, 8.77 per cent and 9.30 per cent respectively.

The annual yield for the cumulative scheme works out to 8.25 for one year, 9.16 for two years and 10.20 for three years. The minimum deposit across the schemes is Rs 10,000. However, one-year deposit holder can opt for the monthly payment option only if he invests a minimum of Rs 25,000.

Recommendation: Considering the company's track record for regular payment of interest, an investment in all the options can be considered.

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