The Hindu Business Line : FD options

KCP Sugar and Industries: Investors can consider subscribing to the two-year fixed deposit programme from KCP Sugar and Industries Corporation. Longer tenures can be avoided in the light of the fluid interest rate scenario.

However, the programme is not attractive to those who can avail of tax benefits by investing in small-savings schemes such as the Public Provident Fund, National Savings Certificates and Senior Citizens schemes.

The interest rate on offer — 9 per cent per annum — offers a reasonable premium over the fixed deposit options from less risky, top-rated manufacturing companies.

The cyclical upturn in the sugar industry, which has significantly bolstered the financial position of KCP Sugar over the past two years, enhances the comfort level with this programme.

With crushing capacities for 11,500 tonnes of cane at two locations in Vuyyuru and Lakshmipuram, KCP Sugar is among the larger players in the sugar industry.

An increase in crushing volumes and buoyancy in sugar prices have helped KCP Sugar report a sharp ramp up in revenues and profitability over the past two years.

In the first nine months of 2004-05, the company reported a 68 per cent growth in sales, while net profits climbed to Rs 25.72 crore from a loss of Rs 3.95 crore.

This has resulted in a sharp improvement in the interest cover as well.

With a recovery in sugar output expected only by 2005-06, firm trends in sugar prices can be expected to last at least over the next couple of quarters.

Thereafter, if cane output recovers, prices could flatten out, which could moderate the pace of earnings growth for producers such as KCP Sugar. However, the company has a reasonable record of servicing its fixed deposit obligations even during the depressed years in the sugar cycle.

JK Industries: Investors may consider parking their funds in the fixed deposit scheme, with a one-year tenure, offered by J. K. Industries.

The deposit with a one-year maturity period carries a healthy interest rate of 8 per cent. The company is fundamentally sound with a strong presence in the automotive tyre industry. It has presence in the fast growing radial tyre segment as well.

The merger of Vikrant Tyres has resulted in the addition of truck radials into the product portfolio.

Despite the inherent strengths, the company's performance in the recent quarters has not been quite impressive owing to unfavourable business environment. Along with other tyre producers, the company's profitability has been under pressure.

This trend is likely to persist in the near term as well. Given this scenario, it would advisable to lock-in to the deposits with a one-year maturity.

BL Research Bureau

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