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KCP Sugar and Industries: Investors willing to assume a degree of risk 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. A cyclical upturn in the sugar industry, coupled with lower interest costs, has significantly bolstered the financials of the company over the past year. However, the programme is not attractive to those who can invest 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. 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. In the first nine months ended December 2004, the net sales almost doubled to Rs 211 crore, while profit after tax was at a healthy Rs 19.9 crore. The interest cover improved to seven times.

With a recovery in sugar output expected for 2005-06, firm trends in sugar prices can be expected to last over the next couple of quarters, after which they may cool off. Therefore, a sharp improvement in KCP Sugar's performance like the one witnessed in 2004-05 may not be possible in the current fiscal. But profits are likely to continue to be at levels reasonable enough to permit debt servicing.

The company has a reasonable record of servicing its fixed deposit obligations even during the depressed years in the sugar cycle.

Madras Cements: An investment in the one-year option of the fixed deposit programme can be considered, but only to park a part of the funds that you may otherwise leave in a bank deposit for a similar period or less, and not out of funds set apart for building a long-term fixed income portfolio. The company offers 6 per cent for its one-year fixed deposit and this comes with a high degree of safety.

The two-year and three-year options may be avoided, as the interest rates on offer, even after taking into the effect of quarterly compounding, do not offer appropriate premium for longer maturity periods.

With interest rates having bottomed out, it may not be appropriate to lock in into an option that pays 7 per cent for a three-year period; this would be the case even for risk-averse investors.

Given its sound financials and demonstrated ability to bankroll its growth plans effectively through debt, Madras Cements is well placed to service its fixed deposit programme. Opt for the one-year cumulative option.

Shriram Investments: Investments can be considered in the high-yielding fixed deposit and debentures schemes of Shriram Investments. The company offers 7.75 per cent for a three-year cumulative fixed deposit and 8.40 per cent for a three-year cumulative debenture.

They also offer 7.50 per cent for a three-year non-cumulative fixed deposit and 8.0 per cent for a three-year non-cumulative debenture.

The offer is attractive and the risks are now lower, considering the business growth and the capital infusion made in recent years. Investors can contact Shriram Investments at 044-24990960, III Floor, Mookambika Complex, 4, Lady Desika Road, Mylapore, Chennai - 600004.

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