The Hindu Business Line : FD options

Cholamandalam Investment: The one-year fixed deposit programme of Cholamandalam Investment and Finance Company appears an attractive option. The company offers 6 per cent with interest being paid either quarterly or annually. To avail of monthly interest payment, the minimum period of investment is three years. This option can be avoided.

Cholamandalam is one of the safer investment options in the financial sector. The rate of interest is also attractive compared to other investment options such as bank term deposit and is only 0.25 percentage points lower than that of the Post-Office Term Deposit. Premature withdrawals before three months are not allowed. Withdrawals after that also suffer penalty in the form of a reduction in the contracted interest.

For withdrawals between three and six months, no interest would be paid. For withdrawals after six months, interest paid will be only 4.5 per cent.

KCP Sugar: Investors willing to assume a higher 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. The interest rate of 9 per cent per annum on offer provides 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.

For the first none months ended December 2004, its 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 sharp 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 seenwitnessed in 2004-05 may not be possible this fiscal. But profits are likely to continue 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.

Shriram Investments: Investments can be considered in the high-yielding fixed deposit and debentures 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, 3 Floor, Mookambika Complex, 4, Lady Desika Road, Mylapore, Chennai - 600004.

BL Research Bureau

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