The Hindu Business Line : KCP Sugar offers 9% interest

KCP Sugar and Industries: Investors can consider subscribing to the two-year fixed deposit programme from KCP Sugar and Industries Corporation. 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. A cyclical upturn in the sugar industry has improved the company's financial position. Higher profitability resulted in a comfortable interest cover of 9 times in 2004-05.

Despite a sharp recovery in sugar output expected for 2005-06, the domestic market for sugar may remain fairly tightly balanced. As a result, sugar prices may sustain current levels or trend upwards. With the crushing volumes for cane also likely to expand, the company's profits may continue to register reasonable growth. Debt servicing is unlikely to pose a problem over this period. The company has a reasonable record of servicing its fixed deposit obligations even during the depressed years in the sugar cycle.

India Glycols: An investment can be considered in the two-year and three-year fixed deposits of India Glycols. The company offers an interest of 8 and 8.5 per cent on its deposits for two and three years respectively. Cumulative options are also available.

India Glycols backed by higher volumes has reported a 21 per cent growth in the first quarter; however, a rise in raw material costs have cut down its operating margin, which has fallen to 18 per cent. Interest expenditure has halved, signifying a substantial reduction in debt.

India Glycols is the only manufacturer of MEG using the molasses route; it also makes di-ethylene glycol and ethylene oxide derivatives.

Price volatility of its products acts as a dampener. Interest expenses are, however, sufficiently covered and the company would be able to meet its interest obligations.

Srei Infrastructure Finance: Investments in the one-year fixed deposit programme of Srei can be considered.

he company offers 7.25 per cent for a one-year cumulative term deposit.

The interest rate is attractive considering housing finance companies and banks offer rates that are lower by more than one percentage point.

In addition, from this financial year, interest from bank deposits and housing finance companies do not enjoy the protection under section 80-L.

Srei is a fast-growing non-banking finance company specialising in infrastructure project financing which has attracted equity investments from international institutions such as IFC of Washington and FMO of the Netherlands.

The company boasts of strong capital adequacy and has also low incidence of bad loans.

The fixed deposit programme is ideal for investors with a one-year investment horizon.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page