The Hindu Business Line : KSE offers attractive interest rates

KSE: Investors can consider adding the one- or two-year fixed deposit programme from KSE Ltd to their portfolio, given the attractive interest rates and the modest risks associated it. The company offers an interest rate of 8 per cent per annum on both options.

KSE Ltd is a large producer of cattle feed, coconut oil from oilcakes and also has a marginal presence in the dairy segment in milk and ice-creams. After facing pressure on profits due to rising input prices in 2002-03, KSE's financial performance improves sharply since 2003-04. In 2004-05, it reported a 14 per cent rise in sales to Rs 212.6 crore, and a 34 per cent increase in net profits to Rs 6.75 crore.

Apart from the capital expansion projects underway at its extraction and refining plants, the company has recently added to capacities by acquiring a 90 tonne per day cattlefeed plant at Mysore.

A strike in the Irinjalakuda unit which has been on since February 2005 was called off in May after the company entered into a wage settlement with workers. However, this did not materially affect the performance or operations for the March quarter. The company's financials are on sound footing and it has an interest cover of over 13 times.

Jindal Saw

An investment in the fixed deposit programme of Jindal Saw can be considered with a one-year perspective. Investment for longer tenures can be avoided, considering the risks involved in the cyclical nature of the business.

Jindal Saw makes arc welded pipes and seamless tubes, which are widely used in oil and gas transportation, water and social infrastructure projects. The demand from these sectors is expected to remain robust translating into higher volumes for the company.

However, the risk element stems from the possibility of pressure on margins due to higher input prices, which could compress the profit cushion available for meeting interest payments. The company, however, appears well placed to meet its interest obligations over the next one year.

JK Paper: An investment can be considered in the fixed deposit programmes across tenures.

As the paper business is subject to a high degree of cyclically, the longer tenures are risky. But the rates on offer appear attractive. The steady improvement in the company's financial profile also augurs well.

The substantial reduction in interest outgo and replacement of high-cost debt with funds sourced at lower rates over the past quarter enhances the degree of comfort that is available to investors in the FD programme.

JK Paper is also set to commission a coated paper facility, which would also lead to a scaling up revenues over the next two years. We had earlier recommended that the three-year option could be avoided.

With further confirmation over the past quarter that the financials are in healthy shape, we believe that even this tenure can be considered as JK Paper is well placed to ride out a weak phase in the business cycle. The minimum amount is Rs 10,000.

In the two- and three-year options, investors can opt for the cumulative option while the non-cumulative option appears appropriate for the one-year tenure.

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