The Hindu Business Line : Invest in 3-year bonds of OCL India

OCL India: Investors may consider exposures in the fixed deposit options of OCL India. The one-year as well as the three-year options may be considered.

As the two-year option does not offer any premium over the rate on the one-year option for the longer duration, it need not be considered. Investors could divide their exposures equally between the one-and three-year option to have flexibility in case interest rates edge up.

Though the premium for the three-year option is a modest 0.25 per cent, the rate of 7.75 per cent appears attractive to lock into. We had earlier recommended only the one-year option.

But given the trend in interest rates, we now take the view that the three-year could be considered. OCL India is in the business cement and related products.

The company's financials are doing well. With an improvement in cement prices, profitability and earnings levels are likely to comfortably cover the interest outgo.

Wheels India: An investment may be considered in the three-year FD option of Wheels India. The rate of 7.5 per cent on offer is attractive. Choose the cumulative option, as it would offer a slightly higher yield of 7.7 per cent.

The rates on offer for the one- and two-year options are 6 per cent and 6.5 per cent. There are other companies, such as OCL that offer a higher rate for these tenors. Wheels India is a TVS group company that is engaged in the manufacture of wheel rims. It caters to the requirements of manufacturers of passenger cars, commercial vehicles, tractors and jeeps.

The company has a stranglehold in this market. Despite the growth numbers being lower than the past two years, they are on a high base, courtesy the robust increase during this period. Demand for the company's products are at healthy levels.

The company has also expanded its exports; it also now manufactures air suspension systems for commercial vehicles and buses. This could provide a boost to revenues.The financials of Wheels India are in excellent shape and investors in the FD programme have no cause for worry. For deposits from the public, the company has exhausted about 80 per cent of the available limit. So investors should use the window that is now open to invest in the three-year option. Do not let the minimum amount of Rs 21,000deter an investment decision. For deposits from shareholders, Wheels India has exhausted about 50 per cent of the limit. Shareholders of the company should use the option to lock in a part of the funds that they have earmarked for investing in fixed-income investments.

Jindal Steel and Power: Investments in the fixed deposit scheme of Jindal Steel and Power can be considered with a one-year perspective.

Low-cost sponge iron operations along with backward integration (it has captive power plant) have helped the company improve its profitability over the past few years. Earnings have grown at a CAGR of about 50 per cent, while OPMs have been fairly consistent at about 37 per cent. While addition of new steel capacities is likely to result in higher volumes, increasing focus on value-added long products is expected to protect it to a large extent from any cyclical downswings. In the long run, the company is likely to benefit from its power business, thereby mitigating the risk associated with cyclical business.

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