The Hindu Business Line : OCL India: Invest in one and 3-year options

OCL India: Investors can consider exposure in the fixed deposit options of OCL India. The one- and three-year options can 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 these options 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. 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 option could be considered.

OCL India is in the business of cement and related products. The company's financials are in healthy shape. With an improvement in cement prices, profitability and earnings levels are likely to comfortably cover the interest outgo.

Wheels India: An investment can 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. Wheels India is a TVS group company that makes 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.

The demand for the company's products are at healthy levels. The company has also expanded its exports; it also now makes 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.

Do not let the minimum amount of Rs 21,000 deter an investment decision. For deposits from shareholders, Wheels India has exhausted over 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.

First Leasing: Investments in the three-year fixed deposit of First Leasing can be considered. The company offers 8 per cent for a three-year tenure, one of the higher rates offered by established finance companies. Financially, the company is in reasonably good shape. Its debt-equity ratio of less than five offers investors higher level of safety.

Profit growth record is also impressive with the company growing its profits in nine out of the past ten years. In each of the past ten years, the return on net worth has been above 15 per cent.

The proportion of bad loans is also quite low at less than 1 per cent and its capital adequacy of about 24 per cent offers scope for business expansion.

Cholamandalam Investment: Investment in the one-year fixed deposit programme of Cholamandalam Investment & Finance Company can be considered. For monthly interest payments, the minimum period of investment is three years which, however, can be avoided. Cholamandalam is one of the safer investment options in the NBFC arena.

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 Post-Office Term Deposit.

Premature withdrawals before three months are not allowed. Withdrawals after three months 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 that, the interest paid will be only 4.5 per cent.

BL Research Bureau

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