The Hindu Business Line : Madras Cements: Invest in 1 and 3 year options

Madras Cements: An investment can be contemplated in the fixed deposit programme of Madras Cements; the one- and three-year options can be considered. It may be better to opt for the three-year option than the two-year fixed deposit, as incremental returns are attractive.

We had earlier this year recommended only the one-year option. As the changes in tax laws have reduced the attractiveness of deposits in banks, the fixed deposit options of high-quality companies that have offered low rates have become more attractive. The one-year option could be used to park funds that might be idle in a bank account. The three-year option can be considered as a core part of the portfolio.

Madras Cements offers an annual interest rate of 7 per cent. If you opt for the cumulative option, the yield is likely to be a tad higher. As interest rates appear to have bottomed out, you could can investing between 25 per cent and 40 per cent of your surplus now and park the rest in floating rate funds. They could be invested in FDs over the next year so that one can benefit from the modest hike in interest rates that appears likely.

Madras Cements rests on fundamentals that should ensure a high degree of safety for interest and principal payments. On a risk-adjusted basis, the fixed deposit programme of Madras Cements is one of the superior options that are available to investors.

Ceat: Taking into account the attractive interest rate offered, an investment in the fixed deposits with one-year tenure can be considered. The one-year deposit carries an interest rate 8.5 per cent which is attractive compared to the rates offered by banks and other companies.

Though the interest rates on deposits beyond one-year maturity also appear attractive, it would be better to stick to the shorter tenure option as the tyre industry is still passing through a relatively depressed phase. The firm trend in input cost and intense competition in the industry along with the sizeable excess capacity would keep the financials under pressure.

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 good shape. Its debt-equity ratio of less than five offers investors higher safety.

The profit growth record is also impressive with the company growing its profits in nine out of the past ten years. In each of these 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 24 per cent offers scope for expansion.

City Union Bank: Senior citizens can consider investing in the short-term deposits of City Union Bank can be considered. The bank offers 6 per cent for deposits maturing in six months, 7 per cent for one-year deposits and 7.50 per cent for two- and three-year deposits. The rates offered are competitive and higher than what is on offer on post-office time deposits.

Deposit insurance for deposits of value less than Rs 1 lakh made in scheduled commercial banks make the scheme even more attractive. Deposits for a term longer than three years, however, can be avoided. Small-savings schemes are more attractive for such deposits.

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