TIDCO: An opportunity to invest

Raghuvir Srinivasan

TAMIL Nadu Industrial Development Corporation (TIDCO), promoted by the State Government, offers a fixed deposit scheme with high degree of safety and offering good returns, considering the current interest rate environment.

TIDCO offers a minimum 10.50 per cent for a 12-month deposit and a maximum 12 per cent for a 60-month deposit. There is also a money multiplier scheme (cumulative deposit) where the interest rate of 12 per cent on a 60-month deposit translates into a yield of 16.33 per cent.

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TIDCO was formed in 1965 to promote large- and medium-scale industries in Tamil Nadu. The company's role is to identify investment opportunities and promote projects in association/partnership with individual entrepreneurs and private companies. TIDCO has promoted joint ventures with industrial groups such as the Tatas, the Birlas and the M. A. Chidambaram group. The projects that the company have promoted are in diverse industries such as fertilisers, chemicals, iron and steel, leather and textiles.

Apart from promoting projects in association with others, TIDCO also facilitates investment in projects by overseas investors -- for instance, the projects of Ford and Hyundai Motor. The company basically assists promoters in obtaining statutory clearances, clearing infrastructure issues such as land acquisition, obtaining power connection, and so on.

TIDCO is led by a high-power board comprising officers from the Indian Administrative Service and two public representatives. It is managed on a daily basis by professionals who identify new business opportunities, technology sources and evaluate projects. TIDCO's equity investments take three forms. In a joint sector project, it subscribes to 26 per cent of the equity of the joint venture, with the private promoter contributing an equal amount.

In an associate sector project, TIDCO subscribes up to 11 per cent of the equity capital, while in the `escort' sector it takes up a token 1 per cent of the equity and mainly acts as a facilitator. Some of TIDCO's better known projects include Tamil Nadu Petroproducts, Titan Industries, Tamil Nadu Telecom and TANFAC Industries. While Titan is a joint venture with the Tatas, TANFAC was promoted in association with the Birlas. Of course, TIDCO also has its list of ventures that are not doing well now such as Asian Bearings, Dyna Lamps and Tamil Nadu Industrial Explosives.

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TIDCO's profitability has dropped; net earnings dropped from Rs 2.46 crore in 1997-98 to Rs 47.22 lakh in 1999-2000. The company has embarked on a restructuring programme for which external consultants have given their report, which is under Government consideration. One option is for TIDCO to divest its holdings in some of the ventures to generate cash for future investments.

Investors can park their savings with TIDCO without any fear for the simple reason that it is a government-promoted company. Falling profitability notwithstanding, safety of the deposits may not really be a cause for worry here.