Exide Industries: Positive player

Anup Menon

THE fixed deposit programme of Exide Industries is a good option for a fixed-income portfolio with a moderate risk profile.

The rates on offer are comparable to other investment options with similar risk profile. The company's financial performance has been stable; this is positively related to that of the automobile industry.

Since there have been some signs of a slowdown in the automobile sector, the operational risk associated with Exide Industries is higher now. The gearing and the ability to cover interest payments are comfortable, and the company is not likely to face any problem in servicing its FD base. Given the additional risk, investors can consider investing in the shorter-end tenors.

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The company offers fixed and cumulative schemes. The tenures on offer are for one, two and three years at 9 per cent, 10 per cent and 11 per cent respectively. For the same tenors on offer, the effective compounded yields for the cumulative scheme are 9.30 per cent, 10.38 per cent and 11.46 per cent respectively.

The minimum amount of deposit under both options is Rs 5,000 and, thereafter, in multiples of Rs 1,000 each. Deposits are accepted at the registered office at Exide Industries Ltd, 59E, Chowringee Road, Calcutta - 700 020.

Exide Industries is among the leading players, with interests in both automobile and industrial segments. A major chunk of its revenues is derived from the automobile sector. With the sector showing signs of slowing down, offtake for the company may come under pressure.

In the past, the company's performance was supported by good demand from tractor manufacturers, two-wheelers and the replacement market. The tractor industry has not been faring well in recent times. However, the demand from the two-wheeler and the replacement markets augurs well for the company's near-term prospects.

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The financial performance for the first half of 2000-01 was in line with expectations. Sales revenues rose by around 1.55 per cent to Rs 357.62 crore compared to the corresponding previous period. In the same time-frame, the operating margins increased from around 19 per cent to 20 per cent. The post-tax earnings rose 8 per cent to Rs 22.4 crore.

Exide Industries' fundamentals are on relatively solid ground. The only cause for concern could be a possible sustained slowdown in the automobile industry which could impact volumes. Considering this factor, investors can look at the one-year tenor only and avoid the longer tenors. This can be considered as and when the overall industry situation looks up and shows signs of sustainable growth.