Tamil Nadu Power Finance Corporation -- Sound backing

Anup Menon

THE fixed deposit programme of Tamil Nadu Power Finance Corporation is a good investment for investors with a low-to-medium risk profile.

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The rates on offer are comparable to the best in the same risk category. The company's earnings performance for the year-ended March 1999 was fairly impressive. Further, since the company is backed by the Tamil Nadu Government, the credit risk associated with the deposit is low. The gearing levels and the ability to cover interest payments are comfortable. Given the rates on offer, investors can consider the shorter-end tenors on offer.

Tamil Nadu Power Finance's fixed deposit programme offers the fixed and cumulative schemes for tenors ranging from one to five years. The interest rates on offer for one and two years are 10.08 per cent and 10.59 per cent respectively. For the three-, four- and five-year tenors, the rates depend on the investors' choice of interest payment option. For the monthly interest payment option, the rate on offer is 11.50 per cent for all the three periods; for the quarterly interest payment option it is 11.61 per cent. The minimum deposit under this scheme is Rs 10,000.

The other option available for the investor is to choose the cumulative deposit scheme. The compounded yields on the investments are attractive. The rates on offer are 10.50 per cent and 11.04 per cent for the one- and two-year tenors and 12.13 per cent for three, four and five years respectively. The minimum deposit under this scheme is Rs 5000. Deposits are accepted at the registered office of the company at 84, T. T. K Road, Alwarpet, Chennai - 600 018.

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TNPFL is a non-banking financial company owned by the Tamil Nadu Government. Its main activity is funding projects of the Tamil Nadu Electricity Board. Their business activities include hire purchase, leasing and term loans. The company meets a significant portion of its funds requirement through public deposits. Being an organisation under the auspices of a State government, investors need not be concerned from the point of view of safety of the instrument.

The company's financial performance for the year-ended March 1999 was impressive. Operating income declined marginally by around 5 per cent to Rs 167.85 crore compared to the corresponding previous period. However, the post-tax improved 31 per cent to Rs 15 crore.

Investors can consider the one-, two- and three-year tenors on offer. Since there is no incremental benefit in investing beyond three years, the four- and five-year options need not be considered. Investors should also note that they can claim exemption on interest income from the deposits under Section 80-L of the Income Tax Act.