TN Power Finance: `Power'ful

Sowmya Krishnan

TAMIL Nadu Power Finance Corporation's fixed deposit programme is a good option for an investor with a medium risk profile.

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The company has a good repayment record. Considering the State government backing, reasonable returns and tax concession available, a one two-year investment can be considered.

The longer-end tenures can be avoided as there is no incremental benefit for locking in the funds.

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Scheme features: Tamil Nadu Power Finance accepts deposits under three schemes. Under the regular interest payment scheme (RIPS), deposits are accepted for 24, 36, 48 and 60 months. Interest is paid monthly or quarterly intervals, at rates varying between 9.58 per cent and 10.59 per cent depending on the payment option.

Under the cumulative interest payment scheme (CIPS), there are two options. Under scheme I a minimum deposit of Rs 10,000 is accepted for 12, 24, 36 48 and 60 months. The interest rates vary between 9.40 per cent and 13.74 per cent.

Under scheme II, a minimum deposit of Rs 593 is accepted for 60 months. The effective yield is 13.74 per cent per annum. Deposit applications can be obtained from the registered office of the Corporation at No 84, TTK Road, Alwarpet, Chennai - 600 018.

Business: TN Power Finance provides hire purchase, lease finance, term loan and other forms of financial assistance for those engaged in generation, transmission and distribution of power and infrastructure development. It is wholly-owned by the Tamil Nadu Government.

Due to strong government backing, the risk of default is low.

Moreover, the interest earned on these deposits is eligible for tax deduction under Section 80L of the Income-Tax Act.

The reasonable returns coupled with a medium risk profile and the tax exemption make its short-end tenures good investment options.

Hence, investors can invest for one-two years. A long-term investment can be avoided.

The company's financial performance for the year ended March 2001 was satisfactory.

The profit-before-tax rose 30 per cent to Rs 24.19 crore and profit-after-tax grew marginally by 0.5 per cent to Rs 12.95 crore.

The Tamil Nadu Electricity Board accounts for much most of TN Power Finance's business.

Hence, TNEB's health has an influence on the company's performance.

The implementation of the much-awaited power sector reforms and the implementation of projects by independent power producers would throw up opportunities for the company.