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Sowmya Krishnan

HUDCO'S fixed deposit programme is suitable for risk-averse investors, especially senior citizens. Deposits of up to three years can be considered. The longer-end tenures can be avoided due to the lower incremental returns offered and a possible change in the interest rate scenario. Though the returns are comparatively lower for the non-senior-citizens category, the HUDCO FD programme can be considered for diversification purposes and tax planning. It is eligible for tax benefits under Section 80 L.

Scheme features: HUDCO offers three deposit schemes — Regular Plus Scheme, Multiplier Plus Cumulative Income Scheme, and Cash Certificate Cumulative Income Scheme. The Regular Plus Scheme offers 8.25 per cent for one and two years; 9 per cent for three, four and five years and 9.5 per cent for six and seven years. The minimum deposit amount is Rs 50,000 and thereafter, in multiples of Rs 5,000. The interest is paid at quarterly, half-yearly and annual intervals.

For the cumulative scheme, the minimum deposit is Rs 10,000 and, thereafter, in multiples of Rs 1,000. Interest is compounded quarterly. The cash certificate scheme is a cumulative scheme that allows investors to earn a particular amount on maturity. HUDCO offers a special additional interest of 0.5 per cent on deposits of three years and above for senior citizens.

The high minimum deposit requirement makes the regular income scheme a bit unattractive and is suitable only for those with a high cash surplus. The yield for senior citizens is attractive on a risk-adjusted basis. Hence, it is suitable for retired investors looking for a safe avenue to park their retirement benefits and also earn a regular income.

Concerns: Most of its loans are granted to state housing boards and development authorities for implementing infrastructure projects. Hence the financial strength of the States casts a shadow on the asset quality. As its primary objective is to grant concessional loans to the poor and weaker sections, recovery is also a cause of concern. Competition and falling spreads are the other challenges.

Financial position: HUDCO's financial performance has not been impressive.

For the nine months ended December 2001, income from operations rose 13.34 per cent to Rs 1,478.04 crore. However, an equal 14.86 per cent rise in interest costs resulted in an almost flat bottomline at Rs 65.43 crore.

However, the Centre's support mitigates these concerns to some extent and hence the credit risk, thus, does not appear high. Fresh investments can be considered in HUDCO's fixed deposits.

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