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G. Madhan

THE fixed deposit programme of Cholamandalam Investment and Finance could be a worthy option. The interest rates offered are lower than that offered by companies such as Ashok Leyland Finance. However, the company 's strong fundamentals and revival in the auto segment justify an investment across all the tenures.

Schemes and features: Cholamandalam Finance offers non-cumulative (fixed) and cumulative schemes. Under the fixed deposit income scheme, interest is paid at monthly, quarterly and annual rests (see table for rates).

The interest rates for the cumulative deposit scheme is akin to that of the quarterly non-cumulative option. However, the annual yield for this scheme works out to 7.19 per cent, 8.01 per cent and 8.94 per cent respectively. The minimum deposit for all the schemes is Rs 10,000. However, the one- or two-year monthly payment option can be availed of only on a minimum investment of Rs 25,000.

Business prospects: Cholamandalam, a Murugappa group company, is among the better-managed NBFCs operating now. The company offers fund-based financial services such as hire purchase, leasing, auto finance, trade finance and services in non-fund areas such as merchant banking. About 65 per cent of the company's assets are in vehicle finance, while 17 per cent of the asset portfolio is vested in the capital market. As the demand for commercial vehicles and two-wheelers has been showing a gradual uptrend, the company's business prospects appear to be bright. However, this may not necessarily lead to a likely growth in earnings given the increasing competition in the vehicle-financing business.

Financials: The company's financial growth was good in the nine-month period ended December 2002. The strong growth in commercial vehicle finance and increasing geographical reach appear to have aided the growth.

The company's disbursements for the nine-month period rose 60 per cent to Rs 754 crore, from the corresponding previous period. The net sales also grew 7.8 per cent to Rs 157.9 crore. Further, the net profit went up by a whopping 54.2 per cent to Rs 19.7 crore. The net profit margin for the period stood at 12.5 per cent, up from the corresponding prior period's 8.7 per cent. The company's capital adequacy was 12.02 per cent as on March 31, 2002, marginally above the 12 per cent stipulated by the RBI. The net non-performing assets were one per cent of the total risk-weighted assets. Given the strong fundamentals and the revival in demand expected in the auto sector, investment across all the tenures can be considered.

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