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G. Madhan

THE fixed deposit programme of SRF is open for fresh investment. An investment up to a year can be considered.

However, exposures beyond that can be avoided, as the incremental returns are not large enough.

Scheme and features: SRF only offers cumulative fixed deposit scheme. Under this, the tenures available are 12 months, 24 months and 36 months at 8 per cent.

However, the annual yields for the tenures are at 8.24 per cent, 8.58 per cent and 8.94 per cent respectively as the interest is compounded quarterly.

The minimum investment for the scheme is Rs 10,000. Further details can be got from the registered office at Express Building, 9-10, Bahadurshah Zafar Marg, New Delhi - 110002.

Business prospects: SRF makes nylon tyre cord fabric (NTCF is used as reinforcement for all kinds of tyres), chemicals (fluorochemicals and chloromethanes) and refrigerant gases used for a variety of industrial, commercial and household applications.

Sixty-five per cent of the company's revenue is derived from the tyre cord fabric segment, while the chemical business segment contributes 23 per cent.

Given the strong growth in the auto and tyre industry, the company appears to have good prospects for growth.

However, this may not necessarily lead to the improvement of the profit margins as there is a sharp increase in imports of NTCF from China.

Financials: The company's fundamentals have remained fairly steady. For the quarter ending June 2003, its net sales grew 13.7 per cent to Rs 209.5 crore; post-tax profit rose 10.3 per cent to Rs 13.7 crore. SRF's net profit margin was at 6.5 per cent (6.7 per cent). SRF's ability to handle interest expense also appears reasonable as the interest coverage ratio for the year ending March 2003 is 2.3 (1.7). The company has continued to reduce its interest expenses, aiding the bottomline. The interest expense for the quarter ending June 2003 dropped by 34 per cent to Rs 7.1 crore from the corresponding previous period.

The interest expenses for the year ending March 2003 dropped by 22.9 per cent to Rs 42.2 crore. This, to a large extent, is due to the sharp reduction in the debt levels (from Rs 350.2 crore in 2002 to Rs 267.8 crore in 2003).

The drop in the debt levels coincides with major investments announced by the company of Rs 180 crore (Rs 20 crore for setting up a plant for specialty chemicals, Rs 160 crore for a 20 kilo tonnes plant for the production of polyster films) earlier this year.

The company also recently announced to invest Rs 50 crore in a new manufacturing facility for producing hydrofluorocarbons.

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