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G. Madhan

THE fixed deposit programme of (KSE) is best for investors with a penchant for risk. Considering the attractive interest rate, low gearing levels and healthy interest cover, an investment up to one year can be considered. Beyond that, an investment can be avoided considering the inherent business risk involved.

Schemes and features: KSE offers cumulative and non-cumulative fixed schemes. The interest rates for both are the same (see table). However, since the cumulative scheme is compounded at quarterly intervals, the annual yields are 8.24 per cent for one year, 8.58 per cent for two years and 10.2 per cent for three years. The non-cumulative scheme is payable at quarterly intervals. Further details can be obtained from Post Box No. 20, Solvent Road, Irinjalakuda, Kerala - 680 121.

Business: KSE is engaged in the production of cattlefeed, solvent extracted coconut oil, rice bran oil, de-oiled and oiled coconut cakes and other oil cakes. The company sells its cattlefeed products under the brand names KS Brand, Jersey and KS Supreme. Some of its major customers include Hindustan Lever, Godrej Soaps, and Ricco Oil.

The company's animal feed division contributes about 60 per cent of the total revenue; oil cake processing division about 30 per cent and the dairy division the rest. Despite easing raw material prices and improved sales volumes, the operating profits of the animal feed division have dropped.

Stiff competition in this segment appears to have led to the lower price realisation. On the other hand, the operating profit of the oil cake processing division improved during 2002-03, on the back of increase in sales volume and improved price realisation.

The dairy division continues to act as a drag on the bottomline as it continues to register operational losses.

Financials: The company's revenues grew 22 per cent in 2002-03 after remaining largely flat in the preceding four years. However, the bottomline witnessed a steady decline during the same period.

For the quarter ending June 2003, the sales grew 20.3 per cent to Rs 44.9 crore from the corresponding previous period. The net profit, however, declined to Rs 0.4 crore (Rs 0.5 crore). The operating profit margin was at 1.9 per cent (2.7 per cent) and the net profit margin less than 1 per cent.

The interest coverage ratio for the year ending March 2003 dropped to 3.2 (5.4). Given the operating risks involved, an investment beyond a year can be avoided.

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