The Hindu Business Line : TN Power Finance and Infrastructure: Power-yielding

INVESTOR may consider the fixed deposit programme of TN Power Finance (TNPF), owned by the Government of Tamil Nadu. The not-so-good financial position of the Tamil Nadu Electricity Board — its primary customer — is a cause for concern. But the State government's backing lends safety to the programme.

Investors, however, must bear in mind that this accords a much lower measure of safety than a Central Government guarantee.

Considering the risk involved, an investment up to one year can be considered. Investors with a significant cash surplus can also consider parking a small part of their funds in the five-year cumulative scheme, which offers an effective yield of 8.35 per cent. The interest income earned on deposits is eligible for tax deduction under Section 80L.

Schemes and features: TNPF accepts deposits under two schemes — cumulative and non-cumulative. Under the latter, interest (see table) is payable at monthly, quarterly and yearly intervals. The monthly and yearly non-cumulative schemes are available only for tenures of 36 months and above.

Under the cumulative scheme, the interest rates are compounded at monthly rests. Hence, the effective yields work out to 6.17 per cent, 6.92 per cent and 7.76 per cent for one, two and three years respectively. TNPF also has a special cumulative scheme with a minimum deposit of Rs 706 that matures to Rs 1,000 in five years, giving an effective yield of 8.35 per cent per annum.

TNPF also provides loans against deposits (up to 75 per cent of the deposit amount) after three months from the date of deposit. Further details can be obtained from the registered office at No 189, TTK Road, Alwarpet, Chennai - 600 018.

TNPF, an NBFC, provides financial assistance to power and infrastructure projects and funds to the TNEB. TNPF's gross disbursements to the TNEB in 2002-03 was Rs 518.6 crore, 18.2 per cent higher than the previous year. The company's fundamentals are strong. Income from operations for the year-ended March 2003 grew 0.4 per cent to Rs 207.9 crore. The post-tax profit, however, was up 10.5 per cent to Rs 22.7 crore. The net profit margin was up at 10.9 per cent against 9.9 per cent earlier. The interest coverage ratio stood at 1.2 times.

The risk involved in the investment can be relatively higher compared to a top-rated investment option.

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