The Hindu Business Line : Jindal Steel and Power: Invest for one-year scheme

Jindal Steel and Power: Investments in the fixed deposit scheme of Jindal Steel and Power can be considered with a one-year perspective. Low-cost sponge iron operations along with backward integration (it has captive power plant) have helped the company improve its profitability over the past few years. Earnings have grown at a CAGR of about 50 per cent while OPMs have been fairly consistent at about 37 per cent. While demand offers a positive outlook, average realisations in the medium term are likely to be lower when compared to the levels in the last 18 months. Volume growth from its capacity augmentation (in plate mill and rail beam) and higher contribution from value-added long products are likely to buffer earnings from lower realisations over the next few quarters.

In the long run, the company is likely to benefit from its power business, thereby mitigating the risk associated with cyclical business.

JK Paper: An investment can be considered in the fixed-deposit programmes across tenures. As the paper business is subject to a high degree of cyclicality, the longer tenures are risky. But the rates on offer appear to be attractive. The steady improvement in the company's financial profile also augurs well. The substantial reduction in interest outgo and replacement of high-cost debt with funds sourced at lower rates over the past quarter enhances the degree of comfort that is available to investors in the FD programme. JK Paper is also set to commission a coated paper facility, which would also lead to a scaling up revenues over the next two years.

We had earlier recommended that the three-year option could be avoided. With further confirmation over the past quarter that the financials are in healthy shape, we believe that even this tenure can be considered as JK Paper is well placed to ride out a weak phase in the business cycle. The minimum amount is Rs 10,000. In the two- and three-year options, investors can opt for the cumulative option while the non-cumulative option appears appropriate for the one-year tenure.

United Bank of India: Senior citizens can consider investing in the recently introduced long-term term deposit scheme of United Bank of India. The Bank has introduced a new term deposit bucket of between 7-10 years. The Bank offers 7 per cent for such deposits for younger investors with senior citizens being offered 8 per cent. This rate of 8 per cent is comparable to the yield on some of the post office schemes such as Post Office Monthly Income Scheme and Kisan Vikas Patra. The attractive yield is also applicable for a longer duration compared to such schemes.

Investors can thus consider investing a small proportion of their surplus for a 10-year period in this scheme.

Srei Infrastructure Finance: Investments in the one-year fixed deposit programme of Srei can be considered. The company offers 7.25 per cent for a one-year cumulative term deposit. The interest rate is attractive considering housing finance companies and banks offer rates that are lower by more than one percentage point.

In addition, from this financial year, interest from bank deposits and housing finance companies do not enjoy the protection under Section 80-L.

Srei is a fast growing non-banking finance company specialising in infrastructure project financing which has attracted equity investments from international institutions such as IFC of Washington and FMO of the Netherlands. The company boasts of strong capital adequacy and has also low incidence of bad loans.

The fixed deposit programme is ideal for investors with a one-year investment horizon.

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