Corporate deposit schemes turn hot with cool rates

Tags: News
Stocks may be hot now, but fixed income assets are no less.

Companies are offering up to 10.5 per cent interest rates on deposit schemes even as some of the domestic banks have revised their fixed deposit rates upward after the recent money policy. Several NBFCs are tapping retail fixed deposit schemes in a big way to raise capital for operational needs. Deposit schemes of Bajaj Finserve, HDFC, LIC Housing Finance and PNB Housing Finance are currently open for retail investors.

A similar scheme of Mahindra Finance is quite popular and collects about Rs 250 crore a month. “We collect Rs 225 crore to Rs 250 crore a month through this. This is an ongoing scheme, but we keep revising the interest rate,” said V Ravi chief financial officer, Mahindra Finance.

Retail fixed deposits contribute about 10 per cent of the company’s total fund requirement, but that share may rise to 15 per cent this year. The company has so far collected Rs 4,500 crore in retail deposits from 2.5 lakh depositors, Ravi said.

PNB Housing, which offers about 9.5 per cent on one-year deposits, collects Rs 175 crore a month.

Chief executive officer Sanjay Gupta said the company raised about Rs 175 crore to Rs 200 crore from investors, who include pension funds, educational trusts and individuals. “We offer competitive rates, which are higher than bank fixed deposit rates. This is what makes the scheme attractive,” Gupta said.

Financial advisers suggest caution on such schemes and say it’s important to understand a company’s business fundamentals and corporate governance standards before investing in such schemes.

Also, one must weigh the income-tax equation. “These schemes can be good for taxpayers who are in the 10 per cent bracket. The post-tax returns will be less attractive for those in higher tax brackets,” said Akshay Gupta, CEO of Peerless Mutual Fund.

Gupta instead suggested short-term liquid funds, which on an average offer around 9.5 per cent per annum.

Bajaj Finserve is raising one-year fixed deposits at rates about 25 to 50 basis points higher than those offered on bank fixed deposits to fund operational and other expenditures. Its one-year deposit scheme offers 9.25 per cent. Bajaj also has a 15-month scheme that offers 9.75 per cent.

Shriram Transport’s fixed deposit scheme, called the Unnati scheme, offers 10.75 per cent per annum on deposits for 36 months, 9.75 per cent for 24 months and 9.25 for one year.

Mortgage financier HDFC’s Platinum deposit scheme offers 9.50 per cent per annum, but has tenures of 15 months, 22 months and 33 months. LIC Housing Finance’s one-year fixed deposit scheme offers 9 per cent for one year, 9.25 per cent for two years and 9.40 per cent for three years.

Other companies that have such deposit schemes open now include Gruh Finance and Dewan Housing Finance. Gruh offers 9 per cent for one year, 9.25 per cent for two years and 9.50 per cent for three years. Dewan Housing has a 14-month fixed deposit scheme that offers 10.50 per cent and a 40-month deposit scheme that offers 10.50 per cent.

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