Investors line up as companies like Gati, Prism Cement, Empire Industries start accepting FDs

MUMBAI: After a four-month lull, risk-averse investors, particularly pensioners, can once again park a slice of their savings in fixed deposit (FD) plans offered by manufacturing companies. Over a fortnight, companies like Gati, Prism Cement, Empire Industries have started accepting FDs from investors. Along with others like Godrej Industries, Godrej Properties, Mahindra and Mahindra, Supreme Industries, these companies had stopped accepting and renewing fixed deposits since April 2014 —soon after the New Companies Act 2013 came into effect.

According to the revised law, in order to raise money through FDs, a company has to get itself rated by a rating agency, pass a resolution at a general body meeting authorising the invitation of such deposits, and provide for deposit insurance on these fixed deposits. “Due to such stringent rules and higher disclosures required for rating, not many companies were interested in raising money through this route,” said Anil Chopra, Group CEO, Bajaj Capital.

Among the companies revisiting the market, Gati (with a rating of BBB+) will have an interest of 12 per cent a year, Prism Cement (Ind TA-) 10.25 per cent and Empire Industries (MA) 10.5 per cent; all three FD plans have a 36-month tenure. Compared with these returns, a three-year FD with a nationalised bank like State Bank of India (SBI) will fetch 8.75 per cent while non-convertible debentures will offer 10-12 per cent.

In the absence of manufacturing companyFDs since April, investors were putting money in FDs of banks and NBFCs like HDFC and Mahindra Finance and NCDs of ECL Finance, Shriram Transport Finance, Muthoot Finance as and when they tapped the primary market. Typically, many retired individuals and senior citizens look around for company FDs where the minimum investment amount is between Rs 10,000 andRs 25,000, with tenure of one, two and three years. Many companies give a monthly income option which helps retirees meet their regular expenses.