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G. Madhan

THE fixed deposit programme of Canbank Factors, a subsidiary of Canara Bank, is a good investment option. The company's fundamentals have remained strong. The interest rates on offer are higher by almost 1-1.5 percentage points than that offered by leading banks. Investors can choose any of the options on offer.

Schemes and features: Canbank Factors offers cumulative and non-cumulative schemes. The deposits are accepted for 12, 15, 18, 21 and 24 months. The interest rate is constant across all tenures. However, depending on the tenure, the yield varies.

For the half-yearly and quarterly payment option (non-cumulative), the yield is 7.62 per cent and 7.55 per cent respectively. The monthly deposit scheme offers a yield of 7.50 per cent.

The effective yield for the cumulative scheme works out to 7.76 per cent, 7.84 per cent, 7.91 per cent, 7.99 per cent and 8.06 per cent for the same tenures. The minimum deposit for each of these schemes, barring the monthly scheme is Rs 25,000. For the monthly scheme, it is Rs 40,000.

Business: Canbank Factors provides factoring services to business enterprises. That is, it lends against a client's account-receivables, at an agreed percentage, enabling the client to get cash as soon as he bills his customer. For the client, this reduces the gap between sales and actual cash realisation and releases funds for working capital requirements. The company also undertakes such services as collection of receivables and maintenance of sales ledger.

Financials: The company registered good financial performance in the nine-month period ending December. The funds deployed during this period grew 30.2 per cent to Rs 181 crore against Rs 139 crore in the corresponding previous period. The total income earned grew 16.3 per cent to Rs 22.03 crore and the net profit 15.5 per cent to Rs 7.24 crore.

The net profit margin for the period stood at 32.8 per cent against 33.1 per cent registered in the prior period. The capital adequacy ratio, as on December 31, 2002, was 26.09 per cent. For the year ending March 2002, the gross non-performing assets dropped to Rs 1.49 crore from Rs 2.42 crore of the previous year.

NPAs, as a percentage of funds in use, also came down to 0.84 from 1.53. Given the stable risk profile, an investment inn any of the option can be considered.

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