In an earlier post, Company Fixed Deposits as a higher risk-higher reward instrument was profiled. Now some companies are giving rates in excess of 12%. Did you know that these companies pay 1-2% commissions to agents who pitch these unsecured FD products to you. In essence, these companies are paying some 15% for your funds. They are doing this because they are not able to tap secured loans from banks due to various reasons.
As mentioned earlier, investors should realize that these FDs are more risky that bank FDs and offer no capital protection. Some of these companies have been raising their unsecured loans by a significant amount. TV18, for example, has over 500 crores in unsecured loans in its sheet. While I don't expect TV18 to disappear overnight, there is a significant risk in these investments. Investors should look at the CRISIL credit rating (or equivalent) of these companies before giving the money to the agent.
| COMPANY | RATING | Min. Deposit Amount | INTEREST RATE | ||||
| 6 | 12 | 24 | 36 | ||||
| Jaiprakash Associates Ltd. | 20000 | 10.50 | 10.50 | 11.00 | 11.50 | ||
| Ansal Properties & Infrastructure Ltd | 50000 | 11.50 | 12.00 | 12.25 | 12.50 | ||
