India: Jaiprakash Associates: Invest for 1-2 years

Jaiprakash Associates Ltd (JAL) has come out with an attractive fixed deposit scheme this festival season. Investors with high risk-appetite and looking for debt avenues have an opportunity to lock into the JAL’s fixed deposits.

These FDs are offering a pre-tax yield of as much as 12.6 per cent (three years). Senior citizens and the shareholders (at least 100 shares) of Jaiprakash Associates get an additional 0.5 percentage point over the coupon rates.

However, investors have to take note that the company offers interest rates that are over four percentage points over a normal bank deposit, suggesting that risks involved are high.

Unlike bank FDs, this is a high-risk high-return debt option, especially because of the unsecured and uninsured nature of the instrument and the long-gestation business which the company is engaged in.

The credit rating of JAL’s long-term debt is ‘CARE A+’(this is considered to offer adequate safety for timely servicing of debt obligations), two notches below the best ‘triple A’ rating. JAL is a major player in the infrastructure space with presence in power, cement, engineering and construction, real estate and hospitality.