CESC offers 10.5% interest rate on fixed deposits

The instrument, which has a three-year maturity, is expected to raise Rs 170 crore. This amount is mentioned as the company's acceptance ceiling. Company sources said the FD programme, which also offered 8 per cent interest rate for one year, would remain open for the next three months.

The four sugar companies of the K K Birla group- namely New India, Gobind, Oudh and Upper Ganges- had invited FDs at 10.5 per cent some weeks ago.

But the Birla scheme was open only to shareholders and employees. The coupon rate was 100 basis points lower for general investors.

The CESC FD programme should please conservative investors searching for high-yield instruments in a falling interest regime. The CESC move has, however, surprised corporate India which has been moving away from similar schemes.

A CESC official FD rate was at least 100 to 150 basis points lower than the rate it was paying on current borrowings to meet its cash credit requirement. The power utility has a Rs 230 crore limit on cash credit.

He said the funds collected through the FD programme would replace high-cost cash credit and so servicing the scheme would not be difficult.

He admitted that the higher rate was being offered as the company's position was "uncomfortable" on account of poor financial performance.

A FD distributor said the attractive rate, coupled with the group's goodwill, should make the FD programme a success. Kolkata has traditionally been a "good market" for fixed income schemes, despite high profile failures like Prudential, IFB and Duncan Industries.

Deposits will be accepted of a minimum size of Rs 5,000 for the cumulative schemes and Rs 15,000 for non-cumulative schemes.