What KSIDC gains from Cheraman Financial investment?

Line-up of big investors; but operations remain miniscule

KOCHI: What does Kerala State Industrial Development Corporation Ltd (KSIDC) gain from its investment in Cheraman Financial Services Ltd (CFSL), which has ample other large investors?

CFSL, as a matter of fact, has been lying low despite the huge financial clout the company’s promoter investors enjoy. Apart from KSIDC, the investors include big names such as MA Yussaffali, Azad Moopen, Abdul Wahab etc.

Though it’s a about six years since the company has been floated with KSIDC as its second largest shareholder with 10.92 per cent stake, the company seems to be languishing with a relatively small share capital of Rs33.62 crore and with an accumulated loss of Rs11.24 crore towards the close of FY2018 (FY19 financials not available yet).

KSIDC’s proportional share capital investment in the company works out to Rs3.67 crore, but the total net profit  the company reported for FY2018 was just Rs19 lakh against a loss of Rs61.27 lakh for the previous year.

The accumulated losses contributed by the company’s subsdiaries have eroded the capital to a good extent, pushing the company into a less desirable financial condition.

The total asset base of the company with three subsidiaries under it is just Rs27.16 crore as of March 31, 2018. The CFSL subsidiaries – Cheraman Infrastructure Pvt Ltd, Cheraman Funds Management Ltd – both wholly owned, and Suits India Pvt Ltd, 86.25 per cent owned by CFSL, have piled up accumulated losses.

Defying the size of the company and its operations, the board has been filled to the capacity with 14 members including two representing KSIDC and with PM Mohammed Hanish, IAS as its managing director.

While the largest shareholder in the company is Siddeek Ahmed Haji owning17.85 per cent, MA Yussaffali owns 8.92 per cent.

Interestingly, the company despite being in the market for more than five years, has still not leveraged its equity and continues to confine the operations to the size of its share capital, which itself has eroded by about one-third.

“While the financial products are leasing and equity finance, the financial resources are the share capital raised by the shareholders,” the company says.

Has the project misfired after conception? In fact, CFSL was established with a view to running a Shariah-based (Islamic) financial services company, but with the regulatory approvals in India for such a venture becoming difficult, the promoters may have decided to keep the licence alive for the time being with limited operations.

Though this has not been officially confirmed as no one was willing to respond to phone calls, this assumption stands amply substantiated by a circular issued by the company in 2013.

The circular [still] appearing on the site acknowledges that Cheraman had ‘inadvertently’ issued a press release on August 17, 2013 claiming that the company was established to promote ‘interest-free financing in India based on the economic principle of Sharia and that it had obtained certificate of registration (CoR) from RBI. However, company said it was not true and the press release was subsequently withdrawn.

CFSL generated total revenue to the tune of Rs2.97 crore for FY18. The company recorded a net profit of Rs19 lakh for the said period compared with a loss of Rs61.27 lakh for the same period in the previous year. Cash and cash equivalent as of FY18 was at Rs3.25 crore.

Kerala State Industrial Development Corporation Ltd (KSIDC) may have played a pivotal role in handholding and facilitating the establishment of numerous successful projects in the state, but has it failed to walk the talk when it comes to Cheraman Financial Services Ltd (CFSL) where it wears the hat of the second largest investor and the only institutional investor?

 

 

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